Final Accounts Preparation Flashcards
What is the formula for gross profit margin?
gross profit/sales *100
What is the formula for mark up?
gross profit/cost of sales *100
When is a settlement discount realised?
Once the creditor has paid, otherwise you don’t know whether they have taken it up or not
Why are settlement discounts given?
To encourage the credit customer to pay promptly
How do you work out selling price when you have gross profit margin and COS?
COS/100%-GPM%
If cash is spent to improve a machine, where does the debit entry go?
Fixed assets
If cash is spent repairing a machine, where does the debit entry go?
Repairs and maintenance expense
Cost of a new machine is what type of expenditure?
Capital expenditure
Repairs of a broken machine is what type of expenditure?
Revenue expenditure
Cost of a part for an existing machine to improve its efficiency is what type of expenditure?
Capital expenditure
Cost of goods for resale is what type of expenditure?
Revenue expenditure
Where does opening stock appear in the final accounts?
Profit and loss account
How is closing stock recorded in accounts?
Debit stock account (asset)
Credit profit and loss account (cost of sales)
Which two places does closing stock appear in the accounts?
Profit and loss account
Balance sheet
Is a car for an employee to use capital or revenue expenditure?
Capital expenditure
