Chapter 1 & Some Of 2 Flashcards
What are the types of transactions
Cash sales
Cash expenditure
Credit sales
Credit expenditure
What is the general ledger
AKA nominal ledger
Has separate record of each type of transaction.
What are payables also known as
Creditors
What are receivables known as
Debtors
What does DEAD CLIC stand for
DEAD
expense
Asset
Drawing
CLIC
liability
Income
Capital
Ok which side of the T account is the debit and credit
The credits are on the right because we cRash on the Right
What is the narrative heading on the T account
In this column should be entered the name of the opposite account to show where the second entry for the transaction would be found
What is interest received in the other income section of the P&L
This is anything which is earned and not in their trade e.g renting out a section of the office
What does the statement of profit and loss contain
Income such as sales to customers or bank interest received
Expenditure such as purchases of inventory rent or salaries
What elements does the statement of financial position contain
Assets owned by the business such as property, vehicles and cash
Liabilities owed by the business such as bank loans or unpaid tax this also includes amounts owed to the owner of the business
receivables are treated as an asset
payables are treated as a liability
What period of time do assets need to be to fall into non current assets
Over 12 months
Gross profit
Sales income - COGS (purchase costs)
Net profit
Sales revenue - all costs
What are the accounting concepts (7)
Accruals
Going concern
Business entity
Materiality
Consistency
Prudence
Money measurement
What are accruals
Accruals should be matched together and included in the period which they relate to
What is going concern
The assumption that the business will continue trading for the foreseeable future by considering the next 12 month period
Business entity concept
The idea that the business and the owner are completely separate and should be treated separately
Materiality
Financial statements should show a true and fair view. Information is material if omitting, misstating or obscuring would influence decisions
Consistency
The concept that we treat similar items in the same way in he current accounting period so that comparisons can be drawn
Prudence
Exercising caution when making judgments
Money measurement
To be recognised in the financial statement it needs to be measured in money
What are the fundamental qualitative characteristics
Relevance
Relevance if it is can make a difference to the decision this will be predictive value which is used to predict future outcomes or if confirmatory value which provides feedback
Faithful representation
Complete, neutral, free from error
What are the enhancing qualitative characteristics (4)
Comparability
Verifiability
Timeliness
Understandability
Users of financial statements
Investors
Employees
Lenders
Suppliers
Customers
Ethical principles - fundamental
Integrity, objectivity, professional competency and due care, confidentiality and professional behaviour
ASSET, LIABILITY, EXPENSE, INCOME
‘Wages paid for the week’
Expense
ASSET, LIABILITY, EXPENSE, INCOME
‘Cash in the petty cash tin’
Asset - it is something that the business owns
ASSET, LIABILITY, EXPENSE, INCOME
‘Customer outstanding balance owed to the business’
Asset - this is owed to the business so will be a benefit in the future when the cash is received
ASSET, LIABILITY, EXPENSE, INCOME
‘supplier outstanding balance owed by the business’
Liability - this is owed by the business
ASSET, LIABILITY, EXPENSE, INCOME
‘Premises where production takes place’
Asset - owned
ASSET, LIABILITY, EXPENSE, INCOME
‘Sales of units to a customer’
Income - this is revenue for the business
ASSET, LIABILITY, EXPENSE, INCOME
Machinery for the factory
Asset - owned and will create future benefit
ASSET, LIABILITY, EXPENSE, INCOME
Loan from an investor
Liability - owed
ASSET, LIABILITY, EXPENSE, INCOME
A bank overdraft
Liability - owed
ASSET, LIABILITY, EXPENSE, INCOME
Stock if materials used in production
Asset - owned by the business and will benefit the business
Are the premises an asset or liability
Asset - as they are owned by the business
Is a loan from the bank an asset or liability
Liability - owed
Is cash in the bank an asset or a liability
Asset - owned by the business
Is VAT owing to HMRC an asset or liability
Liability
Is machinery an asset or liability
Asset - owned by the business
BOOKS OF PRIME ENTRY
what does the cash book receipts deal with
A list of all receipts into the business bank account
the cash book deals with transactions through the business bank account
BOOKS OF PRIME ENTRY
What does the cash book payments deal with
A list of all payments made out of the business bank account
- the cash book deals with transactions through the business bank account*
BOOKS OF PRIME ENTRY
what does the sales say book deal with
A list of all credit sales made by the business
this is a list of all the credit sales invoices raised
BOOKS OF PRIME ENTRY
What does the purchase day book deal with
All credit purchases made by the business
this is a list of all the credit purchase invoices received
When the business makes a transaction involving paying for goods what would one of the effects be
Purchases would be debited
What is the first step in the sales cycle
Step 1 customer requests a quote - quotation
What is the second step in the sales cycle
Order placed by customer - sales order
What is the third step in the sales cycle
Goods delivered to customer - delivery note
What is the fourth step in the sales cycle
Payment requested from customer - sales invoice
What is step five in the sales cycle
Payment received from customer - remittance advice note
