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Accounting > Preparing financial accounting information > Flashcards

Preparing financial accounting information Flashcards

1
Q

Sole trader

A
  • person who sets up and owns their own business
  • restaurants,hairdressers

ADVANTAGES

  • keep all profits
  • easy/ cheap to set up
  • make all decisions

DISADVANTAGES

  • Unlimited liability
  • long working hours
  • harder to get loans
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2
Q

Role of a financial accountant

A

-to work with the finances of the business, collect information from business documents , check the accuracy of them,record the transactions appropriately, analyse and present the financial outcome of the business at the end of the financial period

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3
Q

Business documents (invoice)

A
  • a bill sent by a provider of a product to the purchaser
    last 3 figures;

x- purchases - Dr
x-VAT-Dr
x- name at top- Cr

IF DISCOUNT, TAKE OFF FINAL AMOUNT (WITH VAT)

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4
Q

Business documents(copy invoice)

A

seller keeps a copy to provide a record of sales
last 3 figure;

x-Sales-Cr
x-VAT-Cr
x-name at side-Dr

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5
Q

Business documents(credit notes)

A

can be used if goods have been returned(goods were damaged/unsuitable)
last 3 figures;

x-RP-Cr
x-VAT-Cr
name at side-Dr

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6
Q

Business documents(copy credit notes)

A

used by the business to record al sales returns
last 3 figures;

x-RS-Dr
x-VAT-Dr
x-name at side-Cr

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7
Q

Non- current asset

asset=something you own

A

things that the business own that will lat longer than 1 year

EQUIPMENT FURNITURE

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8
Q

Current assets

A

items that the business owns that can increase/decrease in the everyday course of trading

CASH INVENTORY

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9
Q

Current liabilities

A

things that the organisation owes that will not be owed after 1 year

OVERDRAFT RENT

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10
Q

Long term liabilities

A

things that the organisation owes that they will still owe after 1 year

MORTGAGE LOAN

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11
Q

Debit accounts

A

furniture F&F
cash equipment
sales returns purchases trade receivable
expenses(wages)
drawings
machinery
buildings
bank

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12
Q

Credit accounts

A 
loan                               bank overdraft
purchases returns        trade payable 
sales
 income(rent received)
capital
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13
Q

Trial balance

A

used to check the accuracy of the legers(both debit and credit sides should mathematically match)

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14
Q

Income statement

A

shows profit

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15
Q

Statement of financial position

A

shows how much the business is worth

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16
Q

Cash budgets

A 
a plan of the cash in from estimated sales and other incomes, and the estimated cash out(payments) each month
-shows planned cash flow
-alerts the business to any cash flow problems 
-used to help make decisions 
Ways to reduce the deficit ; 
find a cheaper supplier
increase sales
use hire purchase
17
Q

Overheads

A

indirect costs which are not easily identifiable in the product, but with these costs, the product could not be made.

  • rent/rates
  • electricity
  • heat and light
  • insurance
  • cleaning
18
Q

Cost unit

A
  • the product or service being produced(the item which the business is trying to work out the cost of
  • loaf of bread
  • tin of beans
  • tyre for a car
19
Q

Cost centre

A 
a department or area of a business where costs can be gathered from, or charged to.
-mixing
-packaging
-storage
-
20
Q

Cost allocation

A

-means that an overhead can be allocated to a specific cost centre or department, as this is where the overhead arose

21
Q

Cost apportionment

A

where an overhead cannot be directly allocated or charged to one particular cost centre or department, the overhead will be apportioned( shared or divided) between each cost centre or department
e.g rent would be divided between all the cost centres depending on how much floor space they take up.

22
Q

Cost absorption

A

once all overheads have been charged to cost centres, a total overhead costs for the business or factories can be determined. The next stage is to charge each product being made with a small proportion of the total overheads

23
Q

methods of overhead apportionment

A

FLOOR AREA

  • rent and rate
  • building assurance
  • lighting
  • cleaning of building

NUMBER OF EMPLOYEES

  • canteen costs
  • office and admin costs
  • personnel and staff welfare costs

VALUE OF FIXED ASSETS
-depreciation of fixed assets

POWER

  • electricity
  • gas
  • water
24
Q

Fixed costs

A

costs that do not change with changes in production or sales
rent, insurance and loan interest

25
Q

Variable costs

A

costs that do not change directly with any changes in production or sales
cost of materials,electricity,labour wages

26
Q

Break even charts

A
  • easily understood as it compares costs to sales
  • highlights areas of profit and areas of loss
  • can calculate profit at various levels of output
27
Q

Contribution

A

difference between selling price per unit and variable cost per unit(goes towards paying fixed costs, then goes to wards profit)

28
Q

Time based systems

hrs worked x rate per hour

A

payment is made by the hour, week or month irrespective of the level of output or how hard the employee works
used when;
all workers are doing the same job
quality rather than quantity of work is required

ADVANTAGES

  • easy to calculate wages
  • easy to understand for both employee and employer
  • wage costs can be predicted fairly accurately

DISADVANTAGES

  • Systems does not provide incentives for workers to work harder
  • workers have to be paid even if no work is available for them to do
  • management bust accurately record the time worked by each employee
29
Q

Overtime

A 
work longer hours the is stated in your contract
paid at a higher rate 
DOUBLE TIME
TIME AND A HALF
TIME AND A THIRD
30
Q

Piece work

No. of components x price paid per unit

A
  • employer pays a specific amount for each unit produced
  • suitable for production when large quantities of an identical product are being made

ADVANTAGES

  • simple to operate
  • incentive to work harder

DISADVANTAGES

  • all units require to be checked to ensure high quality
  • workers wages can change from week to week
  • workers may become bored with repetitive work
31
Q

Sources of finance

A

bank loan

  • an amount borrowed from the bank
  • sole trader must put forward a business idea in order for them to secure the investment from others
  • will have inters on it

capital
-investment that the sole trader has put in to the business to start it up

overdraft

  • sole trader can approach the bank to ask permission to withdraw funds greater than the amount in the businesses bank account
  • paid back over a short period of time

credit

  • purchasing inventory and other items such as cars and equipment may be bought now to use and pid for at a later date
  • will have interest attached

Accounting (3 decks)

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