Trial Balance Flashcards
What is a trial balance?
A summary of the debit and credit eateries for each ledger account
Why do we need year end adjustments?
- so financial statements give a fair picture for the periods
- if not we might need to
Amend figures
Insert items not get included
What is accruals accounting?
Income is recognised when it is earned.
Expenses are recognised when the entity recieves the benefit - in cost of sales, the entity receives the benefit from the inventory when it sells .
What are debits and credits?
Debits: something that u spend on
- expenses
- assets
Credits: what you earn
- income/rev
- equity
- liabilities
When is the cost of sales recongiseD?
When the entity sells the inventory
How do you calculate the cost of sales?
Opening inventory + purchases - closing inventory
What is FIFO?
First in, first out
Always use the oldest items first
What is AVCO?
Average cost
Recalculate average
What do you credit/ debit in accruals?
Dr expense
Cr accruals
How do you calculate the expense in accruals?
Expense - opening accruals + closing accruals
How do you calculate the pre payment amount?
Invoice amount x no. Years after years end/ no.months covered
What is the ledger for ppe?
Dr property, plant and equipment at cost
Cr trade payables
How do you calculate the depreciation expense?
Depreciable amount/ useful economic life
How do you calculate the depreciable amount?
Cost - residual value
What do you need for ppe ledgers?
Accumulated depreciation and depreciation expense
How is ppe reflected in financial statements?
Statement of financial position - net book value
= ppe at cost / accumulated depreciation
What are the two depreciation methods?
Straight line
Reducing balance - % x netbook value
How do you calculate the profit or loss on disposals?
Sales proceeds - net book value
What interest is put in the profit or loss statement?
Interest expense = interest rate x outstanding loan balance
What is the interest paid in ledger?
Dr interest expense
Cr cash
What interest is in the trial balance?
The interest paid during the year
What is the accrual ledger for interest?
Dr interest expense
Cr interest payable
What is PCTCT?
Profits chargeable to corporation tax
Accounting profit/ tax adjustments
What is the ledger if a business gets a tax refund?
Dr tax receivables
Cr tax income
How do you calculate dividends?
Pence per share x no. Of shares in issue
Or
% x nominal value x no. Shares in issue
What is the timing if dividends?
Usually approved after year end so not recognised
Where are dividends found?
In retained earnings
Brought forward
+ profit for the year
Less
Interim dividend
Final closing dividend
= closing balance
What is the ledger if the dividend was paid before the year end?
Dr retained earnings
Cr cash
What is the ledger is dividends are not paid before the year end?
Dr retained earnings
Cr dividend payable
How do you calculate interest payable?
Interest expenses from SoPL - interest paid in trial balance
On purchase, what is the inventory ledger?
Dr inventory
Cr trade payables
When inventory is sold, what is the ledger?
Dr cost of sales
Cr inventory
When a sale is made, what is the ledger?
Dr trade receivables
Cr revenue
= selling price
Dr cost of sales
Cr inventory
= cost og goods sold
How do you calculate the net book Value?
PPE at cost - acc depreciation
