Incomplete Records Flashcards
Definition and picture of Margin Cost Structure
Gross Profit expressed as percentage of sales
- start with selling price as 100%
Sales 100%
(Cost of Sales ___75%)
Gross Profit 25% (told margin of 25%)
Definition and picture of Mark-up Cost Structure
Gross profit expressed as percentage of cost of sales
Start with cost of sales 100%, add profit on
Sales ___135%
(Cost of Sales 100% )
Gross Profit 35% (told mark-up of 35%)
Cost of Sales =
= Open Inventory
+ Purchases
- Closing Inventory
With what formula/proforma can sales on credit value be found?
Payments from Trade Receivables
+ Closing Balance of Trade R (represent sales in current period, cash not received yet)
- Opening Balance of Trade R (credit sales in previous period)
——————————————
Credit sales in period
What is the formula/proforma to find purchases value in a period?
Payments to Trade Payables during Period
+ Closing Balance of TP (represent purchases in current period not paid for yet)
- Opening Balance of TP ( represent purchases in previous period, paid for in this one)
—————————————-
Purchases during period
How would income that isn’t to do with the business’ operations paid into business bank account by the owner be dealt with?
This can’t be treated as income as not to do with the business.
DR Bank
CR Drawings
How would money paid from business bank account by owner that didn’t relate to business’ expenses be treated?
as drawings
DR Drawings
CR Bank
If an exam question states that proprietors drawings in a year are approximately $40 a week- how can you use this info?
Assume that each week is $40 so drawings for the year =
40 x 52 weeks
If an exam question states drawings for the year are between £35 and £45 per week - how can you use this info?
- can’t calculate any numbers from this info, do not average it out
- treat drawings as missing figure and then can double check answer once found that it is within range
How are goods taken by owner for own use recorded?
Dr Drawings
Cr Purchases (this has now become now the business’ purchase)
recorded at cost to business not sale price
not recorded against inventories
This can affect Trade Payables T account, as purchases figure must be adjusted
What is the accounting Equation?
Assets- Liabilities (Net assets) = Capital + Profit - Drawings
What is the Business Equation?
Closing Net Assets = Opening Net assets + capital introduced + Profit - Drawings
Why would creating a cash and bank summary be useful to a business?
- if most / all sales are cash
- some payments made from till cash not bank account
What is the structure of a Cash and Bank Summary?
- T account for Cash Summary
- On both DR/CR sides column for Cash in Hand and column for Bank
- Cash Receipts banked would appear as a contra
DR bank Column
CR cash in hand
How would theft of cash be recorded?
DR Expense OR insurance claim
CR cash account
What info can you use to find accrual/prepayment charge to SoP/L
- opening balance b/d
- closing balance c/d
- cash payments during period
What will an accrual b/d balance be?
Credit as they are current liabilities
What will a prepayment b/d balance be ?
Debit as they are current assets
