Service firm accounts theory Flashcards
What are the things a company should consider before applying for a loan - In terms of service accounts
Gearing: ex: The firm has no long term loans currently so it would encourage a lender to grant a loan.
Purpose: The purpose of the loan is to — which would make the company more efficient going into the future.
Security: Security is adequate for a €— loan as the company has fixed assets of €—- and investments of €—- to cover it.
What are service firms?
Businesses set up to earn a profit from providing a service rather than from buying and selling.
Ex: Hairdresser/doctor
Give the four accounts of a service firm
Statement of Capital/Reserves
Special purpose profit and loss account
Profit and Loss a/c
Balance sheet
Explain the statement of Reserves
Prepared to show the net worth of the firm at the start of the year. If you are asked for SOC the capital item is entered as a liability and the final figure is called reserves.
Explain a special purpose profit and loss account
Prepared when a firm earns money from a different but related activity
If there is 3 year accumulated depreciation how does this effect the sale on equipment.
Take accumulated depreciation away from the equipment cost to find equipment value when sold to then work out the profit or loss made on sale of equipment.
How do you get the accumulated depreciation figure for the balance sheet? with three years depreciation prior to year of account
Add Depreciation for the year and the three years accumulated depreciation
Where are bad debts recorded
P&L Expense
Where does a dishonoured cheque usually go
B.sheet current asset
What are the consequences of there being insurance that is prepaid
There will be a prepayment for next year to. Expense figure will be this years prepayment plus the remaining months.
