Key Words (Lectures 1-10) Flashcards
Accounting equation
Assets-liabilities-opening capital +drawings= profit
Going concern
Assumption that the entity will continue in operational existence in the foreseeable future
Accrual
Allocates income + expenses to periods they relate to rather than when cash has changed hands
Matching
The costs that’re incurred thru generating revenue during that period should be included in the financial statements
Materiality
Only significant items should be disclosed on the financial statements
Historical cost
The actual cost price an item was bought for
Fair value
The amount which an asset could be sold for and is valued at now
Money measurement
Every transaction is measured in monetary terms
Duality
For every action there’s an equal + opposite reaction, double entry
Prudence
No profits included unless they’re certain to be received
Substance over form
Preparer of financial statements should look at economic substance of transaction over legal form
E.g leasing a revenue generating asset should be included
Separate determination
No offsetting of assets + liabilities or income + expenses
Net realisable value
Value an asset can be sold- estimated costs incurred when selling it- cost of item
Name all the Books of prime entry
Sales day book
Purchase day book
Sales returns day book
Purchase returns day book
Cash book
Petty cash book
The journal
Revenue expenditure
Money spent by business to maintain everyday operations
Capital expenditure
Money spent by business on income generating items, used in long term
Contra
You owe someone 50p but they owe you £5 so they just give u £4.50
Settlement discount
A discount that’s offered to incentivise ppl to pay earlier, but it’s not always taken
Who is exempt from vat?
Fundraising for charity, charities, most food + drinks, medical supplies, childrens clothes, funeral services
Is net inclusive or exclusive of VAT?
Exclusive
Is gross inclusive or exclusive of vat?
Inclusive
Is vat taken after the trade discount or settlement discount?
Vat is taken after both the trade discount and settlement discount have been deducted
What does the ‘float’ refer to, in petty cash terms?
The fixed amount the petty cashier has at the beginning of each period.
What happens at the end of the period to the petty cashier?
They are reimbursed the exact amount that was spent during this period, making the float back to its original amount.
What are the columns of the petty cash table, in order?
Receipts Date Details Voucher no. Total payment Analysis columns(e.g postage, travel exp, wages)
