Financial Statements, Double Entry, Ledgers Flashcards
Income statement
The profit or loss made by the business
Subtract costs from sales revenue to calculate this
Statement of financial position
Summaries a company’s assets (what it owns), liabilities (what it owes), and equity (assets less liabilities)
What are Trade receivables
The amount of money a business is owed by its customers for goods or services that have been paid for
Trade payables
Suppliers that are owned money by the business because they sold goods to the business on credit
Non current assets (and examples)
Resources owned by the business for more than a year before being converted to cash and sold on
Examples are as followed: Equipment, Land, Premises, Buildings
What does RAIL stand for
Running costs, Assets, Income and Liabilities
Running costs and assets are debits
Income and Liabilities are credits
What’s the difference between debit and credit
Debits are incoming money
Credits is outgoing money
Debits (DR) go on the (left or right?) side of each T account
Left
“In England we DRive on the left and CRash on the right”
Credits (CR) go on the (left or right?) side of each T account
Right
“In England we DRive on the left and CRash on the right”
What are running costs
Running costs is money being regularly spent on certain things in a business
Running costs can be stuff such as wages, utilities, commissions pay & transporting good
What are non current assets
Resources that are owned by the business and are converted to cash within 12 months
Examples: Inventory, Prepayment, Trade receivables
What is capital introduced
Any money or goods provided by the owner for the business
What is typically on the debit side of a receivables ledger
Balance b/d
Credit Sales
Dishonoured Cheque
Discount on dishonoured cheque
Interest to charged receivables
What is on the credit side of the receivables ledger
Receipts from the customer
Discounts allowed (if there was any)
Sales returns
Balance c/d
What is a payables ledger account
An account that records the money that your business owners to
They may be owing money to creditors, vendors, suppliers, investors etc
What is on the debit side of the payables account
Payment to suppliers
Discount received (if there was any)
Purchase returns (credit notes from the purchase returns journal)
Contra with receivables ledger
Balance c/d
What is on the credit side of the payables ledger
Balance b/d
Credit purchases (invoices from purchases journal)
Dishonoured cheque (from the cash book)
Discount on dishonoured cheque (if there is)
Interest charges by payables (if there is)
Irrecoverable debts
Business won’t receive amounts of money owed by customer
Customer was sold goods on credit
The customer account has been declared bankrupt
Irrecoverable debts are an expense in the income statement
Depreciation definition
Spreading the cost of a non current asset over its useful life.
Decreases the value of non current assets over time
Examples of non current assets
Vehicles, Machinery, Equipment, Furniture, Buildings, fixture and fittings etc (these are all non current assets
Non current liabilities + Examples
Amounts owed by the business that are fully repaid after more than a year
E.g: Bank Loans, Mortgages and debenture
Current liabilities + Examples
Amounts owed by the business that must be repaid within a year
Examples: Accruals, Trade payables + Bank Overdraft
Residual value
The estimated value of an asset after it has been fully depreciated and reached the end of its useful life
Carriage in definition
The cost of transporting goods purchased by the business and is included as past of ‘Cost of Sales’
Carriage out definition
The cost of transporting goods sold by the business
Included as an expense
Profit for the year calculation
Gross Profit + Other Income - Expenses
Costs of sales
The cost to the business of buying or making the goods that it’s sold
Purchases definition
The costs of goods that have been bought for resale (doesn’t include non current assets)
Revenue definition
The value of goods and services sold, even if they havent been paid for
Discount received
Cash discount received from suppliers. Added after gross profit to calculate profit for the year
Discount allowed
Cash discount given to customers. One of the expenses subtracted when calculating profit for the year
Net book value
Cost - Accumilated Depreciation
The predicted value of a non current asset
Shown on the statement of financial position
What are accounting concepts
The broad principles that guide the preparation of financial statements
The 10 accounting concepts are..
- Accrual
- Business entity
- Consistency
- Cost
- Duality
- Going concern
- Materiality
- Money measurement
- Prudence
- Realisation
