Glossary Flashcards
What is a partnership capital account?
-the balance on the partners capital accounts represents the official amounts, that each partner has contributed as capital to the business
What is a partnership current account?
-the balances on the partners current accounts, represents amounts that have been allocated to each partner from the business’s income, less amounts each partner has withdrawn from the business in drawings
What are accruals?
-an accrued expense is an expense that has or will be posted to the accounts in a later accounting period
-but the expense was incurred in an earlier period so an adjustment must be made to bring in into the earlier period
What is the accruals concept?
-income earned and expenditure incurred, should be recorded in the financial statements in the period to which they relate to
-may not be when cash is received
What is capital employed?
-capital employed is the sum of capital and non-current liabilities
What is capital expenditure?
-the purchases of non-current assets
What is the carrying amount (NBV)?
-the cost of the asset - total accumulated depreciation
What are cash purchases?
-purchases made where the supplier is paid upfront regardless of the payment method used
What are cost of sales?
-opening inventory + purchases in the period - closing inventory at the end of the period
What are credit purchases?
-purchases made with an agreement to pay the supplier at a later date regardless of the payment method used
What is depreciation?
-the cost of non-current assets, which is spread over a number of years
What are doubtful receivables?
-where there is significant doubt about whether a debt will be paid
-set up a provision for an amount which can be based on a general/specific allowance
What are some asset accounts?
-bank, trade receivables and non-current assets
What are some liability accounts?
-trade payables, loan, overdraft and mortgage
What are some income accounts?
-sales, sundry income and interest receivable
What is going concern?
-expected to continue in operation for the foreseeable future
What is goodwill?
-the value of a business above the net value of all other assets and liabilities
What is gross profit?
sales revenue - cost of sales
What is gross profit margin?
(gross profit / sales revenue) x 100%
What are examples of intangible non-current assets?
-trademarks, patents and goodwill
What is a mark up?
-the profit as a percentage of cost of sales
What is net-assets?
NCA + CA - non-current liabilities
What is net current assets?
current assets - current liabilities
What are net purchases?
purchases - purchases returns + carriage inwards
What is net realisable value?
selling price - costs to get the product into a condition ready for sale
What is the NCA register?
-detailed list of all NCA a business has
-including date of purchase, original value and carrying value following depreciation
What is a partnership agreement?
-formal written agreement that covers matters like management and distribution of profits
What is a partnership appropriation account?
-how the profit is allocated to the partners
-forms part of P&L
What are prepayments?
-included in the accounts in an earlier accounting period because it was paid early
-expense actually belongs in a later accounting period when it was incurred
What is prudence?
-where judgement is required, care must be taken not to overstate income or assets nor understate expenses or liabilities
What is reducing balance depreciation?
-the carrying value of the asset is depreciated by the same percentage each year
-gets lower as assets get older
What is the return on capital employed?
profit for the year / (capital + NC liabilities) x 100%
What is revenue expenditure?
-direct material and labour costs together with the day to day running costs
What is straight-line depreciation?
-charging the same amount of depreciation each year of an asset’s life
What is the formula for SL depreciation?
cost - residual value / useful economic life
What is verifibility?
-different knowledgeable and independent observers could reach consensus, despite not reaching a complete agreement
