Business Law And Practice: Partnership And Companies: Accounts And Regulation Flashcards
What records must a business keep if that employ staff?
- PAYE (pay as you earn
- and national insurance records
- and vat records
What is double entry book keeping?
A system where every transaction is recorded with a debit in one account and a credit in another, keeping the books balanced.
Example: A business buys a laptop for £500, paid in cash.
• Debit (Dr): Equipment (Asset) +£500
• Credit (Cr): Cash (Asset) -£500
What does the profit and loss account tell you?
- how profitable a business in is shows income - expenses = either a profit or a loss
Note: profit and lost account does not show business assets and liabilities
What is a trial balance?
A report that lists all debit and credit balances from the ledger to check if debits = credits. Helps detect errors before preparing financial statements.
What kind of businesses need trading accounts?
- businesses which buy and sell goods
What are fixed assets?
Long-term assets used in a business, not for resale. They help generate income and have a lifespan of over a year.
What are current assets?
Short-term assets that can be converted into cash within one year.
Examples: Cash, inventory, accounts receivable, short-term investments.
What are long-term liabilities?
Debts or obligations a business must pay after more than one year.
Examples: Bank loans, mortgages, bonds payable.
What are current liabilities?
Short-term debts or obligations a business must pay within one year.
Examples: Accounts payable, short-term loans, wages, taxes due.
What does work in progress mean (solicitors)?
-Work in progress (WIP) refers to the unbilled fees for legal work a solicitor has completed but not yet invoiced. It represents ongoing cases or tasks that are still in progress.
