Maintaining Records Flashcards
What are the four important records that should be kept by a business?
- cash book
- debtors ledger
- balance sheet
- revenue sheet
Who are records used by?
- owners/managers
- taxation office
- firms
- investors
What is a debtors ledger?
A document that shows how much people and other businesses owe the business.
What is a cash book?
A record of all transactions between a business and its customers
What should receipts and documentation include? (4)
- date of transaction
- reason for payment
- nature of the receipt
- amount received/paid
What does it mean to be reconciled?
Brought into agreement with the business’s own records by adding late deposits and subtracting unpresented cheques to the bank statement and including direct payments in the business’s books
What is a bank reconciliation statement?
When the balance in a cash book is reconciled regularly with bank statements for that account.
- done regularly
What is a balance sheet?
A balance sheet lists what the business owns (assets) and how these assets were paid for (liabilities and equity)
What are assets?
Items of value owned by or owed to the business
External liabilities
The amounts owed by the business to creditors
Owner’s equity
The amount owed by the business to the owner
What does a balance sheet show?
How much the business is worth at any given time
What is the accounting equation for a balance sheet?
Assets= Liabilities + owners equity
What is a revenue statement?
An income statement, used to calculate net profit
When should a revenue statement be completed?
Weekly, monthly or at the end of the financial year
What is the formula for gross profit?
Gross profit = revenue - cost of goods sold
What is the formula for net profit?
Net profit = gross profit + other income - expenses
What is an example of “other income” in calculating net profit?
Interest received from rent, bank etc.
What must a person do under tax law?
Keep all documents that accurately record and explain all transactions, both receipts and expenses
Where does tax go?
Australian Taxation Office
What should be done to ensure enough money to cover tax?
Budgeting for tax obligations
What is a stocktake?
The process of counting all stock in a shop to determine total sales, then profit
What is a Business Activity Statement?
A document outlining the sales, income and expenditure of the business.
Helps with determining tax
How often do small business send their BAS to the ATO?
Every three months
