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CIMA C02 Financial accounting > Final Ones > Flashcards

Final Ones Flashcards

1
Q

Fundamental Qualitative Characteristics

A

Relevance

Faithful representation

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2
Q

Enhancing Qualitative Characteristics

A

Comparability
Verifiability
Timeliness
Understandability

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3
Q

Vertical presentation of the SFP

A

Assets
Non current assets
Current assets
TOTAL

Capital and liabilities
Capital
Non current liabilities
Current liabilities
TOTAL
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4
Q

Working capital/ net current assets

A

Current assets - current liabilities
If positive = net current assets
If negative = working capital

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5
Q

Errors of commission

A

One side of the transaction has been entered into the wrong account

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6
Q

Errors of principle

A

The correct and incorrect amounts are of different types I.e. Dr has gone to SFP instead of SPL

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7
Q

Error of original entry

A

Wrong amount has been used for both debit and credit entries

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8
Q

Carriage outwards (sales)

A

carriage on goods sold by the organization

treated as an expense against gross profit

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9
Q

Carriage inwards (purchases)

A

carriage charged by the supplier on purchases

treated as an expense in cost of sales

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10
Q

Cash discounts

A

referred to as a settlement discount

MUST BE ACCOUNTED FOR

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11
Q

TAX employers

A

DR Wages payable
CR HMRC
DR Wages expense
CR wages payable

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12
Q

DR Entries

A 
Increase in assets
Decrease in liabilities
Decrease in capital
Increases in expenses
Decreases in revenue
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13
Q

CR Entries

A 
Decrease in assets
Increase in liabilities
Increase in capital
Decreases in expenses
Increases in revenue
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14
Q

Credit sales returns

A

DR sales returns

CR receivables

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15
Q

Cash sales returns

A

DR sales returns

CR Cash

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16
Q

Credit purchase returns

A

DR payables

CR purchase returns

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17
Q

Cash purchase returns

A

DR cash

CR purchase returns

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18
Q

Cash discount allowed

A

DR Discounts allowed

CR Receivablespart of net profit number in SPL

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19
Q

Discount received

A

DR Payables

CR Discounts receivedpart of the net profit number in SPL

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20
Q

Trade discounts

A

ONLY DEDUCTED FROM QUOTED PRICE AND NOT ACCOUNTED FOR

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21
Q

Cash discounts

A

MUST BE ACCOUNTED FOR

if given both trade and cash discount, trade discount must be applied before the cash discount is calculated

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22
Q

Output tax

A

VAT on sales

CREDIT sales tax account

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23
Q

Input tax

A

VAT on purchases
Can be reclaimed
DEBIT sales tax account

24
Q

Irrecoverable debts

A

DR Irrecoverable debts expense account (SPL)
CR receivables account (SFP)
DR Bank accountCR receivables account

25
Q

part payment of an irrecoverable debt after write off

A

Bring CR balance down from receivables
Payment
CR receivables
DR Bank

Write off
DR irrecoverable debts expenses account
CR receivables

26
Q

Double entry for allowance for receivables

A

DR Irrecoverable debts expense account (SPL)

CR Allowance for receivables account (SFP as liability)

27
Q

Accounting for increase in allowance for receivables

A

DR irrecoverable debts expense

CR allowance for receivables

28
Q

Capital employed

A

Capital employed represents the capital investment necessary for a business to function. Consequently, it is not a measure of assets, but of capital investment: stock or shares and long-term liabilities.

29
Q

Valuing inventory

A

should be valued at the lower of cost and net realizable value

30
Q

Net realizable value

A

Revenue expected to be earned in the future when the goods are sold, less any selling costs

31
Q

AVCO

A

previous balance value + new receipts value
/
previous units + new units

32
Q

Straight line depreciation

A

original cost - estimated residual value
/
estimated useful life= depreciation per annumor% x cost

33
Q

reducing balance depreciation

A

Shown as a reduction against the cost of non current assets
Cost x
Accumulated depreciation (x)
= carrying value x

34
Q

Accounting for disposal step 1

A

remove the cost from the books and transfer to disposal account
DR disposal account
CR non current asset cost account

35
Q

Accounting for disposal step 2

A

remove the accumulative depreciation from the books and transfer to the disposal account
DR accumulative disposal account
CR disposal account

36
Q

Accounting for disposal step 3

A

record the cash proceeds
DR cash account
CR disposal account

37
Q

Disposal through part exchange (PEA)

A

Steps 1 & 2 same as disposal process

Step 3 record the part exchange
DR non current asset cost account
CR Disposal account

Step 4 record the cash proceeds (if any)
DR non current asset cost account
CR cash payable

38
Q

Purchase daybook double entry

A

DR purchases
DR sales tax
CR payables

39
Q

Sales daybook double entry

A

DR receivables
CR sales tax
CR sales account

40
Q

Returns in daybook double entry

A

DR returns inwards
DR sales tax
CR receivables

41
Q

Returns out daybook double entry

A

DR payables account
CR sales tax
CR returns outwards account

42
Q

The Journal

A

Where you note transactions that don’t naturally fall into the normal books of prime entry i.e. year end adjustments, bad and doubtful debts, accruals and prepayments, inventory

IS A BOOK OF PRIME ENTRY AND PART OF THE DOUBLE ENTRY

43
Q

Books of prime entry

A

where transactions are first recorded

daybooks i.e. sales day book list of sales made on credit, purchases daybook list of purchases made on credit

44
Q

records outside of double entry

A

memorandum accounts

45
Q

Role of an auditor

A

issue an opinion whether financial statements are true and fair
perform control tests to confirm client controls and detect misstatement

46
Q

Role of management

A

to safeguard assets

act as stewards to the owners

47
Q

historical cost convention

A

in times of rising costs historical cost convention will overstate profits and understate asset values

48
Q

objective of an internal audit

A

to assist directors of a company in the effective discharge of their financial responsibilities towards the members

49
Q

role of an internal auditor

A

to report to management on the accounting systems

50
Q

realisation

A

revenues should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received

51
Q

capital maintenance

A

profit is earned only if the value of the organisations net assets or it’s operating capability has increased during the accounting period

52
Q

stewardship

A

is concerned with ensuring that there are procedures in place to safeguard assets, provide properly for liabilities, protect against misuse of assets and report adequately to the shareholders or stakeholders of an organisation

53
Q

not for profit company accumulated fund

A

equivalent of owners capital

54
Q

prime cost

A

total of direct costs

55
Q

Capital in single entities

A

is equity

Accounting equation is assets = equity + liabilities

CIMA C02 Financial accounting (21 decks)

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