chapter3- Double Entry Bookkeeping Flashcards
What is a sole trader?
organisations that are ran/operated by one person
What is a partnership in business?
organisations owned by two or more people working together to make a profit
What is a company?
organisations recognised in law as ‘persons’ in their own right
What is a management account?
- prepared monthly/weekly/whenever they want
- Informal
- Internal
- (forward thinking)
What is a financial account?
- prepared annually
- formal format (set by law)
- external
- Statement of Financial Position
- Statement of Prof and Loss
- (historic)
What are the two main financial statements?
1- statement of profit or loss
2- statement of financial position
What is sales revenue?
income made from the trading activities of the business
What is cost of sales?
the cost of buying or producing the goods for resale
What is gross profit?
the profit remaining after the cost of sales have been deducted from the sales revenue
What is sundry income?
other types of income that arent from the trading of the business
(such as bank interest, commission)
What are expenses?
day to day running costs
What is net profit or loss?
the profit or loss remaining after expenses have been deducted
What is an asset?
- short term
- less than a year
- something the company owns
- soon to be turned into cash or bank
- eg. inventory, receivables
What is a non-current asset?
an asset used long term in the business and not resold as part of the trading system (e.g delivery van)
What is a current asset?
short term
soon turned into cash
things such as inventory, recievables
What is a receivable?
someone who owes the business money
What is a non-current liability?
an amount owed by the business
long term
to be paid in 12+ months
(such as mortgage loan)
What is a liability?
an amount owed by the business
What is a payable?
someone the business owes money too
What is a capital?
the amount which the owner has invested in the business
What are drawings?
amounts withdrawn by the owner for their own personal use
What is a capital expenditure?
the purchase of non-current assets
What is the revenue expenditure?
day to day running costs of the business
What is capital income?
income from the sale of capital assets of the business
What is revenue income?
income generated from the sale of goods or services
What is a current liability?
an amount owed
due to be paid within 12 months
(such as bank overdraft, payable)
What is the accounting equation at its SIMPLEST form?
Asset=Liabilities
What is the accounting equation at its most complex?
Assets- Liabilities = Captial+ Profit- Drawings
(any profit the business makes will increase what is owed back to the owner and any drawings will reduce it)
(capital is what is owed back to the owner therefore it is a type of liability
Assets= Liabilities + Captial)
what is the dual effect?
every transaction has two effects
