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Accounting CBE Flashcards

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1
Q

What are the double entries for Accrued expenses of £500

A

Dr expenses £500
Cr Accruals £500

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2
Q

What happens to profit and expenses for accrued expenses?

A

Profit decreases and expenses increase

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3
Q

What are the double entries for prepayments for £10,000 rent

A

Dr Prepayments £10,000
Cr expenses

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4
Q

What happens to profits and expenses for prepayments?

A

Profit increases and expenses decrease

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5
Q

What are the double entries for accrued income for £5,000

A

Dr Accruals £5,000
Cr Income £5,000

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6
Q

What happens to profits and income for accrued income?

A

Profits increase and income increases

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7
Q

What are the double entries for deferred income for £1,000

A

Dr income
Cr deferred income

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8
Q

What happens to profits and income for deferred payments?

A

Profits decrease and income decreases

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9
Q

What is meant by accrued income

A

Income earned but not received

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10
Q

What is meant by accrued expense

A

Cost incurred but not received

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11
Q

What is meant by prepayments

A

payment made in advance i.e rent

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12
Q

What is meant by deferred income

A

Income received but not earned

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13
Q

What are the double entries for short team leases / operational leases?

A

Dr Short term lease/Operational lease
Cr Bank

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14
Q

Jamal leases a car for 24 months for £100. The car is valued at £1,000. He makes a deposit of £500.

1) What is the first double entry for the car when purchasing it?
2) What is the double entry for making a deposit and payments?
3) What is the double entry for finance charge/interest for the year

A

1)
Dr Fixed asset cost - £1,000
Cr Loan creditor - £1,000

2)
Making deposit of £500
Dr Loan credit - £500
Cr Bank - £500

making monthly payments in the year
Dr Loan creditor - £1,200
Cr Bank £1,200

Interest charge - car is worth £1,000. Jamal pays £2,400 +£500 = £2,900 - £1,000 = £1,400 charge divide by 2 (12 months as opposed to 24)

Dr Interest charge/finance charge expense £700
Cr Loan creditor £700

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15
Q

What is the double entry for revenue grants

A

Dr bank
Cr grant income

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16
Q

How to close grant accounts and move it to p+l

A

Dr Grant account
Cr grant income

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17
Q

What are the double entries for the disposal of a fixed asset?

A

DR Disposal account - fixed asset price
CR Fixed asset cost

Transfer provision for depreciation to disposal account

Dr provision for depreciation
Cr disposal account

Recording cash receipt of the sale

Dr bank
Cr disposal account

If profit is made

Dr disposal account
Cr P+L

If loss

Dr P+L
Cr Disposals account

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18
Q

What are the double entries for part exchange of a fixed asset

A

Dr fixed asset cost
Cr disposal

Dr provision for depreciation
Cr disposal accounts

Dr fixed asset cost account (part exchange)
Cr disposal account

Dr fixed asset cost (once amount deducted for part exchange)
Cr Bank

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19
Q

What is the double entries for research?

A

Dr research expense
Cr Bank

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20
Q

What is the double entries for Development?

A

Dr development expense
Cr bank

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21
Q

What are the double entries required to WO research/development expense?

A

Dr Amortization expense
Cr provision for amortization

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22
Q

How do you calculate depreciation? what is the formula?

A

Straight line basis - Cost - residual cost / useful life

Reducing balancing method
Cost x % = NBV

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23
Q

How is stock valuation calculated?

A

Calculated from the lower of cost or NBV which is cost - selling/distribution costs

Whichever is lower

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24
Q

What are the three methods closing stock is calculated?

A

FIFO
Average
Weighted average method

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25
What are the double entries for a bad debt expense?
DR bad debt expense Cr Debtors
26
What are the double entries for a doubtful debt
Dr bad debt expense Cr provision for doubtful debt
27
What is the double entry for a bad debt that is now paid?
Dr bank Cr bad debt expense
28
What is the appropriation statement in partnership accounts and how is it calculated?
Shows how profit is split between partners Profit Less salary Less interest Profit sharing ration e.g. 50:50 Total profit share
29
What are the double entries for allocating profits to Partners?
Dr P+L Cr Partner accounts
30
What are the double entries for partners making drawings
Dr Partner accounts Cr Bank
31
What is the double entry for when a CT charge is paid?
Dr CT charge expense Cr Bank
32
What is the double entry for when a CT charge is calculated?
Dr CT charge (expense) Cr CT creditors
33
What is the double entry for ordinary £1 shares which are sold for £1.50. Lets assume 1000 shares sold.
Dr bank £1,500 Cr Share capital £1,000 Cr share premium £500
33
What is the double entry for an under provision of CT charge
Dr CT tax charge expense Cr CT creditors
33
What is the double entry for dividence paid
Dr dividence Cr bank
33
What is the double entry for input tax - purchase invoice for £1,200 inclusive of VAT
Dr purchases/expenses - £1,000 Dr VAT account £200 Cr bank £1,200
33
What is the double entry for an over provision of CT charge
Dr CT creditors Dr CT tax charge
34
What are the double entry for the bonus issue of shares?
Dr P+L account reserve Cr ordinary share capital
35
What is the double entry for when a company receives income tax? of £1,000
Dr bank £1,000 Dr income tax £200 Cr interest/royalty income £1,200
35
What is the double entry for the flat rate scheme?
Dr bank Cr vat control net CR sales gross Dr Purchases Cr bank/creditors For flat rate scheme you do not recover VAT incurred on purchases but rather pay output VAT at a fixed percentage
35
What is the double entry for output tax - sales invoice for £1,200 inclusive of VAT
Dr Bank £1,200 Cr Sales £1,000 Cr VAT account £200
35
What is the double entry for a company paying income tax total £1,000?
Dr interest/royalty expense - £1,000 Cr bank £800 Cr income tax £200
35
What is meant by permanent differences in accounting? and whats the equation or formula to calculate it
Income shown in accounts but not deducted as an allowable expense i.e business entertainment Profit + business entertainment - dividence = taxable profit
36
What is meant by timing differences in accounting? and how do you calculate it equation?
these are differences which arise when income is recognised in different periods of time for the purpose of financial statements e.g. depreciation Profit before tax + depreciation - capital allowance
36
Equation to show gross profit as a percentage of sales
Gross profit / sales x 100
37
Equation to show operating profit before interest and tax?
Operating profit / sales x 100
38
Equation to show how much operating profit is generated as a percentage of capital?
Operating profit / capital employed x 100
39
Equation to calculate capital employed?
Capital employed = shareholder funds + long term liabilities
40
Equation to show how many times value of net assets turned into sales
sales / net assets
41
What is the equation for net assets?
Net assets = fixed assets + net current assets = capital employed
42
Equation to show how long stock is held before sold?
Average stock / cost of sales x 365
43
How to calculate average stock?
Closing stock + opening stock / 2
44
How to check how long debtors take to pay?
Trade debtors / sales x 365
45
How to check how long company takes to pay (creditors)
creditors / purchases x 365
46
Equation to show if a business can meet its short term liabilities with its current assets?
Current assets / current liabilities
47
equation to show if a business can meet its short term liabilities with its current assets without current stock
current assets - stock / current liabilities
48
equation to show how much of the business is financed by long term debt
long term liabilities / long term liabilities + shareholder funds x 100
49
How much the interest is covered by operating profits?
Operating profits / interest payable
50
Profit earned by issuing of shares?
Profit for the year / number of issued ordinary shares
51
What is the DR and CR entry for depreciation?
Dr Depreciation (P+L) Cr provision for depreciation (B/S)
52
What is a hire purchase agreement and what are some of its features?
- HP is when you hire/rent a vehicle for a period of time. - you have option to purchase vehicle at end of agreement - strict legal position - buyer does not own the vehicle until final instalment paid. But in the accounts we treat it as if it has been bought outright
53
What is a hire purchase agreement and what are some of its features?
- HP is when you hire/rent a vehicle for a period of time. - you have option to purchase vehicle at end of agreement - strict legal position - buyer does not own the vehicle until final instalment paid. But in the accounts we treat it as if it has been bought outright
54
What is an operating lease and some of its features
- also known as a short term lease. - essentially paying/hiring for a service it is using. - THERE IS NO OWNERSHIP for this vehicle. It is simply hiring vehicle
55
What is a finance lease and some of its characteristics?
Finance lease is similar to hire purchase. But there is no option to purchase the vehicle at the end. All risks/rewards transfer to lessee (hirer)
56
What is revenue grants and what is the accounting entries?
Revenue grants - is a grant received by the government in relation to wages, salaries DR Bank Cr Grant Income
57
What is asset grants? And what are the entries
Asset grants are grants received from the government relating to capital expenditure I.e purchasing of a property for the business or fixed assets. On receipt of the grant DR Bank Cr grant account (deferred income) On release of the income DR Grant income (deferred income) Cr Grant income account (p+l)
58
What is meant by “goodwill” and explain some characteristics
This is in the case where a business runs successfully and builds a good relationship. The reputation is known as good will. FRS102 guidance suggests goodwill should be capitalised as a an intangible asset. This is a chargeable business asset.
59
If you have depreciation what do you to to profit in operating activities
You add depreciation expense
60
Operating activities - loss of fixed assets or profit on sale of fixed asset
You add any losses of sales of fixed assets -And you deduct when profit is made on sale of fixed asset
61
Operating activities - decrease in debtors and increase in debtors
Add Decrease in debtors Deduct increase in debtors
62
Operating activities - decrease in stock, increase in stock
Add decrease in stock/debtors Deduct increase in stock/debtors
63
Operating activities - increasing creditors Decrease in creditors
Add increase in creditors Deduct decrease in creditors (means more cash outflows)
64
What are the 4 accounting ratio categories?
Profitability ratios Efficiency ratios Short term liquidity ratios Financing ratios
65
Name some of the formulas part of profitability ratios
Operating profit margin Gross profit margin ROCE - return on capital employed
66
Name what formulas come under efficiency ratios
Asset turnover Stock turnover Debtors/creditors payment period
67
Name formulas which come under short term liquidity
Current ratios Quick/acid test
68
Name some of the formulas which are under financing ratios
Capital gearing Interest cover Earnings per share

Accounting CBE (2 decks)

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