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Accounting & Art 2019 > Term 1 Theory > Flashcards

Term 1 Theory Flashcards

1
Q

triple bottom line

A

measures a company’s degree of social resp, economic value and environmental impact

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2
Q

internal auditors

A
  • employed by the company

- examine business-related issues

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3
Q

external/independent auditors

A
  • employed by the shareholders

- give their opinion on the financial statements

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4
Q

purposes of cash flow statement

A
  • reflect a summary of all cash rec and paid during the year
  • indicates company liquidity
  • helps with risk identification
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5
Q

unqualified

A

good report, no problems

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6
Q

qualified

A

has problems in certain areas of the comapny, must be fixed

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7
Q

disclaimer

A

negative, auditor did not want to give a report

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8
Q

purpose of king code reports

A

gives guidelines on how to implement good business practices contributing to social, environmental and economics of the country

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9
Q

can the business pay off all it debts?

A

solvency

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10
Q

to what extent does the business rely on borrowed funds?

A

gearing/risk (debt: equity ratio)

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11
Q

will the business be able to pay of its immediate debts?

A

liquidity

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12
Q

how well is the business managing or controlling its expenses?

A

profitability

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13
Q

control of fixed assets

A
  • have periodic physical counts
  • have an asset ledger
  • the owner must approve all buying/selling of fixed assets
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14
Q

control of stock

A
  • physically protect
  • keep a stock record
  • make sure stock is up to date
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15
Q

control of debtors

A
  • do background checks
  • have a policy
  • send invoice asap
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16
Q

control of cash

A
  • immediately record all cash transactions
  • only allow certain individuals to access cash
  • avoid holding too much cash
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17
Q

directors

A

required to the run the company at the best of their ability

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18
Q

corporate governance

A

involves balancing the interests of all involved in the company: shareholders, suppliers, customers, the government, etc. It is influenced by the company’s board of directors and its processes are used to direct and manage the company.

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19
Q

stock holding period

A

av stock / COS

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20
Q

stock turnover rate

A

COS / av stock

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21
Q

debt : equity ratio

A

non curr liabilities : shareholders equity

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22
Q

shareholders equity

A
  • OSC
  • retained inc
  • non-current assets
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23
Q

liquiditity ratios

A

current and acid test

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24
Q

return on shareholder’s equity

A

np after tax / av. shareholders equity

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25
Q

return on average capital employed

A

profit before tax + finance cost /

average capital employed

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26
Q

capital employed

A

OSE + loans

27
Q

return on total capital employed

A

profit before tax / cap empl @ end of year

28
Q

periodic vs perpetual

A

periodic: cos only calculated periodically
perpetual: continuous checks and taking of stock

29
Q

adv of specific identification

A
  • simplest stock valuation form

- stock values are realistic as they are based on actual cost

30
Q

adv of fifo

A
  • stock values are realistic as they are based on most recent cost
  • is suited for business selling discrete (sep) items
31
Q

weighted average

A
  • best suited for businesses selling large volumes of identical small items of stock
32
Q

business entity

A

the affairs of the business must be kept entirely separate from that of the owners (operate separately)

33
Q

historical cost

A

assets are valued in the books at the original amount of paid for them

34
Q

going concern

A

financial statements are prepared on the assumption that the business will still be operating in the foreseeable future

35
Q

matching concept

A

the transactions of the business must be reported in the correct time period

36
Q

prudence concept

A

financial results are reported in a conservative manner

37
Q

materiality

A

material or important items must be shown in the financial statements

38
Q

finance cost

A

all interest expense of financial assets and stuff like that…

39
Q

reasons for bank recon

A

validity, accuracy, completeness

  • help to avoid fraud and theft
  • help to identify errors
40
Q

accounting equation

A

A = L+ OE

41
Q

inclusive VAT

A

amount x 15/115 = vat amount

42
Q

zero-rated items

A
  • brown bread
  • fresh fruit
  • eggs
43
Q

exempted items

A
  • school fees
  • petrol & diesel
  • financial services
44
Q

tax evasion

A

recording output vat dishonestly, reducing the value illegally

45
Q

tax avoidance

A

acceptable

legally reducing amount to be paid to SARS through donations, etc

46
Q

amount owed to SARS

A

output - input

47
Q

output tax

A

vat charged by the vendor when it sells goods (goods going OUT)

48
Q

input tax

A

the vat charged or paid by the vendor when acquiring goods (goods come IN)

49
Q

reversal of discount allowed

A

output vat

50
Q

discount received

A

negative input

51
Q

why we do creditors recon

A

so that queries and discrepancies can be fixed as soon as possible. fraud and error can be minimized.

52
Q

breakeven point

A

fixed costs / (sp - vc per unit)

53
Q

IN THE BUDGET BUT NOT PROJ INC STATEMENT

A
  • loan
  • drawings
  • dividends
54
Q

IN PROJ INC STATEMENT BUT NOT BUDGET

A
  • depreciation
  • bad debts
  • discounts
55
Q

NAV

A

no of shares issued

56
Q

EPS

A

np after tax / no of shares issued

57
Q

DPS

A

dividends paid & decl / no of shares issued

58
Q

creditors payment period

A

av creditors / credit purhcases

59
Q

gearing ratios

A
  • debt:equity

- return on capital employed

60
Q

drawings vat

A

negative input

61
Q

if we owe sars an amount from last month

A

output = negative

62
Q

if sars owes us an amount from last month

A

input = positive

63
Q

CPJ/CRJ items that don’t get vat

A

interest, salaries, creditors control

64
Q

discount allowed

A

negative output

Accounting & Art 2019 (2 decks)

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