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POA > Equations, Formulas and Definitions > Flashcards

Equations, Formulas and Definitions Flashcards

1
Q

What is the formula for assets?

A

Assets = Capital + Liabilities

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2
Q

What is the formula for capital?

A

Capital = Assets - Liabilities

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3
Q

What is the formula for liabilities?

A

Liabilities = Assets - Capital

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4
Q

What are non-current assets?

A

Assets that the company plans to keep and make use of for a long time (more than a year)

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5
Q

What are current assets?

A

Assets that frequently change in value.

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6
Q

What are non-current liabilities?

A

Amounts likely to be paid in the long term.

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7
Q

What are current liabilities?

A

Amounts that will be paid within the financial period (less than a year)

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8
Q

What is debt load?

A

Amount of money owed by a company or person. The amount can be huge.

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9
Q

What is accounts?

A

The art of recording, classifying, interpreting and summarizing information of a financial nature

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10
Q

Name 3 internal users of financial information.

A

Owners
Employees
Managers
Board of Directors

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11
Q

Name 3 external users of financial information.

A

Suppliers
Banks
Customers
Lenders
Competitors
Tax inspectors
Potential investors

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12
Q

Name 3 bookkeeper duties.

A

Balancing accounts
Preparing trial balances
Payroll records
Keeping inventory records
Storing documentation
Entering and posting transactions

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13
Q

Name 3 accountant responsibilities.

A

Budget and reviews
Prepare financial statements
Supervise accounting staff
Prepare tax assessments
Work with auditors

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14
Q

What are accounts receivables?

A

Anyone who owes the business money for goods supplied to them.

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15
Q

What are liabilities?

A

Money owed by the business to other individuals, businesses or organizations.

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16
Q

What are accounts payables?

A

Money owed by the business to it’s suppliers

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17
Q

What is bank overdraft?

A

When more is withdrawn than what the business has and the account essentially goes into negatives. Only businesses and organizations are allowed bank overdraft.

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18
Q

What is capital?

A

The owner’s investment into the business

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19
Q

What is drawings?

A

The owner taking cash out of business for his/her own private use.

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20
Q

What is the order of Current Assets on an SoFP?

A

Inventory
Receivables
Bank
Cash

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21
Q

What side is debit ALWAYS on?

A

The left side.

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22
Q

What side is credit ALWAYS on?

A

The right side.

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23
Q

An increase in assets goes to which account? Dr or Cr?

A

DEBIT

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24
Q

A decrease in assets goes to which account? Dr or Cr?

A

CREDIT

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25
Q

An increase in liabilities goes to which account? Dr or Cr?

A

CREDIT

26
Q

A decrease in liabilities goes to which account? Dr or Cr?

A

DEBIT

27
Q

An increase in capital goes to which account? Dr or Cr?

A

CREDIT

28
Q

A decrease in capital goes to which account? Dr or Cr?

A

DEBIT

29
Q

Debit or credit purchases?

A

DEBIT

30
Q

Debit or credit sales?

A

CREDIT

31
Q

Debit or credit returns inwards?

A

DEBIT

32
Q

Debit or credit returns outwards?

A

CREDIT

33
Q

What is an expense?

A

A recurring payment to a vendor because of the business’ continued use of the product/service.

34
Q

What is revenue?

A

Income a company receives from it’s normal business activities usually for sale og goods and services to customers.

35
Q

Debit or credit expenses?

A

DEBIT

36
Q

Debit or credit revenue?

A

CREDIT

37
Q

You must always ___ expenses. But if there’s a ___ you ___ it because it is an opposite action.

A

debit, refund, credit

38
Q

T/F? A trial balance consists of balance b/d s.

A

TRUE

39
Q

In terms of trial balances, name 4 accounts with DEBIT balances.

A

Assets
Expenses
Purchases
Returns inwards/sales returns

40
Q

In terms of trial balances, name 5 accounts with CREDIT balances.

A

Liabilities
Capital
Sales
Revenue
Returns outwards/Purchases returns

41
Q

After the trial balance is prepared, what financial statements follow?

A

The Income Statement
The Statement of Financial Position

42
Q

What is an income statement?

A

A statement showing the revenues, expenses, profit or loss of a business based on its activities over a period of time.

43
Q

What is a trading account used for?

A

Used to calculate profit from trade. This profit is called GROSS PROFIT.

44
Q

What is a profit and loss account used for?

A

Used to calculate profit AFTER expenses have been paid. This is called NET PROFIT.

45
Q

Formula for Net Sales.

A

Sales - Returns inwards

46
Q

Formula for COGAS (Cost Of Goods Available for Sale).

A

Opening stock + Purchases + Carriage inwards - Returns outwards

47
Q

Formula for COGS (Cost Of Goods Sold).

A

COGAS - Closing inventory

48
Q

Formula for Gross Profit.

A

Net Sales - COGS

49
Q

Formula for NET PROFIT

A

Gross Profit + any additional revenue - Expenses

50
Q

T/F? It’s possible to not have a Net Sales.

A

TRUE

51
Q

If you are doing a financial statement and something (like returns inwards) isn’t in the table what do you do?

A

Jump to the next section.

52
Q

What are carriage inwards and outwards?

A

Expenses

53
Q

In an Income Statement what does carriage inwards go under?

A

Less COGS

54
Q

NOTE: IN AN SOFP FOR INVENTORY ALWAYS USE CLOSING INVENTORY.

A

NOTE: IN AN SOFP FOR INVENTORY ALWAYS USE CLOSING INVENTORY.

55
Q

What does commissions payables go under?

A

Expenses.

56
Q

In an Income Statement what happens if there is no returns inwards?

A

The sales figure stays the same and is put under NET SALES.

57
Q

What is liquidity?

A

The ability to turn to cash as fast as possible.

58
Q

The Order of Liquidity goes from most to least liquid. List the 4 assets.

A

Cash
Bank
Building
Land

59
Q

What is capital expenditure?

A

Spending money to buy NCA

60
Q

What is revenue expenditure?

A

Money spent on expenses (day-today things)

61
Q

NOTE: WHEN DOING A TRIAL BALANCE WHATEVER SIDE BAL B/D IS ON (CR/DR) IN THE DOUBLE ENTRY IS THE SIDE IT’S ON IN THE TRIAL BALANCE.

A

NOTE: WHEN DOING A TRIAL BALANCE WHATEVER SIDE BAL B/D IS ON (CR/DR) IN THE DOUBLE ENTRY IS THE SIDE IT’S ON IN THE TRIAL BALANCE.

62
Q

NOTE: IF AN ACCOUNT HAS NO BALANCE B/D IT WON’T APPEAR IN THE TRIAL BALANCE BECUASE A TRIAL BALANCE IS A LIST OF BAL B/D.

A

NOTE: IF AN ACCOUNT HAS NO BALANCE B/D IT WON’T APPEAR IN THE TRIAL BALANCE BECUASE A TRIAL BALANCE IS A LIST OF BAL B/D.

POA (2 decks)

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