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Final Accounts > Definitions > Flashcards

Definitions Flashcards

1
Q

Sole Trader

A

An individual in business

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2
Q

Partnership

A

A group of individuals working together as partners in business

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3
Q

Incorporated

A

A business formed into a legal corporation

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4
Q

Limited liability partnership (LLP)

A

An incorporated form of partnership, with a separate legal entity, where members are able to limit their personal liability for the debts of the business.

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5
Q

Limited company

A

An incorporated business, with a separate legal entity, owned by shareholders and run by directors

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6
Q

Charity

A

An organisation, run by trustees, which uses its resources to fund charitable activities under its control

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7
Q

Business entity principle

A

Financial statements record and report on the activities on one particular business

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8
Q

Materiality principle

A

Items with a low value are not worthwhile recording in the accounts separately

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9
Q

Going concern principle

A

The presumption that the business to which the financial statements relate will continue to trade in the foreseeable future

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10
Q

Accruals principle

A

Income and expenses are matched so that they relate to the same goods or services and the same accounting period

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11
Q

Relevance

A

Fundamental qualitative accounting characteristic that requires financial to be useful to users of the financial statements

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12
Q

Faithful representation

A

Fundamental qualitative accounting characteristic that requires financial information to correspond to the effect of financial statements

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13
Q

Comparability

A

Financial statements can be compared with those from previous years and with similar businesses

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14
Q

Verifiability

A

Users of financial statements are assured that the information given is faithfully represented

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15
Q

Timeliness

A

Users of financial statements receive information in time to enable decisions to be made

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16
Q

Understandability

A

Financial statements is presented clearly and concisely so that the users can understand the information given

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17
Q

Material misstatement

A

Information contained in the financial statements is untrue - whether accidentally or intentionally

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18
Q

Integrity

A

Ethical principle of being straightforward and honest in all professional and business relationships

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19
Q

Objectivity

A

Ethical principle of being aware of conflicts or interest

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20
Q

Professional competence and due care

A

Ethical principle of maintaining professional knowledge and skill at the level required to provide a competent service to an employer or client

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21
Q

Confidentiality

A

Ethical principle that information should not be disclosed to third parties (unless permission is given or there is a legal duty), and should be maintained securely

22
Q

Professional behaviour

A

Ethical principle of ensuring behaviour complies with relevant laws and regulations and does not bring the accountancy profession into disrepute

23
Q

Conventional format

A

The form of financial statements used by accountants

24
Q

Gross profit

A

Sales revenue minus cost of sales, ie the profit made before expenses are deducted

25
Q

Profit for the year

A

Gross profit minus expenses, ie the profit which belongs to the owner/owners of the business

26
Q

Assets

A

Items owned by the business, split between non-current assets and current assets

27
Q

Liabilities

A

Items owed by the business, split between current liabilities and non-current liabiliaties

28
Q

Capital/equity

A

The investment of the owner/owners in the business

29
Q

Service sector business

A

A business which supplies services, eg secretarial agency, solicitor, estate agent

30
Q

Adjusted trial balance

A

Trial balance which incorporates the accounting adjustments and form which financial statements can be prepared

31
Q

Companies Act 2006

A

Source of regulation governing company financial statements

32
Q

FRS

A

Financial Reporting Standard - the UK domestic accounting standards

33
Q

IFRS

A

International Financial Reporting Standard - international accounting standards widely used by larger companies

34
Q

IAS 1, Presentation of financial statements

A

IFRS which sets out information to be shown on a company’s statement of profit or loss and statement of financial position

35
Q

IAS 2, Inventories

A

IFRS which sets out the accounting techniques to be used when valuing inventory

36
Q

ISA 16, Property, plant and equipment

A

IFRS which sets out the accounting treatment for non-current assets

37
Q

Incomplete records

A

Financial records where some aspect o the accounting system is missing

38
Q

Gross profit mark-up

A

Profit percentage or fraction added to the buying price

39
Q

Gross profit margin

A

Profit percentage or fraction based on selling price

40
Q

Inventory loss

A

Loss of inventory caused by fire, flood or theft

41
Q

Professional scepticism

A

Part of the assessment of the reasonableness of given figures within a particular context

42
Q

Partnership Act 1890

A

Legislation which includes the accounting rules of partnerships

43
Q

Partnership Agreement

A

An agreement - which may be informal - between the partners which, amongst other things, often varies the accounting rules of the Partnership Act 1890

44
Q

Partnership appropriation account

A

Part of the statement of profit or loss which shows how the profit is shared amongst the partners

45
Q

Capital account

A

Account which records the amount of capital contributed by a partner; usually for a fixed amount, which only alters where a permanent increase or decrease takes place

46
Q

Current account

A

A fluctuating account to which is credited: profit share, salary, interest on capital, and to which is debited: loss share, interest on drawings, and drawings

47
Q

Goodwill

A

The difference between the value of a business as a whole, and the net value of its separate assets and liabilities.

48
Q

Goodwill account

A

An account to which goodwill, an intangible non-current asset, is debited

49
Q

Premium for goodwill

A

Amount charged to a new partner who wins an existing partnership

50
Q

Companies House

A

An online platform when financial statements amongst other things are filed to allow for public viewing

Final Accounts (5 decks)

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