FAPS & MATS key points & questions Flashcards
(42 cards)
Credit balance on the VAT account?
Liability to HMRC
When does an amount go to suspense?
When accounts are under or over-cast
Profit or loss on a disposal?
Calculate the original cost less accumulated depreciation to date = carrying amount. Then work out the difference between that and what it was sold for.
Definition of going concern
Presumes that the business will continue trading for the foreseeable future and has no intention =s to significantly reduce in scale.
Definition of Accruals basis
Income and expenses are recorded at the time they are incurred rather than when cash is paid.
Definition of materiality
How significant the transactions or errors are within the accounts. If it is big enough to significantly change the decisions of the users then it is material.
Accruals are a liability
so a credit on the ETA (included in creditors)
Prepayments are an asset
so a debit on the ETA (included in debtors)
Closing inventory on ETA
credit P&L
Debit balance sheet
Wages
Expense (dr) on P&L
Describe & explain what the accounting equation is, importance and how it’s used.
Assets = liabilities + capital + profit - drawings. It tests the basic principles of double-entry. If DE is done correctly then the AE will always balance. The equation is how the balance sheet is laid out.
Describe and explain the P&L
Shows how the business performed over a period of time.
Describe and explain the balance sheet
Shows the STRENGTH & LIQUIDITY of the business. A snapshot of the business’ financial position at a specific point in time. A & Ls are split between current and non-current
What type of transaction are discounts received?
other INCOME so credit on profit & loss
What type of transaction are discounts allowed?
Expense = debit
Net assets
NC assets + current assets - NC liabilities - current liabilities
order of assets and liabilities on balance sheet
liquidity - so those that take the longest to turn to cash at the top. Debtors, bank, cash
OAR
actual oh/s divided by rate
under-absorbed overheads
budget is less than actual
Valuation using absorption costing
Higher profit because closing inventory is valued higher as fixed production overheads are included in cost of sales
Valuation using marginal costing
Lower profit as closing inventory is valued lower.
How to calculate closing inventory
Direct production costs divided by number produced times number left in stock
SV cost
sv total cost less variable cost = fixed element
Breakeven point in units
Total fixed overheads divided by contribution PER UNIT