Learning Aim C Flashcards
Purpose of accounting (5) ?
Measuring performance
Management of business
Control
Compliance
Recording of transactions
What is recording of transactions?
Accountants record all money coming in and out of a business.
Enabling them to keep track of payments received and ensure bills and taxes are paid.
Must have 6 years of transactions on record to avoid trouble with HM revenue and customs (HMRC)
What is management of a business ?
Manger of a business is responsible for: planning, monitoring, controlling.
What is compliance ?
All businesses have the responsibility to comply with financial reporting requirements in accordance with laws and regulations
Helps to combat and avoid fraud
What is control ?
The tracking of the amount a business is owed - trade receivables. And the amount a businesses owes - trade payables.
Helps to meet businesses day to day expenses.
What is measuring performance ?
Accountants measure how well the business is performing financially through: gross and net profit, sales revenue, efficiency in collecting owed money, expenditure and costs
Types of income (2) ?
Capital income
Revenue income
Types of capital income (5) ?
Loan
Mortgages
Shares
Owners capital
Debentures
Types of revenue income (6) ?
Cash sales
Credit sales
Rent received
Discount received
Commission received
Interest received
What is a loan ?
A loan is an amount of money lent to a business or business owner from a bank or other financial institution
What is a mortgage ?
A mortgage is similar to a bank loan, but tends to be for a longer period of time E.g.25 years and a larger sum of money
What are shares ?
When a business becomes a company they can issue shares to shareholders. Shareholders are owners of a business and contribute towards capital income
What is owners capital ?
Owners capital is money invested in a business from the owners personal savings
What is debentures?
Debentures are medium to long term sources of capital income.
Debentures can be secured against an asset
What are sales ?
Sales or sales turnover is money coming into the business from the sales of goods and services
What is rent received ?
When a business owns property they will charge others for the use of all or part of the property and receive income as rent received
What is commission received ?
A business may sell products or services as an agent on behalf of other businesses and for each sale they make, they receive commission
What is interest received ?
Interest received is money earned on savings or lending E.g. if a business has a positive bank balance it will receive interest on this
What is discount received ?
Discount received is when a business is given a percentage off a sale
Types of expenditure (2) ?
Capital expenditure
Revenue expenditure
Non-current assets ?
Land
Building and premises
Machinery and equipment
Vehicles
Fixtures and fittings
Intangible assets ?
Goodwill
-when you buy an existing business it has reputation which increases the value of the business.
Patents
-a legal protection of an invention
Trademarks
-a symbol, logo or brand name to set one business apart from its competitors
Brand name
-recognised by customers to differentiate the business from its competitors
Revenue expenditure (18) ?
Inventory
Rent
Rates
Heating and lighting
Water
Insurance
Administration
Telephone
Postage
Stationary
Salaries
Wages
Marketing
Bank charges
Interest paid
Straight line depreciation
Reducing balance depreciation
Discount allowed
