Incomplete Records Flashcards
Advantages of maintaining double entry records
1-full details are available about the assets,liabilities,revenues and expenses of the business
2-the preparation of financial statements is relatively straightforwardly
3-the calculation of the profit or loss for the year is likely to be reliable and accurate
4-more informed decision-making possible
5-a greater degree of control over business activities can be exercised
6-the possibility of crowed is rescued
7-comparisons with the results of previous years and with other businesses are possible
8-detailed records are available for reference purposes
9-information required by a bank or other lender is readily available
Define statement of affairs
a statement of affairs is a summary of the financial position of a business on a certain date.it is prepared instead of a statement of financial position when double entry records have not been maintained
State the circumstances in which statements of affairs is prepared
A statement of affairs prepared, instead of a statement of financial position. When double entry records have not been maintained.
State my it is not satisfactory to measure profit by changes in capital
It is not satisfactory to measure profit by changes in capital as it can only be estimated of the profit.it is not possible to show details of the gross profit,the revenue,the cost of sales,the expenses and so on.
-this means it is not possible to analyse the results and so informed decisions about the future cannot be made
Formula to find profit
Closing capital-opening capital+drawing-capital introduced
What is mark up
The gross profit expressed as a percentage of cost price
What is margin
The gross profit expressed as a percentage of the selling price
What is rate of inventory turnover
The number of times a business replaces its inventory in a given period of time
