L1 (Tue-Wed) Analysis and GP calculatiosn Flashcards
What does the recording process in accounting involve?
The recording process involves recording transactions in the accounting system.
What is the formula for the accounting equation?
A = E + L
What does ‘Dr’ and ‘Cr’ stand for in accounting?
‘Dr’ stands for Debit, and ‘Cr’ stands for Credit.
In the recording process, what does Dr (+) refer to?
Assets increase.
In the recording process, what does Cr (-) refer to?
Liabilities decrease.
What account should be credited for dental supplies?
Creditors Control / Dental Supplies
What is a perpetual inventory system?
A system that maintains total control over the flow of inventory.
What is recognized when sales are made in a trading entity?
Income is recognized.
What is the formula to calculate Gross Profit?
Sales - Cost of Sales = Gross Profit
How is Gross Profit expressed?
As a percentage.
Fill in the blank: Gross profit mark-up is based on _______.
Cost
Fill in the blank: Gross profit percentage is based on _______.
Sales
If the cost of goods sold is R3,600 and the gross profit mark-up is 20%, what is the selling price?
R4,320
If the cost of goods sold is R3,600 and the gross profit percentage is 20%, what is the selling price?
R4,500
What does Dr Sales (E) and Cr Bank represent in a trading entity?
Recognition of income at selling price if sales were on a cash basis.
What does Dr Cost of Sales (E) represent?
It represents the cost incurred to make inventory ready for sale.
True or False: Gross profit does not have its own account.
True
What are the two main ways to express gross profit?
- Gross Profit Mark-up
- Gross Profit Percentage
What happens when Sales > Cost of Sales?
Gross Profit is generated.
