Topic 2: cash flow/acrual/cash Flashcards
What is revenue defined as
As increases in the economic benefits arising in the course of ordinary activities of an entiity
Income generated by a company or an individual through their normal business activities. It is the total amount of money received by a company or individual from selling goods or services, before any deductions such as taxes or cost of goods sold.
Where does Australia’s financial year span?
1 July –> 30 June
What is a accounting period concept?
Concept that assumes that the life of a business is divided into arbitary time periods (known as ‘accounting periods’
Company’s financial results can be divided into regularly scheduled time periods for the purpose of reporting financial information
How often can financial results be given?
- Monthly
- Quarterly (3 months)
- Half-yearly (6 months)
- Annually (12 months)
Examples of revenues?
- Service revenue
- Sales revernue
- Dividends
- Interest
- Rent
Expences exmaples?
- Wages
- Electricity
- Interest on loans
- Cost of good sold
When is a revenue recogniesed
When it has been earned
e.x. for a service business, when the service has been peformed
(same situation for expenses, when occurs it is recorded)
What is accrual accounting
Accrual basis recognises transaction and events when they have an economic impact on the entity rather than the associated cash flow; when the action or service is peformed (expence incurred/revenue earned)
What is cash accoutning bases
When the cash flows are recorded when they are earned or given (when cash arrives or leaves)
Revenues: when cash received
Expenses: when cash is paid
What is the difference between a sole trader or a public company in
- Liabilities
Public: issue debt to public via debuntured and unsecured loan/investors can buy debentures or loan money to companies
What is the difference between a sole trader or a public company in
- Owners equity
Sole trader: One capital account and all increases/decreases such as profits/drawings are recorded
Public: Public company’s equity section includes share capital, reserves & retained earnings
List the order of the labels in PROFIT AND LOSS statement and a description
Revenue
(all revenues listed with total on next row on last value)
italis; Less Expences
(All expences with total on last value next row)
Net Profit –> R - E
List the order of the labels in STATENMENT OF FINANCIAL POSITION and a description
Assets (all assets)
Italics- Less Liabilities (all liabilities)
^^^^ all on second $ column unless multiple of same acc like recievable or payable
List the order of the labels in STATENMENT OF FINANCIAL POSITION and a description
Assets (all assets) (total on last value) - sum on last value 3rd column
Italics - Less Liabilities (all liabilities) - sum on last value 3rd column
^^^^ all on second $ column unless multiple of same acc like recievable or payable
Net Assets - 3rd column (assets - liabilities total)
Owners Equity (title)
Capital (list capital first column)
Italics (add) Net profit (1st column (value from profit/loss statement) first column & total on second column same row
Italics (less) Drawings (drawings given on seocnd column) (3rd row, net profit - drawings) same row
Should equal net assets = net OE total
List the order of the labels in STATENMENT OF CASH FLOWS and a description
Cash flows from operating/investing/financing activities
Italics: Inflows (1st $ column) (total on last value 2nd column ‘unless only 1 value auto to second’)
indent…
Italics: Outflows (1st $ column) (total on last value 2nd column ‘unless only 1 value auto to second’)
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Net cash from operating/investing/financing activities (Inflow minus (-) Outflow) –> 3rd $ column
Net increase/decrease in cash held –> sum of all outflows/inflows (negative and positives)
Cash held at the beginning of reporting period –> (balance at start, usually 0 unless given on bank statement)
Cash held at the end of reporting period –> net increase/decrease + cash held/beginning balance (adding cash flow or period + before ones)
