Chapter one Flashcards
What are the three types of industry
Manufacturing organisation
Retailer
Service organisation
What is a manufacturing organisation
Where goods are made and then sold
What is a retailer?
Where goods are brought in and sold to the public at a higher price
What is service organisation?
Where there are no good at all, but a service is provided
What are capital transactions
Purchase of assets for long-term use in the business and gains of sales from these assets
What are revenue transactions?
All day-to-day revenue and expenses except for capital trans
What does capital expenditure result in?
A non current asset on the statement of financial position of the company
Capital expenditure results in benefitting from ..
An asset over a long period rather than short period.
What does revenue expenditure result in?
An expense in the statement of profit n loss.
Revenue expenditure is also known as
Operating expenses
Revenue expenditure is for long or short term ?
Short
What are the two main financial positions
Statement of profit and loss, and statement of financial position
What are the two key types if accounting
Financial accounting and cost accounting (management accounting)
What is financial accounting
The use of info recorded by the system to prepare financial statements related to past transactions for external use: statement profit n loss…financial position
What is the statement of profit n loss
Shows sales revenue plus other operating income less expenses equalling a profit or loss.
What is a statement of financial position
Shows the assets, liability and capital of a business on a particular date
What is an asset
Something valuable the business owns
What is a liability
Amounts that the business owes
What is capital
The amount the business owes its owner once liabilities are deducted from asset
What is a bookkeeping system
The recording of business transactions in the general and subsidiary ledgers
Does the bookkeeping record past or present trans?
Past
The financial statements are used for external publication
Investors of money into the business
Lenders and other suppliers to the business
Hmrc
What has cost accounting been extended into?
Planning, control, decision making
What is planning
The provision of forecast costs at different output levels
What is control
Such as the provision of actual and budget costs for comparison purposes
What is decision making
The provision of information about actual unit costs for the period for pricing decisions
Cost accounting takes the same information as what?
Financial accounting
Who does cost accounting provide information to?
People inside the business
Why does cost accounting give info to people inside the business?
To run the business effectively today and in the future
What can cost accounting analyse ?
Past costs incurred by elements to determine how much it will cost in future to produce any unit of product, broken down in labour, materials and expenses or overheads.
What do cost accounting collect?
Similar costs together, so they can be further analysed and used internally.
What are the lethal requirements for cost accounting and financial accounting?
No legal requirement for cost accounting
In many countries, limited companies are required to produce financial statements
What do financial accounts details?
The performance of an organisation over a defined period and the state of affairs at the end of that period
What format is used for cost accounting?
Entirely up to management discretion, each company can use its own accounting system and format of reports
What format do you use for financial accounts ?
Determined by law, so the accounts of different organisations can easily be compared
What can cost accounting focus on?
Specific areas, to help aid decisions
What area of the business do financial statements focus on?
The business as a whole, mixing revenue and costs from different operations
Does cost accounting focus on money?
Can incorporate none money measures, eg miles traveled, tonnes in metal
Financial accounts present or past
Past operations
Cost accounting past or present
Past and future planning tool
