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Accounting 1,2 > Unit 1 AOS 2 > Flashcards

Unit 1 AOS 2 Flashcards

1
Q

What is a credit transaction

A

= when a service is performed or goods are exchanged h/r cash relating 2 transaction is x exchanged until later date, meaning customer owes debt 2 seller

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2
Q

What is the impact of credit purchases on accounts payable

A

= credit purchases of materials / supplies will inc. bus accounts payable. @ some stage bus will need 2 pay there accounts payable with cash

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3
Q

What is accounts payable from credit purchases

A

= supplier who is owed a debt by bus 4 g/s purchased from them in credit

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4
Q

What is accounts receivable from credit purchases

A

= a customer who owes debt 2 bus 4 g/s sold 2 them on credit

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5
Q

What is a purchase journal

A

= an accounting record that summarises transactions involving purchase of materials / supplies on credit

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6
Q

What is a receipt from cash receivable

A

-> credit sales / fees will inc a bus accounts receivable.
@ some stage bus will receive accounts receivable in form of cash

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7
Q

What is a sales jounral

A

= an accounting record that summarises all transactions involving sales / performing services on credit during a period

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8
Q

What is a statement of accounts

A

= statement provided 2 credit customers 2 give details of transaction occurred during a period of time + resulting balance owing @ end of period

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9
Q

New GST formula…

A

Starting GST balance
+ GST received from c’er
+ GST on credit sales
- GST paid 2 suppliers
- GST on credit purchases
+ GST refund
- GST settlement

+ve final balance = accounts payable
-ve final balance = accounts receivable

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10
Q

What is an accounts payable record

A

= a subsidy accounting record that records each individual transaction in each individual account payable + shows balance owing 2 that account payable @ any point of time

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11
Q

What is an accounts receivable record

A

a subsidy accounting record that records each individual transaction in each individual account receivable + shows balance owing 2 that account receivable @ any point of time

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12
Q

What is a subsidy record

A

= secondary record

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13
Q

What is an account payable schedule

A

= a listing of name and balance of each accounts payable record

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14
Q

What are the qualitative characteristics

A

Relevance
Faithful representation
Verifiability
Comparability
Timeliness
Understandability

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15
Q

What is the Q.C relevance

A

= financial info must be capable of making a difference 2 decisions made by users helping them form predictions and or confirm / change previous recommendations

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16
Q

What is the Q.C faithful representation

A

= financial info should be faithfully rep of the real world economic event it claims 2 represent : complete, free from material error + neutral

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17
Q

What is the Q.C verifiability

A

= financial info should allow dif. knowledgeable + independent observers 2 reach a consensus that an event is faithfully represented

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18
Q

What is the Q.C comparability

A

= financial info should be able 2 be compared with similar info re. other entities + with similar info re. same entity 4 another period / date

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19
Q

What is the Q.C timeliness

A

= financial info should be available 2 decision makers in time 2 be capable of influencing decisions

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20
Q

What is the Q.C understandability

A

= financial info should be understandable/comprehensible 2 users with reasonable knowledge of bus + eco activities + presented clearly + precisely

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21
Q

What is an accounts receivable schedule

A

= listing of the name + balance of each Accounts Receivable records

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22
Q

What is the element revenue

A

= inc in assets / dec in liabilities that -> inc in O.E, other than those relating 2 contributions from the owner

Revenue - Expense = profit

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23
Q

What is the element expense

A

= dec in assets or inc in liabilities that -> dec in O.E, other than drawings

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24
Q

Are cash fees considered revenues

A

Yes

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25
Q

Are credit sales considered revenues

A

Yes

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26
Q

Are cash received from accounts receivable considered revenues

A

No

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27
Q

Are capital contributions considered revenues

A

No

28
Q

Are wages considered expenses

A

Yes

29
Q

Is electricity considered expenses

A

Yes

30
Q

Are payments 2 an accounts payable an expense

A

No

31
Q

Is the purchase of office furniture an expense

A

No

32
Q

What is an income statement

A

= an accounting report that details revenue earned and expenses incurred during the reporting period

33
Q

How to calculate equities

A

Capital
+ Net profit
- Drawings

= Equities

34
Q

What is an instance where a net profit is earned but a cash deficit

A

-> there are cash outflows that aren’t expenses t/f contribute 2 cash deficit h/r not affect net profit

e.g cash drawings, loan repayment, cash purchase of NCA, gst settlement

35
Q

What is an instance where a net loss is incurred but a cash surplus

A

-> cash inflows that are x revenues t/f contribute 2 a cash surplus h/r do x effect / prevent loss

e.g capital contribution, gst received, gst refund, loan received

36
Q

What is the net profit / loss question structure
( 4 marks )

A

1) Cash and profit are…
2) Net profit is… , Net cash is…
3) Some items impact 1 but x the other + there are some that can impact both h/r by differing amounts
4) 1 example is…
5) Another example is…

37
Q

Benefits of preparing an income statement

A

1) Aids decision making
2) Assesses if bus. is meeting revenue + expense budgets / KPIs
3) Assists in planning 4 future service activities, including budgeting
4) Assesses performance management

38
Q

What is profitability

A

= ability of a business 2 earn a profit, measured by comparing its profits against a base, such as sales, assets or owners equity

39
Q

What is profit

A

= under accrual basis accounting, revenues earned - expense incurred within a period, expressed in $ terms

40
Q

What is the Net profit margin formula

A

NPM = Net profit / Net sales X 100

41
Q

What is expense control

A

= firms ability 2 manage its expense so that they are x increasing at a faster rate than revenue is increasing

42
Q

What are KPI benchmarks (examples)

A

1) past performance
2) budgeted performance
3) Industry averages

43
Q

Strategies for improving Net Profit Margin

A
  • Change in suppliers
  • Buy materials in bulk
  • Review staff rostering -> ensure appropriate lvls
  • Effective marketing -> attract new clients
  • Improve service delivery -> better rep
44
Q

What is asset turnover

A

= efficiency indicator which measures how productively a bus has used its assets in the generation of sales revenue
-> measures number of times in the period the value of assets is earned as sales revenue : faster asset turnover, more capable firm is of using its assets 2 earn revenue

45
Q

What is the asset turnover equation

A

A.T = Net sales / average total assets

46
Q

What is return on assets

A

= a profitability indicator assessing how effectively bus used assets 2 earn profit

47
Q

What is the return on assets formula

A

ROA = Net profit / average total assets x 100

48
Q

Strategies 2 improve return on assets

A
  • inc net profit through greater sales by effective advertising / distribution channels
  • increase net profit through expense control
  • less assets so x idle / obsolete assets
49
Q

What is return on owners investment

A

= profitability indicator showing how effectively bus has used owners capital 2 earn a profit
-> measures from owners perspective

50
Q

What is the return on owners investment equation

A

ROI = Net Profit / Average capital X 100

51
Q

What is liquidity

A

= ability of the bus 2 meet S.T debts as they fall due

52
Q

What is stability

A

= ability of the bus 2 meet its debts and continue in the long term

53
Q

What is the debt ratio formula

A

DR = Total liabilities / total assets X 100

54
Q

What does the debt ratio measure

A

-> measures the proportion of the firms assets that are funded by external sources providing an indication of the stability of the business
-> higher debt ration = greater risk

55
Q

What is the relationship between return on owners investment and debt ratio

A
  • Higher DR -> inc reliant on external finance rather than internal
  • Lower DR -> less reliant on external rather than internal
56
Q

What are non-financial indicators

A

= x calculated using $ figure. H/r they can still be an indicator that can be used 2 assess profitability of a bus / reasons behind poor performance

57
Q

What is the working capital ratio

A

= liquidity indicator that measures ratio of current assets 2 current liabilities 2 assess the firms ability 2 meet it’s S.T debts as they fall due

58
Q

What is the working capital ratio formula

A

-> WCR = Current Assets / Current liabilities

-> number of times : 1

59
Q

How to evaluate using the working capital ratio

A
  • If WCR < 1:1 = bus has inc current liabilities than current assets t/f struggle to meet S.T debts
  • If WCR > 1:1 by a lot = bus has excess of current assets that are idle or being employed effectively
60
Q

Strategies 2 improve WCR: if low

A
  • inc cash flow from operations
  • less drawings / more cap contribution
  • Renegotiate s.t debts to l.t debts
61
Q

Strategies 2 improve WCR: if high

A
  • less inventory of materials through more bus expenditure
62
Q

What is the cash flow cover formula

A

-> CFC = net cash flows from operations / average current liabilities

63
Q

What is the cash flow cover

A

= liquidity indicator that assesses firms ability of operating cash flows 2 meet short term debts as they fall due

64
Q

What is the question word Discuss

A

= present a clear, considered + balanced argument / prose that identifies issues + shows strengths/weaknesses / opinions

65
Q

What is the question word Analyse

A

= identify components + significance of relationships b/n them; draw out + relate implications; determine logic + reasonableness of info

66
Q

What is the question word Explain

A

= give detailed account of why+/how with reference 2 causes + effects, continuity, change, reasons / mechanisms

-> IDL

Accounting 1,2 (5 decks)

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