Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Accounting > Random > Flashcards

Random Flashcards

1
Q

What is the definition of an associate?

A

An entity that’s not a subsidiary, but the investor has significant influence.

Usually where the investor holds 20-50% of shares.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

In consolidations, under which circumstances will a provision for unrealized profit adjustment be necessary?

A

When a company sells to another company within a group, and the other company still has some of those goods in inventory at the end of the year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

In a consolidated Statement of Financial Position, how is the share capital calculated?

A

It is the share capital of the parent company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How is goodwill arising on consolidation calculated?

A

It’s the difference between the fair value of the subsidiary and the fair value of the net assets of the subsidiary.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the definition of a subsidiary?

A

An entity that is controlled by another entity (usually with a shareholding of at least 50%).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Does a rights issue of shares appear on a Statement of Cash Flows?

A

Yes.

It appears under the heading Cash Flows from Financing Activities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Does a surplus on revaluation appear on a Statement of Cash Flows?

A

No.

It does not appear as no cash is received.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Does a bonus issue of shares appear on a Statement of Cash Flows?

A

No.

Bonus shares are issued for free, so no cash is received.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the difference between the Direct and Indirect method of arriving at the ‘cash generated from operations’ on a Statement of Cash Flows?

A

Direct method - Shows the actual amount of cash received and paid in respect of operations.

Indirect method - Starts with the profit before tax, then adjusts it to result in the cash generated.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What items appear on the Statement of Cash Flows under the heading ‘Financing Activities’?

A

Proceeds from the issue of shares.

Long term borrowings made or repaid.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What three main headings appear on the Statement of Cash Flows?

A

Cash flows from operating activities.

Cash flows from investing activities.

Cash flows from financing activities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What items appear on a Statement of Cash Flows under the heading ‘Investing Activities’?

A

Cash spent acquiring non-current assets.

Cash received from the sale of non-current assets.

Income from investments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

According to the IAS 38 - Intangible assets, how should research be treated in the financial statements.

A

Research costs should be expensed in the Income Statement.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How is a contingent asset treated in the Financial Statements if the likelihood of the asset being confirmed is regarded as probable?

A

It is not recognized in the Financial Statements.

It should be disclosed by way of note.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How is a contingent asset treated in the Financial Statements if the likelihood of the asset being confirmed is regarded as possible?

A

It is not recognized in the Financial Statements, nor is it disclosed in any other way.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How is a contingent liability treated in the Financial Statements if the likelihood of the liability being confirmed is regarded as remote?

A

It is not recognized in the Financial Statements, nor is it disclosed in any other way.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is a contingent liability treated in the Financial Statements if the likelihood of the liability being confirmed is regarded as possible?

A

It is not provided for in the Financial Statements.

It should be disclosed by way of note.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How is a contingent liability treated in the Financial Statements if the likelihood of the liability being confirmed is regarded as probable?

A

It should be provided for in the Financial Statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a contingent asset?

A

A potential asset that may appear due to past events.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What’s is a contingent liability?

A

A potential liability that may arise due to past events.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What does the term provision mean?

A

A liability of uncertain timing or amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

In the context of IAS 10 - Events after the reporting period - what is the treatment of a non-adjusting event?

A

The financial statements are not amended to reflect the event, but it is disclosed by way of note if material.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

In the context of IAS 10 - Events after the reporting period - what is the treatment of an adjusting event?

A

The financial statements are amended to reflect the event.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are revenue reserves?

A

Profits that have been earned and retained by the company - retained earnings and general reserve.

They represent amounts owing to shareholders that can be paid out as dividend.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What are capital reserves?

A

The share premium amount and the revaluation reserve.

They represent amounts owing to shareholders, but this amount cannot be paid out as dividend.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What does the share premium account record?

A

The excess from the amount of cash received from the issue of shares over the nominal (par) value of the shares.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is a bonus issue of shares?

A

An issue of new shares to existing shareholders in proportion to their existing shareholdings, free of charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is a rights issue of shares?

A

An offer of new shares to existing shareholders in proportion to their existing shareholdings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What are the differences between ordinary and preference shares?

A

Ordinary shares
- Have voting rights
- Dividend on ordinary shares is recommended by the directors
Preference shares
- Usually no voting rights
- Carry a fixed dividend
Ordinary dividend is paid out of profits left after the preference dividend has been paid.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What does the Statement of Changes in Equity show?

A

It shows the reasons for the changes in share capital and reserves during the accounting period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is meant by a gross margin?

A

The gross profit expressed as a percentage of the sales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What is meant by mark-up?

A

The gross profit expressed as a percentage of the cost of sales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is the difference between the Statement of Comprehensive Income and the Statement of Profit or Loss?

A

The SoCI is the same as the SoPL but with the addition of any surplus on revaluation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is meant by an error of original entry?

A

When the correct double entry has been made, but the amount is wrong.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What are compensating errors?

A

Two or more errors where the net effect is zero.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is an error of principle?

A

An entry that should’ve been recorded in an asset account, has been in an expense account (or vice versa).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What is an error of commission?

A

When an entry has been posted to the wrong account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What is an error of omission.

A

A transaction that has not been recorded in the books of the company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What is an overdraft?

A

A negative balance at the bank.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

A companies bank statement shows a debit balance.

Do they have money at the bank, or are they overdrawn?

A

Overdrawn.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What is an uncleared lodgement?

A

A receipt that has been entered on the cash book, but has not yet appeared on the bank statement.

42
Q

What is an outstanding (unpresented) cheque?

A

It’s a cheque that has been entered in the cash book, but has not yet appeared on the bank statement.

43
Q

What is the purpose of bank reconciliation?

A

To check the accuracy of the entries in the cash book and the bank statement.

44
Q

What is the purpose of reconciling the receivables ledger control account with the receivables ledger?

A

To check the balance of the control account is the same as the total of all balances on the individual accounts of the receivables ledger.

If this isn’t the case then there must be an error.

45
Q

What is the payables ledger control account?

A

An account in the general (nominal) ledger recording the total amount owing to suppliers.

46
Q

What is the receivables ledger control account?

A

An account in the general (nominal) ledger recording the total amount owing from customers.

47
Q

What is the general (nominal) ledger?

A

A ledger containing all the accounts necessary to produce financial statements.

The double entry is made between these accounts.

48
Q

What is recorded in the accounts payable ledger?

A

The amounts owing to each individual supplier.

49
Q

What is recorded on the accounts receivables ledger?

A

The amounts owing by each individual customer.

50
Q

What is recorded in the sales day book (sales journal)?

A

All sales made on credit.

51
Q

What is recorded in the purchase day book (purchases journal)?

A

All purchases made on credit.

52
Q

What is meant by refund?

A

A repayment of cash previously paid.

53
Q

What is a credit note?

A

A ‘negative invoice’ prepared by the supplier to cancel a previous invoice.

54
Q

What is a statement?

A

A summary of the amount owing by a customer.

55
Q

What is the difference between a purchase invoice and a sales invoice?

A

Both are prepared by a supplier, but it is called a sales invoice by the supplier, and a purchase invoice by the customer.

56
Q

What is a goods received note?

A

A note prepared by the receiving company, to list the quantity and description of the goods being received.

57
Q

What is a goods delivery note?

A

A note provided by the supplier, listing the quantity and description of the goods being supplied.

58
Q

What is meant by a part-exchange agreement when a non-current asset is disposed of?

A

Where an old asset can is provided as a part payment for a new asset.

59
Q

In the straight-line method of depreciation, what is meant by residual value?

A

The estimated disposal value at the end of its useful life.

60
Q

What is the reducing balance method of depreciation?

A

Where a reducing amount of depreciation is charged each year.

61
Q

What is the purpose of depreciation?

A

To reflect the cost of using a non-current asset.

62
Q

What is the straight-line method of depreciation?

A

Where the charge is the same each year.

The cost is spread over the expected useful life.

63
Q

Do we depreciate the Land and Buildings categories?

A

Buildings will be depreciated as they have a limited useful life.

Land isn’t normally depreciated as it has an unlimited life.

64
Q

What is the non-current asset register?

A

A record of the non-current assets held by the business.

It is for internal control purposes and is not part of double entry bookkeeping.

65
Q

What’s the difference between tangible and intangible non-current assets?

A

Tangible assets have physical substance.

Intangible assets cannot be touched e.g. goodwill or development expenditure.

66
Q

What is meant by revenue expenditure?

A

Costs of running the business.

Appears on the Income Statement.

67
Q

What is meant by capital expenditure?

A

The purchase of non-current assets and expenses that enhances the asset.

Appears of the Statement of Financial Position.

68
Q

What is meant by credit limit?

A

The maximum amount of credit the business is prepared to allow a customer.

69
Q

What is the purpose of an aged receivables analysis?

A

To keep track of outstanding debts and follow up on any that are overdue.

70
Q

What is an aged receivables analysis?

A

A list showing how much each customer owes and how old their debts are.

71
Q

What is the purpose of the allowance for receivables?

A

To recognize the possibility that some receivables may not be received.

72
Q

What is meant by an irrecoverable debt?

A

An amount owing to the business that will not be recovered.

73
Q

What is meant by prepaid income?

A

Income for the next year that has been received in the current year.

74
Q

What is meant by accrued income?

A

Income for this year that has not been received by the year end.

75
Q

What is meant by a prepaid expense?

A

When some of next years expense has been paid in the current year.

76
Q

Does the net selling price include or exclude sales tax?

A

Excluding sales tax.

77
Q

Does the gross selling price include or exclude sales tax?

A

Including sales tax.

78
Q

Is output sales tax charged on purchases or sales?

A

Sales.

79
Q

Is the input sales tax charged on purchases or sales?

A

Purchases.

80
Q

Is sales tax a form of direct or indirect taxation?

A

Indirect.

81
Q

What methods of calculating the cost of inventory are allowed by the accounting standard?

A

-FIFO First in first out.
-AVCO Average cost.
-Unit Cost Actual cost.

82
Q

In inventory valuation, what is meant by net realizable value?

A

The expected selling price minus any expected costs before sale.

83
Q

Inventory is valued at the lower of ___ and ___?

A

Cost and net realizable value.

84
Q

What is the main purpose of a trial balance?

A

To check that for every debit entry made, there is an equal credit entry.

85
Q

What is meant by an early settlement discount?

A

A discount given for early payment.

86
Q

What is the double entry for the sale of goods on credit.

A

-Debit receivables.
-Credit sales.

87
Q

What is the double entry for the purchase of goods for resale on credit?

A

-Debit purchases.
-Credit payables.

88
Q

Is an increase in capital a debit or credit for the ledger account for capital?

A

A credit entry.

89
Q

Will an increase in income be a debit or credit entry in the ledger control account for income?

A

A credit entry.

90
Q

Is an increase in a liability a debit or credit in the ledger account for liability?

A

A credit entry.

91
Q

Is drawings a debit or credit entry in the drawings account?

A

A debit entry.

92
Q

Is an increase in an asset a debit or credit in the ledger account for the asset?

A

A debit entry.

93
Q

Is an increase in expense a debit or credit in the ledger account for the expense?

A

A debit entry.

94
Q

What is meant by net assets?

A

Net assets = total assets - total liabilities.

95
Q

What is the accounting equation?

A

Increase in net assets = capital introduced + profit - drawings.

96
Q

What are non-current assets?

A

Assets acquired on a long-term basis.

Not held for resale in the normal course of trading.

97
Q

What are current assets?

A

Assets that are expected to be realized in the normal course of trading.

98
Q

What are current liabilities?

A

Liabilities payable within 12 months of the reporting date.

99
Q

What are non-current liabilities?

A

Liabilitiespayable more than 12 months after the reporting date.

100
Q

What is the definition of drawings?

A

Anything taken from the business by a sole trader.

Financial Accounting (29 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions