Essesntial accounting procedures Flashcards
What is an asset?
An asset is items of value owned by a company
What is a liability?
It is money owed by an organisation to another organisation
What is a debtor?
A person or organisation that owes money to the organisation
What is a creditor?
A person or business to whom the organisation owes money to
What is income?
Income is the money received from sales
What is expenditure
Expenditure is money spent to purchase goods and services by the organisation
What is a cash sale?
When the customer pays at time of sale
What is a credit sale?
When the organisation allows the customer to pay some time after the sale
What is a cash purchase?
When an organisation pays at time of purchase
What is a credit purchase?
When the supplier allows the organisation to pay some time after the purchase
Why is it better for an organisation if it pays for goods and services on credit?
It helps cash flow as the organisation is able to keep hold of its money for longer
What is a cash transaction?
When an organisation makes a sale and receives payment straight away
What is a credit transaction?
When an organisation makes a sale and receives payment sometime after.
What is a profit?
When an organisation earns more money than it spends
What is a loss?
When an organisation spends more money than it earns
What is gross profit?
Gross profit is sales minus the cost of sales
What is net profit?
Net profit is gross profit minus expenses
What is a purchase order?
A document used by customers to list the goods that they want to purchase
What is an invoice?
A document sent by the supplier to the customer listing the goods supplied and requesting payment
What is a credit note?
A document sent to the customer informing of amounts refunded for returned goods
What is a remittance advice?
A document sent to the supplier notifying them that an invoice has been paid
What is a statement of account?
A document that summarises transactions between a supplier and customer
What is a receipt?
A document given as proof of a cash transaction
What are the 6 books of prime entry?
- Sales daybook
- Sales returns daybook
- Purchases daybook
- Purchases returns daybook
- Cash receipts book
- Cash payments book
How often are the books of prime entry updated?
Daily
What books are payments made and received detailed in?
- Cheques paid listing
- Cash paid listing
- Cheques received listing
- Cash received listing
Why are codes used in an accounts department?
to make it easier to cross-reference documents and group information
What is batch processing?
It is when batches of financial documents are entered all together rather than individually
What is a paying-in slip?
A form used to pay cash and cheques into the bank
Why is it important to complete a paying-in slip accurately?
To make sure the business accounts match the actual amounts being paid into the bank
