Definitions

Question 1

Market Reaction

Answer 1

-response of customers in a marketplace to price levels of goods

Question 2

Break-even point

Answer 2

• level of sales where revenue and expenses are equal

- business doesn’t make profit or loss

Question 3

Variable cost

Answer 3

• cost that vary with level of activity

- no. of sales=cost

Question 4

Fixed cost

Answer 4

• cost that don’t vary with level of activity

- eg. electricity

Question 5

Contribution Margin

Answer 5

• gross profit from each sale
• covers other expenses to give net profit

SP—VC

Question 6

Perpetual Inventory System

Answer 6

-accounting for stock, involving recording continuous movement of stock cards

Question 7

Stock card

Answer 7

-rbbbecords individual movements of stock in & out of business

Question 8

Sales

Answer 8

-revenue earned from the sale of stock

Question 9

Purchases

Answer 9

-stock bought for purpose of resale

Question 10

Cost of Sales

Answer 10

-expense occurred when stock flows out of business (sale)

Question 11

Gross Profit

Answer 11

-profit earned from sale of stock

Sales Revenue—Cost of Sales

Question 12

Stocktake

Answer 12

• counting every item on hand to verify stock cards

- detect stock loss/gain

Question 13

Stock loss

Answer 13

-expense occurred when stocktake shows less stock than stock card

Question 14

Stock gain

Answer 14

-revenue earned when stocktake shows more stock than stockcard

Question 15

Stock sheet

Answer 15

-listing quantity & value of each line of stock on hand

Question 16

Stock Turnover

Answer 16

-measures average number of days it takes to convert stock to sales

Question 17

Sales invoice

Answer 17

-source document of credit sale

Question 18

Purchase invoice

Answer 18

-source document of credit purchase

Question 19

Debtor

Answer 19

-customer who owes business debt

Question 20

Creditor

Answer 20

-supplier who is owed a debt by business

Question 21

Creditors/Debtors record

Answer 21

-records individual transaction of creditors/debtors & balance owing

Question 22

Debtors Turnover

Answer 22

-measures average number of days it takes to collect cash from debtors

Question 23

Creditors Turnover

Answer 23

-measures average number if days it takes to pay cash to creditors

Question 24

Balance day adjustment

Answer 24

• ensure profit calculated accurately

- adjusting prepaid, accrued and depreciation expenses

Question 25

Prepaid expense

Answer 25

-expense that is paid for, but yet to be consumed

Question 26

Accrued expense

Answer 26

-an expense that has been consumed, but yet to be paid for

Question 27

Depreciable asset

Answer 27

-non current asset what has a finite life; & must be depreciated

Question 28

Depreciation

Answer 28

-allocation of cost of a non-current asset over its useful life

Question 29

Depreciation expense

Answer 29

-part of the non-current asset which has been consumed in current reporting period

Question 30

Depreciable value

Answer 30

-total value which will be consumed by current entity

Question 31

Accumulated depreciation

Answer 31

-value of non-current asset hat has been used over its life

Question 32

Carrying value

Answer 32

-value of non-current asset that is yet to be used

Question 33

Operating activities

Answer 33

-cash flows related to day to day activities

Question 34

Financing activities

Answer 34

-cash flows related to the change in the financial structure of the firm

Question 35

Investing activities

Answer 35

-cash flows related to the purchase & sale of non-current assets

Question 36

Recommended retail price (RRP)

Answer 36

-selling price recommended by manufacturers