Double Entry Bookkeeping Flashcards
what is double entry bookkeeping known as?
accounting equation
for every transaction, there is how many financial effects?
2
what r the 2 different financial effects known as?
‘the dual effect principle’
accountating purposes, what is the business owner seperate from?
the business owner is seperate from the business
the owner seperate from the business is known as what?
the seperate entity principle
what does seperate entity principle mean?
means that if the owner invests money into the business, this is shown as capital introduced
what does capital introduced mean?
money invested becomes a liability for the business, as the business owes money.
what will profit increase?
increase the owners capital acc & any drawings the owner takes will reduce this.
what assets can be owned and controlled by the business?
car, premises, cash, inventory, bank balance
what are liabilites?
liabilities are things owed by the business
examples of liabilites?
business loans, payables (money owed to suplier), liabilites owed for VAT or tax, bank balance -
what are drawings?
drawings are money or goods taken from the business by the owner, for their own use
what does capital relate to?
capital relates to the moeny, or assets, invested by the business owner.
what can capital include?
cash, cars, office equiptment
capital amount is owed to who?
owed back to the business owner and is therfore a liability of the business
What does the statement of profit and loss show?
The income and expenditure of a business over an accounting period
What does the profit and loss statement show?
It determines if the business has made a profit or loss
What does the statement of fiannaicla position show?
Shows the assets and liabilities of a business as of the last day of the accounting period
What is capital income
Capital income is income received from the sale of the capital assets of a business
Eg of capital income
Sale of a motor vehicle, sale of a property, sale of office equipment
Where would capital sales be show?
On statement of profit and loss
What is capital expenditure
This is incurred on the purchase for non current assets or alteration/improvement of non current assets
Example of capital expenditure
Motor vechiles, property, office equipment, improvements to non current assets
What is capital expenditure items show?
On the statement of financial position
What is revenue income?
This is received on the day to day business actives
Eg of revenue income
Sales of services, sales of good
Where will revenue income be shown?
On the profit and loss statement
What is revenue expenditure
This is incurred on the day to day running expenses of the business
Example of revenue expenditure
Light and heat, staff training, repairs, rent
Where will revenue expenditure be shown
Profit or loss statement
What is a trial balance
A list of the business assets, liabilities, income and expense
Is premises asset or liability
Asset
Office equipment asset or liability
Asset
