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Fundamentals of Accounting and Finance > Statements > Flashcards

Statements Flashcards

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1
Q

what is the consistency concept

A

once an accounting method has been chosen, that method should be used unless there is a sound reason to do otherwise

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2
Q

cost of sales equation

A

opening inventories + purchases (+manufacturing expenses) - closing inventories

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3
Q

trade payables equation

A

opening payables + credit purchases - payments = closing payables

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4
Q

does depreciation go through the income statement

A

yes, under expenses

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5
Q

separate entity concept

A

we should always seperately record the transactions of a business and its owners (otherwise there is a risk that the transactions of the two will become intermingled)

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6
Q

what goes in cash flows from investing in sofc

A 
capital expenditure (net)
interest received
investments made (and sold)
net cash from capital
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7
Q

where do liabilities go

A

SoFP

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8
Q

expenses d

A

decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity

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9
Q

what is the accruals concept

A

revenue and expenses are recorded when they occur and not when the cash is received or paid out

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10
Q

prepayment d

A

amount prepaid at sofp date

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11
Q

money measurement concept

A

the accounting process only records activities that can be expressed in monetary terms

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12
Q

where do expenses go

A

IS/SoCI

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13
Q

dual aspect concept

A

necessitates the recognition of all aspects of an accounting transaction

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14
Q

do you take depreciation off the price of the item and put NBV in the sofp

A

yes subtract depreciation to get nbv

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15
Q

in socf why would the difference in retained earnings not necessarily be the profit before tax

A

because retained earnings includes dividends that have been paid out (so would need to take off dividends to get profit)

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16
Q

what do you always need to remember to include in these statements

A

missing figure

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17
Q

where does income go

A

IS/SoCI

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18
Q

if dividend approved in the year but not paid what do you do

A

taken off profit because accruals (in statement of changes in shareholder equity),
added to current liabilities as the amount is still owed

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19
Q

what happens if the company issues debt worth £250,000

A

cash increases by £250,000,
long term liabilities increases by £250,000,
if paid in instalments part of it is short term liability and that part of it will be included in current liabilities while the balance will be in long term liabilities

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20
Q

what is the owner’s equity

A

investment the owner has put in + any profits made to date - money the owner has drawn out

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21
Q

materiatility concept

A

minor events may be ignored, but the major ones should be fully disclosed

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22
Q

profit before tax equation

A

operating profit - interest payable + interest receivablw

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23
Q

examples of things which are expenses

A

rents, wages, depreciation, director’s fees, audit fees, director’s fees, provisions, bad debt write off, profit/loss on disposal

24
Q

what is the profit (sofp)

A

retained earnings

25
Q

going concern concept

A

the business entity for which accounts are being prepared is in good condition and will continue to be in business in the foreseeable future

26
Q

what is the prudence concept

A

revenue and profits are only included in the balance sheet only when they are realised but liabilities are included when there is a reasonable possibility of incurring them

27
Q

asset d

A

resource controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity

28
Q

what are the four headings at the top of the statement of changes in shareholder equity

A

ord shares, share premium, retained earnings, total

29
Q

trade receivables equation

A

opening trade receivables + credit sales - amounts received - amounts written off = closing trade receivables

30
Q

what happens on the sofp when profit is made on the sale of some inventory

A

cash or bank balance up,

retained earnings up (by difference between nbv and what it was sold for)

31
Q

what is the investment (sofp)

A

share capital

32
Q

might need to use profit information to find total sales figure, subtract cash sales to find credit sales, use credit sales to find closing receivables for your sofp

A

remember that

33
Q

liability d

A

present obligation of the entity arising from past events, the settlement of which is expected to result in a future outflow from the entity

34
Q

operating profit equation

A

gross profit - operating expenses + other income

35
Q

equity d

A

residual interest in the assets of the entity after deducting all its liabilities

36
Q

where do assets go

A

SoFP

37
Q

income statements are produced on the ______ basis

A

accruals

38
Q

what are the different headings in the income statement

A

revenue, cost of sales, gross profit, depreciation, expenses, operating profit, income tax expense, profit for the period

39
Q

what happens if the company issues 100,000 £1 ordinary shares at £2.50

A

cash increases £250,000,
issued share capital increases £100,000,
balance is ‘share premium account increases £150,000

40
Q

what are the five headings down the side of the statement of changes in shareholder equity

A 
balance b/fwd (per opening sofp),
profit/loss for the period (per IS/soci),
dividends approved,
shares issued,
balance c/fwd (per closing sofp)
41
Q

gross profit equation

A

sales revenue - cost of sales

42
Q

accrual d

A

amount still owed at the sofp date

43
Q

what is revaluation reserve and where is it on the sofp

A

example (bought building for £1 mil now worth £2.5 mil),
nca increase by 1.5,
revaluation reserve in equity section increase by 1.5 mil (by entering the reserve on the statement of changes in shareholder equity)

44
Q

income d

A

increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity

45
Q

what are the main headings on the statement of cash flows

A 
cash gen from operating activities,
cash flows from investing activities,
cash flows from financing activites,
net cash inflow/outflow,
opening net cash,
closing net cash
46
Q

where are accruals and prepayments in the sofp

A

accruals - current liabilities,

prepayments - current assets

47
Q

what is the best way to do the cash flow statement

A

just look at two sofps and see the difference between values if there is a difference then there is a cash flow

48
Q

profit for the period equation

A

profit before tax - tax

49
Q

historical cost concept

A

measure of value used in which the price of an asset on the balance sheet is based on its original cost when acquired by the company

50
Q

what goes in cash flows from financing activities in sofc

A 
interest paid
dividends paid
issue of shares
repayment of debentures
net cash from financing
51
Q

what are the headings in note 1 (cash generated from operations)

A 
profit before tax,
adjustments for:
interest payable
interest receivable
depreciation
loss on disposal
increase in tr
decrease in tp
decrease in inv
52
Q

do you depreciate the asset in the year of purchase or sale

A

purchase

53
Q

where do you put bad debts in the sofp

A

trade receivables,

less: provision for doubtful debts

54
Q

what goes in cash generated from operating activities in socf

A 
cash generated from operations,
income tax paid
dividends paid
interest paid
net cash from operating activities
55
Q

retained earnings is the _____ of all profits (less any losses) to date

A

sum

Fundamentals of Accounting and Finance (4 decks)

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