Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Intro to Accounting > Exam Revision > Flashcards

Exam Revision Flashcards

1
Q

What is the full accounting equation?

A

Assets = Liabilities + Capital + (Income - Expenses) - Drawings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Assets

A

An asset is a present economic resource controlled by the entity because of past events.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Liabilities

A

A liability is a present obligation of the entity to transfer an economic resource because of past events.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Equity

A

The residual interest in the assets of the entity after deducting all its liabilities.

OR

What is left of assets after taking away all liabilities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Capital

A

What the business’ financial assets are that are available to spend.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Income

A

Increase in economic benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Expense

A

Decrease in economic benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Drawings

A

Money taken out of the business for personal use.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Why should the accounting equation balance?

A

It should balance because according to the dual aspect concept every transaction impacts the business in two ways which must be equal and opposite.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Annual Depreciation Charge

A

Cost - Residual Value
______________________

Useful economic life (in years)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Straight Line Depreciation

A

Given percentage rate X historical cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Reducing Balance Depreciation

A

% rate of depreciation X net book value of asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Net Book Value

A

Cost - Accumulated Depreciation

(accumulated depreciation is previous accumulated depreciation not the same as the one you calculate)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

SOPOL OR SOFP? / Debit or Credit

Depreciation Expense

A

Statement of Profit or Loss / Debit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

SOPOL OR SOFP? / Debit or Credit

Accumulated Depreciation

A

Statement of Financial Position / Credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Prudence Concept for Year-End Inventories

A

Prudence concept means we use the value lower between cost and net realisable value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is closing inventory presented on SOFP?

A

As a current asset.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How is closing inventory presented on SOPOL?

A

As a reduction of the cost of goods sold.

Explanation: Cost of goods sold = opening inventory + purchases - closing inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

SOPOL OR SOFP? / Debit or Credit

Accruals

A

Statement of Financial Position / Credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Accruals

A

Outstanding payments that the company hasn’t recorded or paid yet.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

SOPOL OR SOFP? / Debit or Credit

Specified accruals e.g. marketing expenses

A

Statement of Profit or Loss / Debit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How do you include Accruals in SOPOL?

A

E.g. marketing expenses get added to the marketing expenses given in the trial balance to get total marketing expenses for the year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How do you include Accruals in SOFP?

A

Under current liabilities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

SOPOL OR SOFP? / Debit or Credit

Prepayment

A

Statement of Financial Position / Debit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
SOPOL OR SOFP? / Debit or Credit Specified prepayments e.g. rent
Statement of Profit or Loss / Credit
26
How do you include Prepayments in SOFP?
It would be recorded as a prepayment under current assets.
27
How do you include Prepayments in SOPOL?
E.g. the rent prepayment would be removed from the rent given in the trial balance to attain the total rent for the year. This would be placed as rent as part of administrative expenses.
28
What do credit losses do?
They reduce the amount of trade receivables whilst creating a new expense.
29
SOPOL OR SOFP? / Debit or Credit Credit Losses
Statement of Profit or Loss / Debit
30
SOPOL OR SOFP? / Debit or Credit Trade Receivables
Statement of Financial Position / Credit
31
How do you include Credit Losses in SOPOL?
This would be recorded as credit losses as a part of administration expenses.
32
How do you include trade receivables in SOFP?
You remove credit losses from the trade receivables given in the trial balance to get a new receivables number which is recorded under current assets.
33
How do you include Tax in SOFP?
It is recorded as a current liability called Corporation Tax Payables.
34
How do you include Tax in SOPOL?
Tax is used to find net profit in the Statement of Profit of Loss. You just use the tax percentage on your profit before tax to find net profit.
35
How do you include Retained Earnings in SOFP?
You add the retained profit from the year before to the net profit from this year (found in SOPOL) to get the retained profit for this year. Retained profit is put into the SOFP in the equity section.
36
SOFP OR SOPOL (and where) Sales
SOPOL Right at the beginning - used to find gross profit after removing the cost of sales.
37
SOFP OR SOPOL (and where) Inventory from the start of the year you are recording
SOPOL Your opening inventories - you add your purchases and remove your closing inventories from this to get cost of sales.
38
SOFP OR SOPOL (and where) Marketing expenses
SOPOL In the mock you have to do accruals for SOFP but in SOPOL you put marketing expenses under distribution expenses for full value + adjustment. This is between gross profit and profit from operation.
39
SOFP OR SOPOL (and where) Rent for office building
SOPOL In the mock you remove the prepayment (and the prepayment is put into the SOFP) but the rent for office building is put under administration expenses between gross profit and profit from operation.
40
SOFP OR SOPOL (and where) Share Capital
SOFP This is put under equity.
41
SOFP OR SOPOL (and where) Non-current borrowing
SOFP This is put under non-current liabilities.
42
SOFP OR SOPOL (and where) Finance Cost
SOPOL This cost is removed from your profit from operation, then taxation is also removed to leave you with your net profit.
43
SOFP OR SOPOL (and where) Purchases
SOPOL This put in the cost of sales section and added to your opening inventories (then closing inventories are removed to find total cost of sales - which is then removed from sales to find gross profit).
44
SOFP OR SOPOL (and where) Telephone
SOPOL This is put under administration expenses between gross profit and profit from operation.
45
SOFP OR SOPOL (and where) Receivables
SOFP This is put under current assets - credit losses are removed from this in the mock so the number isn’t the exact same as shown in the trial balance.
46
SOFP OR SOPOL (and where) Office Buildings
SOFP In the statement of financial position this is called PPE (Property, Plant and Equipment), in the mock you had to remove the full accumulated depreciation which was the new depreciation value for the year added onto the accumulated depreciation from before. This is all under non-current assets.
47
SOFP OR SOPOL (and where) Accumulated Depreciation from beginning of the year you are reporting
Both In SOFP this is added to the depreciation from the year and that total is removed from the value of the current assets they refer to. In SOPOL you remove this from the value of what is being depreciated (as shown in the trial balance) and then multiply this new number by the rate of depreciation to find depreciation expenses which goes under administration expenses - between gross profit and profit from operation.
48
SOFP OR SOPOL (and where) Payables
SOFP This is put under current liabilities.
49
SOFP OR SOPOL (and where) Bank
SOFP This is put under current assets.
50
SOFP OR SOPOL (and where) Cash
This is put under current assets.
51
SOFP OR SOPOL (and where) Retained profit from the beginning of the year you are reporting
SOFP This is added to the net profit found in your SOPOL to get a new value for retained earnings which goes in the equity section.
52
What order are the sections in the SOFP?
Assets, Non-Current Assets, Current Assets, Equity and Liabilities, Equity, Non-Current Liabilities, Current Liabilities. Totals for each section at the end of them.
53
What order are the sections in the SOPOL?
Gross Profit (Sales minus cost of sales) Profit from Operation / Operating Profit (Gross profit minus administration/distribution expenses) Net Profit (Profit from Operation minus finance costs and taxes). There is also profit before taxation which is profit from operation minus finance costs.
54
Return on capital employed
Operating Profit _________________________________________ (equity + non-current liabilities)
55
Net profit margin
Net Profit ___________ Revenue
56
Current Ratio
Current Assets ___________________ Current Liabilities
57
Quick Ratio (acid test ratio)
Current Assets - Inventory ___________________________ Current Liabilities
58
Quick Ratio (acid test ratio)
Current Assets - Inventory ___________________________ Current Liabilities
59
Gearing Ratio
Non-Current Liabilities __________________________________ (Non-Current Liabilities + Equity)
60
What calculations does profitability relate to?
Return on capital employed / net profit margin relate to profitability – if they go down/up then profitability goes down/up.
61
What calculations does liquidity relate to?
Current ratio/Quick ratio (acid test ratio) relate to liquidity – if they go down/up then liquidity goes down/up. Quick ratio provides a stricter viewpoint, so it is more important. It measures if they have enough assets to cover liabilities (with quick ratio removing inventories).
62
What calculations does solvency relate to?
Gearing ratio relates to solvency – the lower the ratio, the better the solvency of the business as the result tells you how much of the business is financed by non-current liabilities – the rest of the business would be financed by equity
63
Break-Even Point
Fixed Costs _____________ Contribution
64
Contribution
Selling price per unit - variable cost per unit
65
What is the margin of safety described as?
A measurement of risk.
66
Margin of Safety (in units)
Expected sales - break-even point
67
Margin of Safety (as percentage)
Margin of safety (in units) ___________________________ Expected sales
68
Sales Variance
Sales volume variance = original budget profit – flexed budget profit Sales price variance = actual sales – flexed budget sales Total sales variance = sales volume variance + sales price variance
69
Material Variance
Material usage variance = (actual quantity used – budgeted quantity) x budget cost per unit Material price variance = actual cost of materials used – budgeted cost Total material variance = material usage variance + material price variance
70
Labour Variance
Labour efficiency variance = (actual hours worked – budget hours) x labour rate per hour Labour rate variance = actual cost of hours worked – budgeted cost of hours worked Total labour variance = labour efficiency variance + labour rate variance
71
ABC Costing Activity Rate
Estimated overhead for cost pool (different activities such as assembly) _____________________________________________ Total activity for cost pool
72
Expected total overheads for product
Activity rate per cost pool X expected activity for cost pool per unit
73
Absorption rate per (e.g. machine hour) for two products
Overheads incurred _________________________________________________ (machine hours per unit product A X amount of sales product A) + (machine hours per unit product B X amount of sales product B)
74
After finding absorption rate (e.g. per machine hour). How do you find overhead absorbed for product A?
(machine hours per unit product A X amount of sales product A) X absorption rate per machine hour two products

Intro to Accounting (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions