Account 2 Flashcards
(27 cards)
What is the matching concept?
- applies when calculating profit (income statement)
- sale of that period
- MATCHED TO:
- expense of that period
We may not have paid them yet but if they helped generate this period sale revenue they must be included in same income statement
What is depreciation
A reduction in the value of an asset overtime due to wear and tear
Debt factor
A service offered by financial institutions that involves the factor taking over the management of the trade receivables of the business. The factor is often prepared to make an advance to the business, based on the amount of trade receivables outstanding
Corporate governance
Matters concerned with directing and controlling a company
E.g shareholder didn’t run the firm they hire directors to and the directors may pursue their own interests over the shareholders and what’s best for the firm
Share premium
A capital reserve reflecting any amount, above the nominal value of shares, that is paid for those shares when they are issued by a company
Bad debt
An amount owed to a business which is considered to be irrecoverable
Bank overdraft
A flexible form of burrowing which allows a firm to have a negative current account balance
Business entity concept
The convention that holds that, accounting purposes, the business and its owners treated as separate and distinct
What is a dividend
The transfer of assets (usually cash) made by a company to its shareholders
Hire purchase
A method of acquiring an asset by paying the purchase price by instalments over a period. Normally, control of the asset will pass a soon as the hire purchase contact is signed and the first instalment is paid, whereas ownership will pass on payment of the final instalment
Liability
The restriction of the legal obligation of shareholders to meet all of the companies debts
Limited company
A firm of business that is granted a separate legal existence from that of its owners. The owners of this type of business are liable for debts only up to the amount that they have agreed to invest
Operating revenues
All the exposed deducted away from the revenue
Private limited company
A company for which the directors can restrict the ownership of its shares
Public limited company
A limited company for which the directors can not restrict the ownership of its shares
Revenue reserves
Part of the owners claim of a company that arises from realises profits and gains, including after tax trading profits and gains from disposable of non current assets
Annual report
- directors report to shareholders
- usually 100+ pages in length
- convey a whole spectrum of information
- important in PR
- include income statement/ statement of financial position/CFS + a wealth of other information
Clean audit report
Company followed the accounting standards which will reduce the likeliness of the report containing errors
Gearing
Refers to the relative proportions of debt and equity that a company uses to support its operations.
‘True and fair view’
Means that the financial statements are free from material misstatements and faithfully represent the financial performance and position of the entity
Articles of associations
Document that specifies the regulations for the company’s operations and defines the company’s purpose.
Qualifies audit report
That the accounting information that presents in the financial statements is not correct, this means the accounting treatment is not following accounting standards
Partnership current account
Shows balance of profits attributable to each partner, drawings made by partner, interest on drawings, interest on capital, salary
Statement of changes in equity
Produced it help users understand changes in share capital and reserves that took place during the period
