Chapter 1&2 Flashcards
What is stewardship accounting?
Overview
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Stewardship accounting refers to the practice of managing and reporting financial information with a primary focus on demonstrating to stakeholders, like shareholders, that the company’s resources are being used responsibly and effectively.
What is a statement of financial position?
A statement of financial position is a financial report that shows a company’s assets, liabilities, and equity at a specific time. It’s also known as a balance sheet.
What is a statement of profit or loss?
A profit and loss (P&L) statement, also known as an income statement, is a financial statement that summarizes the revenues, costs, expenses, and profits/losses of a company during a specified period.
what is a statement of cash flow
A statement of cash flow is a financial report that shows how much cash a business has received and spent over a period of time. It’s a common financial statement that helps businesses understand their cash flow.
What is financial accounting ?
Financial accounting is the process of recording, summarizing, and reporting a company’s financial activities. It’s a branch of accounting that helps businesses track their income and expenses, and communicate that information to external stakeholders.
what is management accounting?
Management accounting is a type of accounting that provides financial information to help managers make decisions
What is a financial statements
A financial statement is a written record of a company’s financial performance and activities. They are used to assess a company’s financial health and to help make future decisions.
What is a bookkeeping system?
A bookkeeping system is a method of recording and tracking a business’s financial transactions in an organized manner, typically using a set of accounts to categorize income, expenses, assets, and liabilities, allowing for the generation of financial statements that show the company’s financial health.
What is a double entry bookkeeping system?
What is double-entry accounting? Double-entry accounting is a system of bookkeeping where every financial transaction is recorded in at least two accounts. A double-entry system provides a check and balance for each transaction, which helps ensure accuracy and prevent fraud.
What is a statement of financial performance?
A statement of financial performance is an analysis of a company’s financial health over a period of time. It’s based on a review of the company’s financial statements, including the balance sheet, income statement, and cash flow statement
What is the structure of financial position?
- Asset
- Non-current assets
- Current assets
- Total assets
- Equity and Liabilities
- Equity
- Total equity
- Non-Current liabilities
- Total non-current liabilities
- Current liabilities
- Total liabilities
- Total equity and liabilities
Why is a trading account?
A trading account is a statement that calculates the gross profit that a
business has made by buying and selling its goods during a particular period
of time
What are purchases?
The goods bought for resale are called
What are sales in accounting?
The goods sold are called ‘sales’
How to work out gross profit?
Sales
- less returns in
= Net sales
- Less of cost of Goods sold
= Gross Profit
How to work out cost of Goods sold?
Opening Stock
+ Add Purchases
- Less Returns out
+ Carriage in
- Less Closing Stock
= Cost of Goods Sold
What is gross profit?
Gross Profit = Total Revenue - Cost of Goods Sold (COGS)
What is Net profit?
Net profit is calculated by deducting all expenses incurred by the business
from the gross profit that it has earned through buying and selling its goods.
What is sales return?
Sales returns (Returns In) are goods that have been returned by the customer. They are also known as returns in or returns inwards. These
are deducted from the sales figure
What is purchase return ?
Purchase returns (Returns Out) are goods that the business sends back to the supplier. They are also known as returns out or returns outwards. Purchase returns are deducted from purchases.
What is carriage inwards?
Carriage inwards is an expense incurred when a supplier charges for delivery on the goods purchases. Carriage inwards makes the goods that are purchased more expensive. It is added to the goods that appear as purchases on the trading account.
What is carriage outward?
Carriage outwards is also an expense which a business incurs when it pays
for delivery of goods to a customer. It is sometimes referred to as carriage
on sales.
How to work out net profit on an accounting sheet?
- Sales
- returns in
- less of cost of sales
= Gross profit
- total expenses
= Net profit
what is trade debtors ?
Trade debtors are people (or organisations) that owe money to a business,
because they are customers who have not yet paid for the goods or services
provided.
what is trade creditors?
Trade creditors are people (or organisations) that the business owes money to, because they have supplied goods and services that the business has received but as yet has not paid for.
what are fixed assets?
Fixed assets are assets that will be retained by the business for longer than
one year. They include Land and buildings, equipment, machinery, fixtures
and fittings and motor vehicles.
what are current assets?
Current Assets are cash or assets that will be changed into cash in the near future. They include stock, debtors, bank and cash.
what are current liabilities?
Current Liabilities are debts owed by a business which need to be repaid within one year. They include suppliers who are owed money for goods (trade creditors), or money owed to a landlord for overdue rent.
what are long term liabilities?
Long Term Liabilities are debts owed by a business which need to be paid after more than one year. They include a bank loan that needs to be paid within five years or a 25 year mortgage on a property
Structure of Statement of Financial Position
Non-current Assets
Total Non-Current Assets
Current Assets
Total Current Assets
Total Assets
Equity and liabilities
Equity
Total Equity
Current liabilities
Total Current liabilities
Non current liabilities
Total Non current liabilities
Total Equity and Liabilities
