Key Points Primer 2

Question 1

current assets

Answer 1

assets expected to be converted into cash in that year

Question 2

debtors

Answer 2

customers that owe money (accounts receivable)

Question 3

marketable securities

Answer 3

short term investments, securities or debts to be sold or redeemed within a year

Question 4

creditors

Answer 4

money owed (accounts payable)

Question 5

overdraft

Answer 5

short term bank borrowings

Question 6

accurals

Answer 6

expense recongized before its paid

Question 7

debentures

Answer 7

loans in small amounts, not secured by physical assets or collateral by creditworthiness and reputation of issuer

Question 8

called up share capital

Answer 8

‘face vale’ shareholders money they put in on a permanent basis

Question 9

contra account

Answer 9

natural balance is opposite of the associated account, ex accumulate depreciation

Question 10

what happens to retained earnings reserve when dividends are paid?

Answer 10

retained earnings reserve in the balance sheet is reduced

Question 11

retained earnings formula

Answer 11

RE = Beg. RE + Net Income - Dividends

Question 12

historic cost

Answer 12

price of an asset based on original cost when acquired

Question 13

net relaizable value

Answer 13

the amount a company should expect to recieve once it sells or disposes of an asset

Question 14

replacement cost

Answer 14

the cost you’d have to pay to replace an asset with a similar asset at the present time and value

Question 15

gross profit

Answer 15

sales revenues - COGS (general indicuation of profitabllity, not as prcises as net profit)

Question 16

net profit

Answer 16

ALL revenues - ALL expenses

Question 17

operating profit

Answer 17

gross profit - operating expenses

Question 18

sales revenue

Answer 18

income realised from selling goods or services before deductions for expenses

Question 19

Cost of sales

Answer 19

direct costs incurred by businesses from the process of selling goods and services

Question 20

profit for financinal year

Answer 20

profit after deducting interest and tax

Question 21

credit sales

Answer 21

before cash has been received

Question 22

receipt

Answer 22

any amount of cash received from sales, services, investing activites, etc.
- transfer of cash

Question 23

time period

Answer 23

income statment = period of time

balance sheet = point in time

Question 24

other names for income statement

Answer 24

statement of operations or profit and loss