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Accounting sac Revision Flashcards

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1
Q

Define Inventory

A

Goods purchased by a Trading firm to be sold for profit (To create revenue)

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2
Q

Define Fees

A

Cash received by service firms for the completion of a service to a customer

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3
Q

T-form balance sheet

A

Can be used to show the direct effect of the two-fold effect of transactions

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4
Q

Two-fold effect

A

For every transaction, there is at least two items that are effected on the balance sheet (3 including GST)

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5
Q

GST paid by the business…

A

…decreases GST debt

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6
Q

GST received by the business…

A

…increases GST debt

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7
Q

What is COD and what does it stand for…

A

Cash On Delivery: Cash is paid when the delivery of stock/inventory arrives

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8
Q

Trade Credit is…

A

…when suppliers give their customers a set period of time to sell the inventory they bought before the money has to be paid back

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9
Q

What are at least two effects of selling inventory…

A

1) Inventory decreases (Asset)
2) Cash at Bank Increases (Asset)
3) Cost of Sales Increases (Expense)
4) Owners equity increases (Profit)
5) Increase GST debt (Liability)

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10
Q

What is “Cost of Sales”?

A

The cost price of Inventory sold. The expense of the inventory being sacrificed

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11
Q

Goods are sold for $800 plus GST (Cost Price $500). Show the effect on the balance sheet

A 
Inventory (Dec.) - $500
Cash at bank (Inc.) - $880
GST liability (Inc.)  - $80
Cost of sales (Inc.)(Decreases profit) - $500
Owners Equity (Inc.) - $800
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12
Q

Selling price - Cost price =

A

Profit

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13
Q

Accounts receivable does not include GST. True or False?

A

False. Accounts receivable includes GST

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14
Q

Define Purchases and Sales

A 
Purchases = The cost of inventory bought for the purpose of resale
Sales = Revenue earned from the sale of Inventory bought
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15
Q

What is a purchase Invoice?

A

Evidence of Inventory bought on credit by the business

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16
Q

What is a sales Invoice?

A

Evidence of Inventory sold on credit to customers by the business

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17
Q

EFT payments are used when you want to…

A

…buy inventory online, quickly and easily.

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18
Q

EFTPOS Transactions are used when you want to…

A

…sell inventory without handling large amounts of cash. Although you must rent a terminal and pay a bank fee to use.

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19
Q

Service firms record …… and Trading firms record …… in cash journals

A

Fees, Sales

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20
Q

Capital or Loan can be recorded as ……

A

EFT instead or Receipts

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21
Q

The heading “Assets” in Cash Payment journals are ….. and are recorded in the statement of receipts and payments as …..

A

non-current assets, one value

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22
Q

An ………. ……….. column can be provided for rare transactions in Cash Payment journals

A

other expenses

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23
Q

Buying/Selling on credit - Good’s sold/purchased on credit are ……… unless money is received/paid out from the Accounts (GST column is ………)

A

not recorded, not used when money is received from accounts receivable

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24
Q

For Trading firms, In Statement of Receipts and Payments “Assets” is recorded as ……… and “Other expenses” can be recorded as either …… or …….

A

One Value, one value or separate values

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25
What are the three outcome of a stocktake?
1) Unit's of Inventory are correct 2) Unit's of Inventory are too low 3) Unit's of Inventory are too high
26
What are some causes of Inventory Loss? (Name at least three)
Theft, Oversupply to customers, Undersupply from suppliers, Double invoicing by suppliers, Stocktake errors, Recording errors
27
What are some causes of Inventory Gain? (Name at least three)
Oversupply by supplier, Undersupply to customer, Recording errors, Stocktake errors
28
What source document is used to report Inventory Loss/Gain?
Memorandum (Memo)
29
Does Identified cost or FIFO apply to Inventory Losses/Gains?
FIFO
30
What is a Purchase return?
Inventory returned to supplier
31
What is a Sales return?
Inventory returned by customer
32
Issued when Inventory is returned to supplier or customer
Credit Note
33
Unless using Identified cost, Inventory returned should be recorded in Inventory sheets as......
....The last cost price in the 'Out' column
34
What is a stocktake?
A physical count of the number of units of Inventory on hand
35
Why is a stocktake important?
1) Helps calculate annual profit 2) Satisfy's Taxation Authorities 3) Helps to find any Inventory Loss's or Gains
36
Define Inventory sheet
Document used to record details of Inventory stock
37
What are the two steps of an Inventory stoke take?
1) Counting the Inventory | 2) Determining the cost price originally paid for the Inventory
38
State the formula for determining cost price using the mark-up method
(After taking away GST) Cost of Inventory = | Selling price x 100 / 100 + Mark-up
39
Business can use different methods to put the cost price on Inventory items in store
1) Barcodes 2) Number codes 3) Letter codes
40
What is the Perpetual Inventory system?
Recording the movement of inventory transactions continuously throughout a period
41
What is Identified cost?
(accurate) Cost price is determined for each unit of Inventory
42
What is the FIFO method?
(simple/easy) Recording Inventory cost price based on the assumption that first goods bought are first good sold (First-In-First-Out)
43
Is FIFO or Identified cost preferable for most business's?
FIFO
44
Inventory cards have what headings?
Date, Reference, In, Out, Balance
45
Does the supplier need to identify the cost price of Inventory returned?
Yes, it is not FIFO because they issue the credit note with all the details
46
Income Statement includes Credit sales. True/False?
True, Income Statements include cash and credit sales in the revenue column
47
The price of a non-current asset can include...
anything that gets the asset ready to use, such as cartage inwards, installation, labelling the item, anything that is paid for the asset when it is bought and that is the end of the expense exc.
48
The price of a non-current asset does not include...
GST, anything that is paid "Per annum" or paid on a regular bases such as insurance or registration
49
What headings does Cost of Sales (COS) go under in the balance sheet?
Owners Equity
50
Revenue - COS =
Profit!
51
What headings does Inventory go under in the balance sheet?
Current Assets
52
What is one reason we track Inventory?
~ To identify fast and slow moving lines of stock ~ To know what to re-order ~ Allows for setting maximum and minimum levels of stock
53
Define Equipment
A resource the business owns/controls (1 mark) that will bring future economic benefit
54
Define Revenue
an increase in assets or decrease in liabilities that results in the increase of OE
55
Define Expense
an decrease in assets or increase in liabilities that results in the decrease of OE
56
Define Assets
Economic resources held by the business from which there is expected to be future economic benefits/inflow of economic benefits
57
Define Liabilities
A current obligation which is expected to have future economic outflows/outflow of economic benefits
58
What is a Settlement discount? (Hint: Credit terms)
Discounts offered to credit customers to encourage them to pay off their accounts quicker.
59
Why are Settlement discount a benefit to the supplier?
Because slow paying Accounts Receivable
60
Why are Settlement discount a benefit to the supplier?
Because slow paying Accounts Receivable can be costly to the business

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