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Financial Management > Week 1 > Flashcards

Week 1 Flashcards

1
Q

What is bookkeeping?

A

Represents the drawing up of financial transactions and the collection of data to create financial statements

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2
Q

What is accounting?

A

It is the summarising, reporting, analysis and interpretation of financial statements

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3
Q

What is the basic accounting equation?

A

Assets = equity + liabilities

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4
Q

What are the two types of cash books you can put a transaction in?

A

Cash receipts book
Cash payments book

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5
Q

What is the difference between a creditor and debtor?

A

Creditor is a person whom you owe money to and a debtor is a person who owes you money

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6
Q

What are the four steps in doing a bank reconciliation?

A
  1. Check bank statement. Compare the EFT paid from your bank account against entries in the cash book
  2. Compare each deposit received with deposits shows on bank statements - mark them off
  3. Payments that are not yet reflected on the bank statement is recorded separately to outstanding payments
  4. All other costs not get ticked off must be recorded in the cash book
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7
Q

What is VAT? What is the %?

A

Vat is a type of consumption tax placed on a product - 15%

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8
Q

How do you calculate VAT on a cost price?

A

Cost price x 15%

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9
Q

How do you calculate the selling price when given the cost price?

A

Cost price x (115)% = selling price

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10
Q

How do you calculate VAT included in selling price?

A

Selling price x 15/115 = VAT
(Tip: what you want over what you have)

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11
Q

What is a trial balance for?

A

Reflects the balances of every kind of income, expenditure, assets and liability.
Used to ensure that a debit and a credit entry was done for each transaction.

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12
Q

What are the 5 types of adjustments that can be made on a trial balance?

A
  1. Depreciation on assets
  2. Straight-line method
  3. Reducing balance method
  4. Writing off bad debtors
  5. Provision for compulsory expenditures that have not yet been paid
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13
Q

What is cash flow statements?

A

Provides information on the flow of funds - namely inflows and outflows of cash

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14
Q

What can cash flow statements be used for?

A
  • provide an opinion of the risk of the business
  • make projections about cash available in the future
  • evaluate the ability of the business to make money from its operating activities
  • to determine which sources of cash were used for financing operating and investment activities
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15
Q

What are the three sections in a cash flow statement?

A
  1. Operating activities
  2. Investing activities
  3. Financing activities
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16
Q

What is financial management?

A

It is the process of planning, organising, controlling and monitoring a business’s financial resources to archives its goals

17
Q

What is the function of the financial department?

A

Determine the capital requirements
Establish the best way to finance these requirements
Record all transaction and report on financial matters for sale of planning and controlling

18
Q

What is a liability?

A

A present obligation that arises due to a past event will lead to the outflow of economic benefit from the business - current & non-current

19
Q

What is equity?

A

Represents the shareholders stake in the company - capital & retained income

20
Q

What is liquidity?

A

Refers to the ability of the business to pay its short term financial commitments continuously and on time

21
Q

What is solvency?

A

It is the degree to which the total assets of the business cover its total liabilities

22
Q

What is the elements of stationary on hand?

A

Asset

23
Q

What is element of capital?

A

Equity

24
Q

What is the element of 10% long term borrowing?

A

Liability

25
Q

What element is drawings?

A

Equity

26
Q

What element is trade receivables?

A

Non-current Asset

27
Q

What element is trade payables?

A

Current Liabilities

Financial Management (7 decks)

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