Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FAF > Urgent > Flashcards

Urgent Flashcards

1
Q

What are the 3 types of ledger?

A
  • Purchase
  • Sales ledger
  • General ledger
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a purchase ledger?

A

-a business records and monitors its creditors. The purchase ledger contains the individual accounts of suppliers from whom the business has made purchases on credit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a sales ledger?

A

The Sales Ledger is your record of sales, and whether or not you have received the money, and how much you are still owed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the general ledger?

A

-A general ledger, or GL, is a means for keeping record of a company’s total financial accounts. Accounts typically recorded in a general ledger include: assets, liabilities, equity, expenses, and income or revenue.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the 5 main subsidiary books?

A
  • Sales day book
  • Returns inwards daybook
  • Returns outwards daybook
  • Purchases day book
  • Main cash book
  • General journal
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the main cash book?

A

A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger.

Date, reference, amount, discounts allowed/received or any reference to ensuring debited/credited
correctly.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Purposes of subsidiary books

A
  • Division of Work: In place of one general journal, we have several subsidiary books, So the resulting work may be divided among several members of the staff. This will save time, improve efficiency and result in fewer errors as well.
  • Saving labour hours: since we use a number of subsidiary books, various accounting process can be undertaken simultaneously. This to will save the time of the clerks/accountants.
  • Easier for Checking: If the Trial Balance does not match, it will be much easier to locate the error thanks to the existence of separate books i.e. a subsidiary book.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Double entry for disposal of non-current assets

A

Dr Bank £10,000
Cr Van – Disposal Account £10,000

Dr Van – Acc. Depreciation £12,000
Cr Van – Disposal Account £12,000

Dr Van – Disposal Account £20,000
Cr Van - Cost £20,000

Being the disposal of a van

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Steps for balancing off

A
  1. Add up the total of debits (make a note)
  2. Add up the total of the credits (make a note)
  3. Whichever side is smaller – insert the difference and label ‘Bal c/d’ and the
    date (normally the end of the month)
  4. Write the total of each side so that they are the same as each other
  5. Whichever side was bigger – insert the difference from (3.) underneath the
    total line and label ‘Bal b/d’ and the date (start of next month)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How to enter a journal entry into T-accounts?

A
  • If the debit is purchases and the credit is payables
  • Then payables should be entered as a debit in the purchases
  • And purchases should be entered as a credit in payables
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Discount allowed 10%

A

Dr Bank £90
Dr Discount allowed £10

Cr Receivable – (XYZ) £100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Discount received 10%

A

Dr Payable – (ABC) £100

Cr Bank £90
Cr Discount received £10

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What to include at the bottom of a journal entry?

A

-Being…

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What side of the T-account goes in the trial balance?

A

-If either side is larger than the other then that is the side which is entered into the trial balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What to include in a trial balance?

A
  • Title of company
  • Trial balance as at…
  • debit and credit sides which should equal eachother
  • And a row of t-account names
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Errors that the TB can identify and make the TB not balance

A 
T ransposition error
• A rithmetic error
• P osting error
• U nequal posting error
• P artial omission
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Errors that the TB cannot identify and the TB is still in balance

A 
C ommission
• O riginal entry
• R eversal of entries
• P Principle
• O mission
• C ompensating
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is partial omission?

A

-Included a credit or debit but not the other part.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is an unequal posting error?

A

-One side has a different entry than the other side

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a transposition error?

A

The numbers are reversed e.g. £45 not £54 for only one side

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is reversal of entries?

A

-Debit where should be credit and credit where debit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is error of commission?

A

Correct type (e.g. Asset), wrong name (e.g. wages for insurance)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is a posting error?

A

Two debits or two credits

24
Q

What is error of original entry?

A

-The wrong amount is included for both debit and credit

25
Q

What is a compensating error?

A

-One of the other errors is cancelled out by another

26
Q

What is error of principle?

A

-Correct side but wrong type of account (e.g. motor repairs (expenses) to Motor vehicle
(asset)

27
Q

How to account for depreciation?

A

Dr Depreciation charge £3,251
Cr Acc. Depreciation £3,251

Being the depreciation charge for the year

28
Q

Double entry for accruals

A

Dr&raquo_space;>Expense item«< £X

Cr Accrual £X

29
Q

Double entry for prepayments

A

Dr Prepayment £X

Cr&raquo_space;> Expense item«< £X

30
Q

Bad debts double entry

A

Dr Bad debts

Cr Trade receivables

31
Q

What is a bad debt?

A

-A cautious approach assuming that a number of trade receivables will not
pay
• Even where no/minimal knowledge that they will not be paying

32
Q

Why do we need to adjust for bad debts?

A

Concept – prudence

• Past evidence shows that X% of debts turn bad so should be consistent

• Market conditions suggest that it is likely that more/less receivables will
turn bad.

33
Q

Provision for bad debts at first time of trading (increase)

A

Dr Increase in Prov. for bad debts (I/S) £X

Cr Prov. for bad debts (SFP) £X
Being the creation of a provision for bad debts

34
Q

Provision for bad debts for subsequent years (increase)

A

Dr Increase in Prov. for bad debts (I/S) £X

Cr Prov. for bad debts (SFP) £X

Being the creation of a provision for bad debts

35
Q

Decrease in provision for bad debts double entry

A

Dr Prov. for bad debts (SFP) £X

Cr Decrease in Prov. for bad debts( I/S) £X

Being a decrease in provision for bad debts

36
Q

What are preference shares?

A

-Expressed as a % of nominal value. Example: 6% of
£50,000 of preference shares

-Non-voting shares

37
Q

What are ordinary shares?

A

-– Expressed as Xp per share. Example: 5p per share, 6p
per share

-These are voting shares

38
Q

Double entry for both ordinary and preference shares

A

Dr Retained earnings £128,000

Cr Bank £128,000

39
Q

Double entry for rights issue

A

Dr Bank £X+Y

Cr Share Capital £X
Cr Share Premium £Y

40
Q

What is the Partnership Act 1890?

A

• A partnership is ‘…between persons carrying on a business in common with a
view of profit

• Between 2 -20 people

• Exceptions are large professional firms e.g. Accountants =Limited liability
partnerships (“LLP”).

• Can be to form a new business, and or the natural growth of a sole trader

41
Q

What are the advantages of a partnership?

A
  • They are cheap and easy to set up
  • There is the possibility of Increased capital
  • Different partners can specialise in particular areas e.g. Criminal law, contract law
  • More partners mean more cover for illness and holidays
42
Q

What are the disadvantages

A

-• As there are more owners, decisions may take longer as the other partners may need to be consulted

• There may be Disagreements between partners

•	All partners are Liable in law for the firm and its debts –Unless it is a Limited
Liability Partnership (“LLP”)

• The retirement or death or a partner may Adversely impact the running of the business

43
Q

What are the accounting requirements of a partnership?

A

-• The rules set out in the Partnership Act 1890 (“PA 1890”)
OR
• The partners agree amongst themselves by means of a Partnership Agreement to follow different accounting rules

44
Q

Accounting rules under a partnership

A
  • Profits/losses shared equally
  • No partner salaries
  • No partners to receive interest on their capital
  • No partners to be charged interest on drawings
  • Where a partner contributes more. than agreed, they are entitled to interest at 5% per annum
  • Partnership dissolves on the death of any of the partners
45
Q

Key facts on limited liability companies

A
  • A limited company is owned by shareholders
  • A company is a separate legal entity from its owners.
  • There must be at least one shareholder, and there is no maximum
  • The owners have limited liability and can only lose their investment.
  • The law companies need to follow are covered by the companies Act 2006.

• The rules that determine how companies are run internally are called the articles of
association.

  • Companies pay tax on their Profits
  • Companies employ directors to act as management

• Companies file their accounts with Companies house and are available to the
public

46
Q

Companies act 2006

A
  • A Public Limited company must include the letters PLC after the company name.
  • A Private Limited company must include the letters LTD after the company name.
47
Q

What is a public limited company?

A
  • Must have issued share capital of at least £50000
  • At least one shareholder and two directors.
  • A public limited company can raise additional capital on the Stock exchange. However, it doesn’t need to raise capital this way.
48
Q

What is a private limited company?

A

-• This is the most common form of limited company. It is defined by CA 2006 as ‘any company that is not a public limited company’.
• They are often family owned.

  • No minimum requirement for issued share capital.
  • At least one shareholder and one director.
  • They are not traded publicly but can be transferred between individuals, although valuation will be difficult as there is no active market for the shares.
  • Another type of company that is not common is a ‘company limited by guarantee’
  • In this type of company the members agree to pay a certain amount if the company becomes insolvent
49
Q

What is a sole trader?

A

a person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.

50
Q

Advantages of sole trader

A
  • You have no staff to manage or pay.
  • Starting your business is quick and easy.
  • You have full control over daily and strategic decision making.
51
Q

Disadvantages of sole trader

A
  • You have full personal liability for any debts.
  • There’s no staff to deligate to if you have an accident or fall ill.
  • It may be difficult to bid and accept larger contracts.
52
Q

Advantages of limited liability companies

A

-Limited liability relates to the shareholders/investors, preventing them from losing more than their
initial investment.

-Legally separate entities meaning that the individual investors are not personally liable for any action
taken against the company by third parties

-Increased access to capital is possible because there are no restrictions to the number of shareholders and, due to the other points above, it may encourage wider engagement

53
Q

Disadvantages of limited liability companies

A
  • Increased legal controls result in increased time and cost being spent to ensure compliance.
  • Publicity is increased because all of the filings and documentation are publicly available
54
Q

4 stakeholders

A
  • potential investors
  • employees
  • creditors
  • competitors
55
Q

Why would these 4 stakeholders be interested in the statements?

A

-Potential investors:To determine whether it is a good investment opportunity/Record of dividend payments

-Employees: To determine job security OR to determine whether they could obtain a pay rise (1.0)
Profitability

-Creditors: To determine the ability of the borrower to repay funds (1.0)
Liquidity

-Competitors: To compare their performance to a competitor (1.0)
Any aspect but most likely profitability OR liquidity

56
Q

Purposes of accounting

A
  • facilitating the decision making processes and keeping them updated.
  • The fundamental role of accounting is to maintain a systematic, complete, accurate and permanent record of all transactions of a business which could be retrieved and reviewed whenever necessary.
  • Organizations need to plan how they intend to allocate their limited resources (e.g. cash, labor, materials, machinery and equipment) towards competing needs in the future. An effective way of doing so is by using various forms of budgets

FAF (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions