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Accounting > UNIT 1 > Flashcards

UNIT 1 Flashcards

1
Q

Credits are equal to…

A

rights

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2
Q

promissory notes are equal to..

A

bills of exchange

(431) sell
(401) buy

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3
Q

what is the difference between the 400 and 410 accounts ?

A

they are both liabilities but the 400 account is used for primary activities while the 410 is used for secondary activities.

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4
Q

What are 523 and 173 code used for and what are their differences?

A

“Payable to supplier of fixed assets”
523 - short term (current)
173 - long term (non-current)

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5
Q

what is the difference between the 430 and 440 accounts?

A

they are both assets but the 430 account is used for primary activities while the 440 is used for secondary activities.

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6
Q

What are 543 and 253 code used for and what are their differences?

A

“loans for disposal of fixed assets”
543 - long term (current)
253 - short term (non-current)

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7
Q

codes used for personnel

A

465 - liability

460 - Asset

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8
Q

Code used for prepaid expenses and deferred income

A

480 - Asset

485 - Liability

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9
Q

How many type of containers are there and what are their codes?

A
  1. Returnables (406) Asset, right

2. Non- returnable (include in 600, 601)

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10
Q

Define doubtful trade receivables

A

Accounts receivable, whether customers or debtors, represent those collection rights that we can consider in a normal collection situationnormal collection situation.

When the collection expectations foresee risks or doubts, as a consequence of insolvency situations, we are facing credits in a situation situation of uncertainty.

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11
Q

trade receivable and doubtful trade receivable codes for primary and secondary activities

A

Primary Activities

  • 430 trade receivable (right)
  • 436 doubtful trade receivables (right)
  • 650 losses on irrecoverable trade receivables (loss)

Secondary Activities

  • 440 receivables (right)
  • 446 doubtful receivables (right)
  • 650 losses on irrecoverable trade receivables (loss)
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12
Q

Define promissory notes

A

It is an unconditional written promise to pay a stated sum of money upon demand or a future determinable date.

Usually prepared by the debtor as a result of a request made by the creditor

Upon receipt of the invoice by the buyer, it is the buyer’s obligation to prepare and deliver to the seller the promissory note within a reasonable time

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13
Q

Define INTEREST-BEARING PROMISSORY NOTES

A

It is a written promise to pay a certain sum at a fixed and determinable future date along with an additional sum known as interest

This interest is calculated based on the holding period of the note, which is usually expressed in days, and the payment of a specific stated rate in interest, which is calaculated on the face amount of the note

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14
Q

The interest assigned to the promissory note is usually calculated based on three factors:

A

1) The face value of the note, known as the PRINCIPAL

2) The amount of time the note is in the hands of the
creditor before payment is made, known as the TIME

3) The rate of interest being charged on the note, which is commonly referred to as the RATE

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15
Q

The basic formula for calculating interest is:

A

Principal x Rate x Time = Interest

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16
Q

When you receive a promissory note, you are able to…

A
  1. hold it until maturity; (431) or (441)
  2. To endorse it to other creditors;
  3. To discount it: sell it to a bank or finance company
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17
Q

define DISCOUNTING THE NOTE

A

IT IS THE PROCESS OF SELLING THE PROMISORY NOTE TO A BANK OR OF SELLING THE PROMISORY NOTE TO A BANK OR FINANCE COMPANY.

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18
Q

what is the process of discounting a promissory note

A

1 ) The note is endorsed and delivered to a bank;

2) The bank deducts from the maturity value of the note (face value of the note plus interest) their discounting charges and provides the seller with the net proceeds maturity; (665)
3) When the note becomes due, the lending institution expects to receive the maturity value from its maker;
4) The fact that the note has been discounted and turned over to the lending institution does not eliminate the seller’s involvement with the note: if the maker fails to pay the bank, the seller will do it;
5) A CONTINGENT LIABILITY has developed until the due date of the note: the commitment of the endorser to pay the discounter the maturity value of the note in the event that the maker of the note defaults; (5208)

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19
Q

Define Subsequent Measurement

A

At the balance sheet date, monetary items shall be measured at the closing rate, considered to be the average spot exchange rate at that date.

Exchange gains and losses arising on this process and on settlement of these assets and liabilities shall be recognised in the income statement for the reporting period in which they occur.

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20
Q

Define serve assessment system

A

If we sell to another country, no VAT is included, If we receive a purchase from another country, VAT is included upon arrival.

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21
Q

Liabilities codes

A
  • (400) Primary activity
  • (410) Secondary activity
  • (523) Short-term fixed assets bought on account
  • (173) Long-term fixed assets bought on account
22
Q

extending credit

A
  • When credit is given, a receivable is set up on the books of the seller (oral promise called “Account receivable” or “Trade receivables”)
  • A receivable represents claims against individuals, business organizations, or other debtors that will eventually be settled by the receipt of cash, checks, bank transfers or any other asset accepted by the creditor
  • When the creditworthiness of reliability of a customer is in doubt, the seller may decide to sell to the customer on credit (on account) with certain additional requirements: a promissory note as evidence of the buyer´s obligation to the seller
23
Q

Accounts receivable/suppliers (400)

A
  • (410) Payables for the rendering of services
  • (430) Trade receivables
  • (440) Receivables
24
Q

Notes receivable/suppliers, trade bills payable (401)

A
  • (411) Trade bills payable
  • (431) Notes receivable
  • (441) Receivables, trade bills
25
Q

determining interest

A

The interest assigned to the promissory note is usually calculated based on three factors:

  1. The face value of the note, known as the principal
  2. The amount of time the note is in the hands of the creditor before payment is made, known as the time
  3. The rate of interest being charged on the note, which commonly referred to as the rate
26
Q

The basic formula for calculating interest is

A

Principal x rate x time = interest

27
Q

Transferring and discounting notes receivable

A

When you receive a promissory note, you can:

  1. To hold it until maturity: (431) or (441)
  2. To endorse it to other creditors
  3. To discount it: sell it to a bank or finance company
28
Q

Receivables, trade bills (43)

A

(431) Trade receivable, trade bills receivable
- (4310) Trade bills in portfolio wait till maturity
- (4311) Discounted trade bills discounts
- (4312) Trade bills in debt collection management
- (4315) Past trade bills

29
Q

Receivables, trade bills (44)

A

(441) Receivables, trade bills
- (4410) Receivables, trade bills in portfolio
- (4411) Receivables, discounted trade bills
- (4412) Receivables, trade bills in debt collection management
- (4415) Receivables, past due trade bills

30
Q

Discounting the note

A

company

  1. The note is endorsed and delivered to the bank
  2. The bank deducts from the maturity value of the note (face value of the note plus interest) their discounting charges and provides the seller with the net proceeds’ maturity (665)
  3. When the note becomes due, the lending institution expects to receive the maturity value from its maker
  4. The fact that the note has been discounted and turned over to the lending institution does not eliminate the seller´s involvement with the note: if the maker fails to pay the bank, the seller will do it
  5. A contingent liability has developed until the due date of the note: the commitment of the endorser to pay the discounter the maturity value of the note if the maker of the note defaults (5208)
31
Q

Discounting the note- the entries

A
  1. The receipt of the promissory note
  2. The discounting of the note
  3. The entry made on the due date of the note
32
Q

Discounting a company´s own note

A
  • When a company wishes to borrow money from a bank, it may issue a promissory note payable to that bank
  • The bank in accepting the note will frequently discount the note
  • Discounting a notes payable will result in the company receiving less cash than the face value of the note, because of the interest charged by the bank for the privilege of borrowing the money
33
Q

Initial measurement

A

Transactions in foreign currency must be recorded in Euros, at the exchange rate corresponding to the date of transaction

34
Q

Subsequent measurement

A
  • At the balance sheet date, monetary items shall be measured at the closing rate, considered to be the average spot exchange rate at the date
  • Exchange gains and losses arising on this process and on settlement of these assets and liabilities shall be recognized in the income statement for the reporting period in which they occur
35
Q

(4004)

A

Suppliers- foreign currency

36
Q

(4104)

A

Payables for the rendering of services- foreign currency

37
Q

(4304)

A

Trade receivables- foreign currency

38
Q

(4334)

A

Trade receivables, group companies- foreign currency

39
Q

(4404)

A

Receivables- foreign currency

40
Q

(668)

A

exchange loss

41
Q

(768)

A

Exchange gains

42
Q

Intra-community transactions

A
  • Intra-community acquisitions purchases

- Intra-community supplies

43
Q

Personnel

A

Subgroup 46- personnel
Subgroup 64- personnel expenses

(465) Liability
(460) Asset
(64) Expenses

44
Q

public entities

A

Subgroup 47

It includes the accounts used for the company´s relationships (receivables and payables) with public institutions, when these relationships are not commercial in nature
- Accounts for the relationship between the company and re tax authorities
(VAT, income tax, grants)
- Accounts for the relationship between the company and Social Security institutions

45
Q

income tax

A

paid monthly

46
Q

(476)

A

social debt securities

47
Q

(471)

A

Receivables social security, a right

48
Q

(473)

A

Withholdings and payments on account, a right

–> Withdraw- do not lose, use it for the VAT liquidation- we have a right

49
Q

(4751)

A

Debt tax authority- income tax

50
Q

confers

A

not a payment

51
Q

(4708)

A

A right, a revenue–> no collection

52
Q

Prepaid expenses and accruals

A

The effects of transactions and other economic events shall be recognized when they occur. Expenses and revenues shall be recognized in the accounting cycle they belong to, irrespective of the payment or collection date.

  • (480) Prepaid expense- asset
  • (485) Deferred income- liability

Accrual: earned, not received –> a right
Deferral: unearned, received–> an obligation

Accounting (3 decks)

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