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Accounting > Credit Transactions & Pricing Method > Flashcards

Credit Transactions & Pricing Method Flashcards

1
Q

What are the accounting principles?

A

CHER @ MCG

Consistency, Historical Cost, Reporting Period, Monetary Unit, Conservatism, Going Concern

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2
Q

What are the qualitative characteristics?

A

RRUC

Reliability, Relevance, Understandability, Comparability

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3
Q

What are service firms?

A

Businesses that provide intangible good to customers, that cannot be touched and requires the customer to be present for the service to take place, all in return for a fee.

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4
Q

What are trading firms?

A

Business that aims to make a profit by purchasing goods from a wholesaler and selling them at a higher price. Where the difference between the cost price from the wholesaler and the selling price is the profit made.

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5
Q

What are the 5 price setting strategies?

A
  1. Recommended retail price
  2. Competitors Prices
  3. Market Reaction
  4. Percentage Mark up
  5. Cost Volume Profit Analysis
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6
Q

Recommended Retail Price

A

The selling price suggested by the wholesaler or manufacturer of the goods.

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7
Q

Competitors price

A

Where the prices are based on that of similar business in the same market’s selling price of similar items. Where the business does so to match and remain competitive.

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8
Q

Market reaction

A

The price is determined by the reaction of customers; where if demands are high selling prices set higher, if demands are low prices are discounted.

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9
Q

Mark up

A

Selling price = Cost price* (1+ mark up%)

Selling price is got by adding a predetermined profit margin to the cost price of the stock.

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10
Q

Cost Volume Profit Analysis

A

Tool used to determine the selling price or volume of sales necessary to achieve a specific profit.
Quantity = fixed + profit/selling price - variable

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11
Q

Variable Costs

A

Costs related to making the product, as per unit. Which will differ or change according to the number of goods sold.

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12
Q

Fixed costs

A

The cost associated with running the business regardless of the volume of sales.

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13
Q

Contribution margin

A

=Selling - Variable
The bottom line of the formula states the profit from each sale as it is essentially the revenue from sale minus the expenses of making the product.

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14
Q

Credit transactions

A

A credit transaction is when good are exchanged but the cash relating to the stock is exchanged at some later date.

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15
Q

Invoice

A

The source document that verifies the details of a credit transaction

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16
Q

Sales invoice

A

Where the business sells stock on credit to the customers,

17
Q

Credit transactions

A

A credit transaction is when good are exchanged but the cash relating to the stock is exchanged at some later date.

18
Q

Invoice

A

The source document that verifies the details of a credit transaction

19
Q

Differentiate between Sales invoice & Purchase Invoice

A

Source document verifies credit sale of stock, where the business sells stock on credit to a customer (duplicate copy & letterhead)
Source document verifies credit purchase of stock, where the business purchases stock on credit (original cop & invoice addressed to)

20
Q

Debtors

A

A customer who owes a debt to the business for good or services sold to them on credit.

21
Q

Creditors

A

A supplier which the business owes a debt to for goods do services purchased from them on credit

22
Q

Credit purchase

A

When a business buys stock or other assets from a supplier and is not required to pay until a later date. To be verified by the purchase invoice.

23
Q

Break even

A

To break even is when the business earns enough revenue to cover the expenses of the variable costs, making zero profit.

24
Q

Purchases journal

A

An accounting report which summarises all transactions involving the purchase of stock on credit, during a particular reporting period

25
Q

What is the use of the purchases journal?

A

through summarising all the transactions allows the business to keep track of all the stock they have purchased on credit. To make note of how much the business owes to certain business and how much GST they have incurred.

26
Q

Creditors formula

A

To calculate the amount owing at the end of the reporting period.
Balance at start (last reporting period)
+ credit purchases (total in purchases journal)
- payments (settlement of account in SPJ)
=balance at end (balance sheet at liability)

27
Q

Creditors record

A

Records each individual transaction with each individual creditor, and shows the balance owing to the creditor at any point in time.
Details; stock/GST or payment

28
Q

Creditors scheduale

A

A listing of the name and balance of each individual’s creditors record. The total of the balances adding up in total should equal the total of the creditors formula, to be used in the balance sheet for that reporting period
(end line - balance as per creditors formula)

29
Q

Credit Sale

A

The transaction that involves the business selling goods to a customer who will repay the amount at a later date. Verified by the course document of the sales invoice

30
Q

what are the special records?

A 
balance sheet 
Cash receipts journal
Cash payments journal
Sales journal
Purchases journal
31
Q

sales journal

A

An accounting record that summarised all transactions involving the sale of stock on credit during a reporting period.

32
Q

What is the use of sales journal?

A

Through summarising all the transactions of customers purchases on credit allows the business to better understand how much revenue they have earned and who has made these to follow up the sales to be earned.

33
Q

Debtors formula

A 
To calculate the total balance owed by debtors to the business at the end of a particular reporting period.
Balance at start
\+ credit sales 
- receipts 
= balance at end
34
Q

Debtors record

A

Records each individual transaction with each individual debtor, and shows the balance the debtors at any point in time.
Details; sales/GST or receipt

35
Q

Debtors schedule

A

A listing of the names and balance of each debtors record. The total of the balances adding up in total should equal the total of the debtors formula, to be used in the balance sheet for that reporting period
(end line - balance as per debtors formula)

36
Q

Benefits of using, debtors/ creditors record for each business.

A

-Management of debtors/creditors.
To ensure all invoices ares sent out, debts are collected and paid, creditors paid on time and debts followed up
- Detection of errors
The balance of the schedule should equal the balance of the formula. To ensure amount is reliable for the balance sheet
- Ease of reporting
Only one figure needs to reported in the balance sheet, as all the different debtors and creditors are not relevant.

Accounting (5 decks)

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