Brainscape's Knowledge GenomeTM

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


See full index

Year 1 Semester 1 > Accounting Relevant > Flashcards

Accounting Relevant Flashcards

1
Q

income statement
components

A

profit or loss
-revenue (normal trading activities)
-other income (not part of core business disclosed separate interest)
-expenses (used up in period being reported on)
-profit/loss

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

balance sheet
components

A
  1. assets = resources (of value generate future income)
    -non current (+12months)
    -current (cash in a year)
    -tangible vs intangible
    -available for sale
    -investments in associates
  2. equity & 3. liabilities = claims/funding
    -current (pay within year)
    -non-current)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

debtors

A

trade receivable
owe you money

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

creditors

A

trade payable
owed a supplier money

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

accounting equation

A

assets = liabilities + equity

equity = capital +profit/loss
equity = owners capital + retained profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

cash/bank account

A

asset -> debit -> debit to increase

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

capital account

A

owners contribution to business
equity -> credit account -> credit to increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

debit

A

increase asset/expense
decrease liability, revenue or equity

cash/bank
drawings

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

credit

A

increase liability, equity
decrease asset or expense

capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

drawings

A

owner withdraws cash or other business assets for personal use
decreases equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

cash transactions
2 types

A

receipt/payment of cash = immediate

  1. cash receipt
    debit = cash/bank
    credit = account where cash receipt is from
  2. cash payments
    debit = account what cash payment is for
    credit = cash/bank
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

credit transactions
sales

A

cash receipt/payment occurs later after point of transaction
accruals principles - income/expense recognised as earned/incurred not when payment happens

debit = trade receivables
credit = sales
THEN
debit = cash/bank
credit = trade receivables

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

purchase on credit

A

debit = purchases
credit = trade payables
THEN
debit = trade payable
credit = cash/bank

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

trade receivables

A

sales
current asset

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

trade payables

A

purchases
current liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

c/d

A

carried down

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

balance sheet accounts for trial balance

A

asset liability capital
balance carried down into next period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

income statement accounts for trial balance

A

income expense
transferred to income statement
closes the account no balance carried into next period

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

capital related accounts

A

drawings & profit/loss (income statement)

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

debit and credit balances

A

total amount on debit side greater than credit = debit balance
reverse = credit balance

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

trial balance

A

balances in ledger at end of period

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

trade discount

A

discount from 1 trader to another
deducted on invoice
no need to recored already reflected in lower invoice price

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

cash discount

A

reduction in amount customer has to pay
provided payment is made within given period stipulated by seller at time
no need to record discount allowed to customer discount received from suppliers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

receipts vs payments

A

debit = receipts
credit = payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

cost of sales (cost of goods sold)

A

costs directly connected to purchasing and or producing goods sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

matching concept

A

income must be recognised in period in which it is earned
-expense incurred in achieving income also recognised in same period
-expense should be matched against income generated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

purchases during accounting year

A

SOLD - matched with sales generate COS this years I.S

NOT SOLD - cost of items deducted from this years purchase treated as an asset (inventory) this year when items get sold next year = converted into COS in next years I.S closing inventory this year, opening inventory next year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

inventory in trial balance

A

always opening inventory (last periods closing inventory)
inventory account not accumulative record
- only entries made are for recording closing inventory and transferring opening inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

classification of costs and expenses

A

operating expenses: COS, selling and distribution, administrative

finance cots: interest on borrowings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

income statement for limited companies

A

operating expenses
finance costs
corporation tax/income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

selling and distribution

A

costs of selling & warehouse operation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

administration

A

cost of administrative functions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

net profits

A

profits/loss at end of current year goes from IS -> BS usually added to retained earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

expenditure of acquiring an asset

A

treated as an asset (capital expenditure)
increases financial position of the business NOT an expense

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

measurement of NC asset

A

recorded at historical cost
objective and verifiable measure = always relevant
companies can chose between historical costs and fair value (mkt value) after initially recording asset at HC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

historical cost

A

cost originally paid to acquire asset and get it in working order includes:
1. delivery charges & installation costs
2. legal costs
3. extensions and improvements (buildings)

not repairs and maintenance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

depreciation

A

systematic allocation of depreciable amount of asset over useful life

-carried out to reflect amount of economic benefits of tangible non-current asset consumed during accounting period

38
Q

depreciable amount

A

cost of asset or other amount substituted for cost - residual value

39
Q

dual effects of depreciation

A

charged on all tangible non current assets except land (infinite useful economic life)

40
Q

straight line method of depreciation

A

fixed instalment method
same amount of depreciation charged to I.S every year of assets useful economic life

41
Q

diminishing/reducing balance method

A

depreciation expense that decreases over the assets useful life

42
Q

ledger entries for depreciation

A

expense -> IS, periodic, balance -> IS at end of year

contra asset -> BS, accumulative, balance carried down to next year

43
Q

Disposal of non-current asset

A

record sales proceeds
clear non current asset
clear off accumulated depreciation of disposed asset
close asset disposal account
complete cr entry for profit and dr entry for loss

44
Q

partial year depreciation

A
  1. strict time basis
    -in year of acquisition, date of purchase to end of accounting year, year of disposal from start of accounting year to date of sale
  2. if date of acquisition or disposal is not given
    -full years charge in year of purchase
    -none in year of sale
45
Q

bad debts

A

irrecoverable debts officially written off as uncollectible
TR unable/unwilling to pay amount owed in respect of goods/services supplied on credit
-matter of judgment
-expense on I.S

46
Q

doubtful debt

A

money predict will be uncollectible and turn into bad debt

47
Q

provision

A

setting aside income to meet a know/highly probable future liability or loss (estimate)
-prudence concept (providing for losses)
-matching concept (recognising loss/cost against revenue that generates it)

48
Q

types of provision for doubtful debts

A
  1. specific - particular TR identified as unlikely to pay
  2. general - estimated % of TR end of accounting year unlikely to pay
49
Q

accruals/accrued expenses

A

charged against profit for a particular period even though not been paid
-consume now pay later
-instead of payable = recognise accrual = liability

50
Q

arrears

A

money owed and should have been paid earlier

51
Q

accruals concept & matching concept

A

expenses recognised when incurred not when they are paid for

expenses are matched to revenue that generate them

52
Q

prepayments/prepaid expenses

A

services are paid for in advance
rise to a receivable in respect of services paid for but not yet consumed

53
Q

limited company

A

legal entity in own rights
separate from owners = ordinary SHs
limited liability
private or public

54
Q

ordinary share capital

A

nominal value of funds raised from share issue
funds raised by company through issues of ordinary shares
proceeds recorded in share capital account

55
Q

nominal value

A

basic value of the share
fixed known as face value

56
Q

issue price

A

shares issued at price at least equal to nominal often exceeds to try and raise money

57
Q

share premium
reasons for issuing at premium

A

excess of shares issue price over nominal value

-maintain control = issue less but at higher price = limit number of shares

58
Q

market value of a share

A

fluctuates
according to market expectations and company performance
doesn’t feature of financial statements

59
Q

equity

A

credit balance
share capital = credit

60
Q

reserves

A
  1. capital
    -cant be distributed as dividends
    -share premium = type of capital reserve
  2. revenue
    -can be distributed as dividends
    -retained earnings
61
Q

dividends

A

appropriation of profit - distribution of profit, reduced retained earnings

62
Q

debenture/loan stock

A

raise funds issuing to public
liability
holders = entitled to = repayment of nominal/face value of debenture when reach maturity after fixed time period
fixed interest payments until reach maturity

63
Q

interest on debenture

A

EXPENSE
charge against profit finance cost
usually in 2 instalments
liability from the accrual = sometimes referred to as interest payable

64
Q

taxation

A

company liable for tax on annual profit
lower net profit
accrued tax = increase liabilities
EXPENSE

65
Q

accrual in terms of taxation

A

should be created at year end reflect estimated tax due
liability arising sometimes referred to as tax provision/tax payable

66
Q

horizontal analysis

A

comparison of historical financial info over 2 or more reporting periods
start with base year and a comparison year = determine year on year change
performed on income statement and balance sheet

67
Q

vertical analysis

A

income statement:
-take revenue as base figure
-express every line on IS as % of sales
-proportion of line items to sales
-complements profit margin rations - illuminate why profit margins are what they are, focus in costs

balance sheet:
-asset- total assets as base figure and express every asset as % of total assets
-claims (liabilities + equity) total claims as base figure and express liability and equity items as % of total claims

68
Q

ratio analysis

A

expression of relationship between figures
evaluate financial performance and position = decision making

69
Q

point of reference for ratios

A
  1. comparisons with other firms
  2. historical comparisons
70
Q

profitability ratios

A

profit margins (GPM, OPM)
ROCE
ROE

71
Q

boost profit margins

A
  1. increase revenue (SP x vol)
  2. cost control (boost GPM, lower expenses through efficiency reforms/outsourcing)
72
Q

efficiency ratios

A

-evaluation of working capital management
1. collection days
2. trade payable days
3. inventory turnover days

73
Q

working capital management

A

working capital: level of CA & CL in business
‘right’ level of inventory, TR, TP to have in business relative to level of trading (buying and selling) activity

74
Q

liquidity ratios

A

ability to generate cash to pay for current liabilities
1. current ratio

75
Q

financing ratio

A

ability to meet long term liabilities and pay interest
1. gearing ratio

76
Q

investor ratios

A

computed from investors perspective
1. dividend cover

77
Q

shares

A
  1. book value (value of shares issued as reported in accounts)
  2. nominal value (face or per value)
  3. share premium
78
Q

dividend

A

distributions of profit to SHs, determined by company’s dividend policy

79
Q

market value (share price)

A

reflects investors perceptions and reactions to company performance and decisions also affected by wider economy

80
Q

costs

A

expenditure attributable to an item or activity

81
Q

cost concepts in financial accounting

A

expenses (revenue expenditure) - costs consumed in generation of revenue during given period, decrease profit on I.S

assets (capital expenditure) costs of items to be retained for use within business capitalised as assets, increase financial position on B.S

82
Q

cost classifications in management accounting

A
  1. by type (product cost vs period cost) (direct vs indirect)
  2. by behaviour (fixed cost, variable cost, semi-variable cost)
  3. by relevance to decision making (sunk cost, opportunity cost, future outlay)
83
Q

product costs in manufacturing

A
  1. direct costs (direct materials, direct labour) - traceable to product, prime cost
  2. indirect costs (production/manufacturing overheads) - cant be traced to specific products
84
Q

cost object

A

anything that needs own cost measurement can be a unit of product or a job

85
Q

absorption costing

A

traditional full costing technique

86
Q

full costing

A

term
trying to cost a product so that it includes both direct costs and indirect costs are the production overheads
-cost of unit of product (all direct costs and allocation of production overheads)

87
Q

method of allocation of production overheads

A

different forms
single blanket overhead absorption rate
separate absorption rates for each department
take total production overheads and divide by some kind of allocation basis (can be random basis)

88
Q

allocation basis for OAR (overhead absorption rate)

A

direct labour hours used as allocation basis (most common)
machine hours is common
no single correct

89
Q

activity based costing (ABC)

A

cause and effect allocation of overheads, modern full costing technique
individual products and jobs are then assigned overheads according to consumption/use of said activities
instead of 1 overhead absorption split overheads into activities and track how much of activities

90
Q

ABC process

A
  1. split overhead costs into activities (cost pools)
  2. each cost pool identify cost driver (what causes it)
  3. each cost pool calculate cost per driver
  4. allocate overhead to individual products using cost per driver x usage of cost driver by product
91
Q

contribution margin

A

proportion of sales revenue not consumed by variable costs and contributes to covering fixed costs

92
Q

cost volume profit analysis assumptions

A

-Selling price and unit variable costs are constant within the relevant range
-Costs can be readily and accurately split into fixed and variable elements
-VC = linear relationship with volume – in practice costs behave in a non-linear way due to EOS and capacity limits
-FC doesn’t vary with volume of activity – practice FC may increase with activity in a step-like way when volume of output exceeds certain level
-one product line or one sales mix for multi-product businesses (rare in practice)

Year 1 Semester 1 (4 decks)

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