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Financial Accounting > Key Words (Lectures 11-22) > Flashcards

Key Words (Lectures 11-22) Flashcards

1
Q

Bad debts

A

Those u no longer receive payment for (unrecoverable)

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2
Q

Doubtful debt

A

A debt that is possibly unrecoverable

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3
Q

Allowance for doubtful debts

A

Should be set up when a debt is possibly unrecoverable

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4
Q

Where do investments go on the SOFP

A

under non- current assets

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5
Q

Written Down Value (WDV)/ Net Book Value (NBV)

A

Historical cost of a NCA- accumulated depreciation

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6
Q

Useful life

A

Period where an assets expected to be available for use by the business

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7
Q

Residual value

A

Estimated amount business would get from disposal of asset at end of its useful life (- cost of disposal)

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8
Q

Straight line depreciation formula

A

Cost- residual value / useful life (years) OR given % rate x historical cost

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9
Q

Reducing balance method depreciation formula

A

Cost of asset x rate of depreciation CUMULATIVE

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10
Q

Rate of depreciation (RBM)

A

100- (UL x (square root of RV/Cost) x 100

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11
Q

What are the posting entries for Accruals?

A

Dr Expenses
Cr Accruals liability account

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12
Q

What are the posting entries for prepayments?

A

Dr prepayments
Cr expenses

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13
Q

Net Realisable Value (NRV)

A

Expected sales proceeds - associated costs to be incurred to make the sale

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14
Q

If the cost of an item is £27 and the NRV of an item is £32 which do you choose for the inventory figure?

A

Cost- £27

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15
Q

FIFO

A

First goods purchased are to be sold
Closing inventory consists of most recent purchases

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16
Q

LIFO

A

Latest goods purchased are to be sold first
Closing inventory consists of earliest purchases

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17
Q

Simple Average

A

Total cost/ no. of units sold

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18
Q

Outstanding cheques + outstanding lodgements

A

Cheques + cash received, paid into bank + entered in cash book but not yet credited on bank statement

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19
Q

Unpresented cheques + unpresented lodgements

A

Cheques drawn + entered in cash book which’ve not yet been presented for payment, thus don’t appear on bank statement

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20
Q

What are the errors that don’t change the trial balance?

A

Error of principle
Error of commission
Error of omission
Error of prime entry
Compensating error
Double posting error
COPPCD

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21
Q

Correct: Plant that was acquired at a cost of £5000 has been credited in the cash book but debited to the purchases account in error

A

Dr- Plant 5000 Cr- Purchases 5000

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22
Q

Correct: The purchase of consumable tools for £50 has been debited to repairs account in error

A

Dr- 50 Consumable tools Cr- 50 Repairs account

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23
Q

Correct: Bank charges of £27 shown on the bank statement have not been entered in the cash book

A

Dr- 27 Bank charges Cr- 27 cash book

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24
Q

Correct: a purchase invoice received from A. Creditor for £1,100 has been entered in the purchases day book as £100

A

Dr- 1000 Purchases Cr- 1,100 Payables

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25
Q

Correct: Wages paid of £40 have not been posted to wages account + debit side if purchases account has been overcast by £40

A

Dr- 40 Wages + Cr 40 Purchases

26
Q

Correct: Rent received of £400 has been entered in both cash book + ledger as rent paid

A

Dr- 400 cashbook Cr- 400 Rent paid + Dr 400 Rent received + Dr 400 cashbook

27
Q

What are the types of errors that cause a trial balance to disagree?

A

Arithmetic error
Posting error
Extraction error

28
Q

Correct: the debit side of a cashbook has been overcast by £1,000

A

Credit- 1000 cashbook Debit- suspense account 1000

29
Q

Correct: goods bought by cheque for £200 have been credited in cashbook but also not entered in purchases account

A

Dr- 200 Purchases Cr- 200 suspense account

30
Q

Correct: rent paid of £50 has been credited in cash book but also credited in error to rent account

A

Debit- 100 rent account Credit- 100 suspense account

31
Q

Correct: car repairs of £23 shown in cashbook have been debited to motor expenses as £32 in error.

A

Cr- motor expenses 9 Dr - suspense account 9

32
Q

Correct: the sales account contains a balance of £2000 but this has been entered in the trial balance as £200

A

Dr- 1800 suspense account Cr- sales 1800

33
Q

Sum of Year Digits Depreciation method

A

Annual depreciation expense= years of remaining useful life at start of year/ sum of years digits x depreciable amount

*depreciable amount = cost- residual value

34
Q

Return on assets

A

Profit from operations/ total assets x 100

35
Q

Profit margin/ gross profit margin/ operating profit margin

A

Profit/ revenue x 100
Gross profit/ revenue x 100
Operating profit/ revenue x 100

36
Q

Markup

A

Profit/ cost of sales x 100

37
Q

ROCE

A

Profit from operations/ assets - liabilities x 100
OR
Profit from operations/ share capital + reserves + long term loans x 100

38
Q

Return on shareholders’ fund ROSF

A

Net profit after tax + preference dividend/ share capital + reserves x 100

39
Q

Earnings per share

A

Net profit after tax + preference dividend / number of shares issued

40
Q

Current ratio

A

Current assets/ current liabilities

41
Q

Acid test

A

Current assets- inventories/ current liabilities

42
Q

Inventory holding period

A

Inventories/ cost of sales x 365

43
Q

Trade payables

A

Trade payables / cost of goods sold x 365

44
Q

Trade receivables

A

Trade receivables/ revenue x 365

45
Q

Asset turnover

A

Revenue/ total assets

46
Q

Gearing

A

Non- current liabilities/total capital + non current liabilities x100

47
Q

Interest cover

A

Profit from operations/ interest charges

48
Q

What are the components of the appropriation account?

A

Interest on drawings
Interest on capital
Partners salaries
Share of profit

49
Q

What are the postings for the current account?

A

Dr Cr
Bal b/d. Interest on capital
Interest on drawings. Salaries
Drawings. Share of profit

50
Q

What does the capital section of the SOFP consist of? (Partnerships)

A

Capital accounts + current accounts

51
Q

Write the SOPL+ SOCI for companies.

A

Turnover
Less cost of sales
Gross profit
Other income
Distribution expenses
Administrative expenses
Finance costs
Profit before tax
Tax expense
Profit after tax
Other comprehensive income:
Revaluation reserve
Total comprehensive income

52
Q

What are distribution costs?

A

Anything relating to warehouse or sales costs

53
Q

What are administrative costs?

A

Anything other, e.g rents + rates, wages, telephone

54
Q

Write out a SOCE.

A

Share capital Share premium Reval reserve Retained earnings Total
Bal at XX/XX/XX
Shares issued
Dividends
Total comprehensive income
Bal at XXX/XXX/XXX

55
Q

Write out a cash flow statement

A

Profit before tax
Adjustments:
Depreciation
Income from disposals of NCA’s
Finance costs
Increase/ decrease in inventory
Increase/ decrease in payables
Increase/ decrease in receivables
Cash flow generated from operating activities
Taxation
Interest charges
Net cash flow from operating activities
Cash flow generating from investing activities
Acquisition of NCAS
Proceeds from disposal of NCAS
Net cash flow from investing activities
Cash flow generated from financing activities
Dividends paid
Share capital
Proceeds from Loan
Net cash flow from financing activities
Total change in cash during period
+ Beginning cash bal
Ending cash bal

56
Q

How do you work out dividends paid in the CF statement

A

Retained earnings from previous year
+ net profit after tax from current year
- retained earnings from current year

57
Q

Working capital

A

Current assets- current liabilities

58
Q

Name all the profitability ratios

A

Return on assets
Gross profit margin
Operating profit margin
Expense/ revenue %
ROCE
ROSF
Earnings per share

59
Q

name all the Liquidity ratios

A

Current ratio
Acid test

60
Q

Name all the efficiency ratios

A

Inventory holding period
Trade receivables period
Trade payables period
Asset turnover

61
Q

Name all the position ratios

A

Gearing
Interest cover

62
Q

Tax paid

A

Taxation from current year
- tax expense from current year
- taxation from previous year

Financial Accounting (2 decks)

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