Key Words (Lectures 1-10)

Question 1

Accounting equation

Answer 1

Assets-liabilities-opening capital +drawings= profit

Question 2

Going concern

Answer 2

Assumption that the entity will continue in operational existence in the foreseeable future

Question 3

Accrual

Answer 3

Allocates income + expenses to periods they relate to rather than when cash has changed hands

Question 4

Matching

Answer 4

The costs that’re incurred thru generating revenue during that period should be included in the financial statements

Question 5

Materiality

Answer 5

Only significant items should be disclosed on the financial statements

Question 6

Historical cost

Answer 6

The actual cost price an item was bought for

Question 7

Fair value

Answer 7

The amount which an asset could be sold for and is valued at now

Question 8

Money measurement

Answer 8

Every transaction is measured in monetary terms

Question 9

Duality

Answer 9

For every action there’s an equal + opposite reaction, double entry

Question 10

Prudence

Answer 10

No profits included unless they’re certain to be received

Question 11

Substance over form

Answer 11

Preparer of financial statements should look at economic substance of transaction over legal form
E.g leasing a revenue generating asset should be included

Question 12

Separate determination

Answer 12

No offsetting of assets + liabilities or income + expenses

Question 13

Net realisable value

Answer 13

Value an asset can be sold- estimated costs incurred when selling it- cost of item

Question 14

Name all the Books of prime entry

Answer 14

Sales day book
Purchase day book
Sales returns day book
Purchase returns day book
Cash book
Petty cash book
The journal

Question 15

Revenue expenditure

Answer 15

Money spent by business to maintain everyday operations

Question 16

Capital expenditure

Answer 16

Money spent by business on income generating items, used in long term

Question 17

Contra

Answer 17

You owe someone 50p but they owe you £5 so they just give u £4.50

Question 18

Settlement discount

Answer 18

A discount that’s offered to incentivise ppl to pay earlier, but it’s not always taken

Question 19

Who is exempt from vat?

Answer 19

Fundraising for charity, charities, most food + drinks, medical supplies, childrens clothes, funeral services

Question 20

Is net inclusive or exclusive of VAT?

Answer 20

Exclusive

Question 21

Is gross inclusive or exclusive of vat?

Answer 21

Inclusive

Question 22

Is vat taken after the trade discount or settlement discount?

Answer 22

Vat is taken after both the trade discount and settlement discount have been deducted

Question 23

What does the ‘float’ refer to, in petty cash terms?

Answer 23

The fixed amount the petty cashier has at the beginning of each period.

Question 24

What happens at the end of the period to the petty cashier?

Answer 24

They are reimbursed the exact amount that was spent during this period, making the float back to its original amount.

Question 25

What are the columns of the petty cash table, in order?

Answer 25

Receipts Date Details Voucher no. Total payment Analysis columns(e.g postage, travel exp, wages)