WK 2: Statement of Profit or loss and accounting eqn Flashcards
What is the matching concept
requires expenses to be matched to revenue that they generated in same FY
What are trade receivables/debtors?
Amounts owed by customers of the business, who having been sold goods/services on credit have not yet paid the business.
What are trade payables/creditors?
Amounts owed to suppliers of the business who, having supplied goods/services on credit have not been paid by the business
Types of account: what is an asset?
Item controlled by business/owned
what is a liability
amount owed by business
what is capital
amount invested by owner
what are drawings
amount withdrawn by owner
What is the accounting eqn?
A = O + L
Assets - business owns; liabilities - what business owes; Owners equity; what the business owes the owner / net asset value
what is the double entry system
for every single account transaction, there are at least two entries, one account is the use of funds and one account is the source of funds
What is the trial balance
record of all account balances at a point in time and is used to prepare the final accounts
Purchase/sale effect what is it?
if sale is made on credit, trade receivable is created until the amount owed by customer is received
Cash effect - what is it?
the credit sale of credit purchase will be recorded when customer pays the business for goods received.
Inventories - what are they
goods (stock) for resale held in stock by business
