Key Terms Flashcards
What is inventory?
Raw materials or items for resale.
What is duality?
When two things happen. (e.g. paying and receiving)
What are the three different types of business?
Sole Trader
Partnership
Limited Liability Company
What is a sole trader?
This means that only one person owns the company. There is no difference between personal assets and business assets.
What is an asset?
What you own.
What is liability?
What you owe.
What is a partnership?
When two or more people own the business.
What is a limited liability company?
It is owned by shareholders whose liability is limited to the amount invested in shares.
What does the right side of a ledger show?
Amounts credited to the account.
What does the left side of a ledger show?
Amounts debited to the account.
What is petty cash?
Loose notes and coins.
What does cash at bank mean?
Money in your bank account. (the digital number)
What does Dr mean?
Debit
What does Cr mean?
Credit
What is a ledger?
A big book split into pages or ‘accounts’.
What is an income statement?
Profit loss. A statement that shows our performance in businesses sales, expenses and profits.
What is a statement of financial position?
A record of our assets and liabilities.
What type of discount does not need to be recorded in a ledger?
Trade
What is trade receivable?
Amounts owed by customers.
What is trade payable?
Amounts owed to customers.
How do we record a trade discount?
Record the amount after the discount has been taken off. Do not record the original amount unless necessary.
What is the cash discount/early settlement payment?
Discount for early payment.
What is a non-current asset?
An asset bought on credit for the long term in a business.
What is Capital?
The money or supplies used to start a business.
What is gross profit?
Sale minus the cost of sales.
What is a net asset?
The net value of the company.
What are books of prime entry used for?
Listing all transactions of a similar nature before we post them into a double entry book keeping system (a ledger). They are just a list, not an actual part of the double entry book keeping system.
What are the six different books of prime entry?
Sales Day Book Sales Returns Day Book Purchases Day Book Purchase Returns Day Book Cash Book Journals
What is a sales Day Book?
This is a book of prime entry. It records sales and is produced from the invoices we send to customers.
What is a sales return day book?
This is a book of prime entry. It records sales returns and is produced from the credit noted that we send to customers.
What is a purchase day book?
It is a book of prime entry. It records our purchases and is produced from the invoices we receive from suppliers.
What is a purchase returns book?
It is a book of prime entry. It records our purchase returns and is produced from the credit notes we receive from suppliers.
What is a purchase order?
A document we send to our supplier requesting goods.
What is a credit note?
It is received when goods are returned to a supplier or we send when goods are returned.
What is an invoice?
It is sent with goods that are sold.
What is a trial balance?
A list of all the balances extracted from the ledgers at a certain date. We can check that the credits and debits balance.
What is an error of omission?
Miss out an entry completely.
What is an error of commission?
An entry posted to the wrong account but the same class or type of account e.g. gas instead of electricity.
What is error of principle?
An entry posted to the wrong account and to a different type or class e.g. revenue expenditure vs. capital expenditure.
What is an error of original entry?
When an entry is entered into a book of prime entry incorrectly.
What is a complete reversal of entry?
Debits and credits the wrong way round.
What is a compensating error?
Errors that cancel each other out.
What is a subsidiary book?
A book of prime entry.
What is carriage inwards?
Cost of delivery of purchases.
What is carriage outwards?
A normal expense e.g. cost of delivery
What are return inwards?
Sales returns.
What are return outwards?
Purchase returns.
What is inventory?
Stock
