Definitions Flashcards
Cash sales & purchases
Paying for goods upfront & receiving a till receipt showing what they have bought.
Credit sales & purchases
Having goods now and paying later
VAT
Tax added to products by VAT registered businesses
Prompt payment discounts
Offered to customers to encourage prompt payment and is an allowance off the invoice amount for paying on/before time
Trade/bulk discounts
Allowed in form of a reduction in price
General ledger
Where all account information - sales purchases, inventory, cash in/out - come together and form financial statements.
Receivables
Money owed to the business for a good that has been delivered but not been paid for yet
Payable
When a company purchases good/ services from its suppliers in credit.
Dual effect principle
For every transaction, there will be 2 financial effects
Asset
Owned by business
Liabilities
Owed by the business
Drawings
Money/goods taken from business by owner for own use
Capital
Money/assets invested by owner. Amount is owed back to owner therefore liability to business
Equity
Balance that is left over after the liabilities are deducted from the assets of the business
Debit
Increases the balance other accounts with a debit balance and reduces the balance of accounts with a credit balance.
