Business accounts Flashcards
(284 cards)
1
Q
What is the dual recording of business money transactions called
A
Double entry book-keeping
2
Q
What are individual bookkeeping records called
A
Ledgers
3
Q
What lists all ledger balances at a specific time
A
Trial balance
4
Q
What is a common accounting period length
A
Full year
5
Q
What are the two main year-end financial statements
A
Profit and loss account and balance sheet
6
Q
What is the routine recording of money transactions
A
Book-keeping
7
Q
Where are similar transaction types grouped
A
Nominal ledger
8
Q
What is the collective name for all business ledgers
A
Books
9
Q
What is one side of a double entry recording
A
Debit
10
Q
What is the other side of a double entry recording
A
Credit
11
Q
What should the total of debits equal
A
Total of credits
12
Q
When are ledgers typically ruled off
A
End of accounting period
13
Q
What does a trial balance help prepare
A
Financial statements
14
Q
What are the five main ledger classifications
A
Asset liability capital income expense
15
Q
What does a business own
A
Asset
16
Q
What does a business owe
A
Liability
17
Q
What is owner investment considered
A
Capital
18
Q
What is money earned by a business
A
Income
19
Q
What is money spent by a business
A
Expense
20
Q
What is a long-lasting business-owned item for profit
A
Fixed asset
21
Q
What is a physical long-lasting business asset
A
Tangible fixed asset
22
Q
What is a non-physical long-lasting business asset
A
Intangible fixed asset
23
Q
What are short-term business-owned items easily converted to cash
A
Current assets
24
Q
What are goods for use or resale also known as
A
Stock or inventory
25
Who owes money to the business
Debtors
26
What is money held by the business
Cash
27
What are amounts owed by the business to others
Liabilities
28
What are short-term business debts
Current liabilities
29
What are long-term business debts
Non-current liabilities
30
What is a common example of a short-term liability
Bank overdraft
31
What is a common example of a long-term liability
Term loan
32
What represents owner withdrawals from a business
Drawings
33
What type of accounts record daily business spending
Expense accounts
34
What type of accounts record money received by a business
Income accounts
35
What adjustments ensure accurate period-specific financials
Year-end adjustments
36
What is another term for financial year
Accounting period
37
What is a list of all account balances
Trial balance
38
What is a synonym for non-current assets
Fixed assets
39
What is a synonym for non-current liabilities
Long-term liabilities
40
What financial statement shows income minus expenses
Profit and loss account
41
What is another term for profit and loss account
Income statement
42
What is used to construct financial statements
Trial balance
43
What two main financial statements are prepared
Profit and loss account and balance sheet
44
What does the profit and loss account record
Income and expenses
45
What is the result when expenses exceed income
Loss
46
What is the result when income exceeds expenses
Profit
47
What timeframe does a profit and loss account cover
Accounting period
48
Where is the accounting period stated on the account
Heading
49
What type of trial balance entries go into profit and loss
Income and expense
50
Where are income entries typically placed
Top
51
What is an example of an income account
Sales
52
What is an example of an expense account
Telephone
53
What type of account is cash at bank
Asset
54
What is the standard format for profit and loss accounts
Similar structure
55
What is deducted from total income to get gross profit
Cost of sales
56
What two stock figures are used in cost of sales
Opening stock and closing stock
57
What type of accounts are opening and closing stock
Asset
58
What is gross profit minus total expenses
Net profit
59
Where are expenses other than purchases deducted
After gross profit
60
What is the final figure in a profit and loss account
Net profit
61
What does cost of sales calculation use
Stock figures
62
What does gross profit represent
Income less cost of sales
63
What is deducted from gross profit to find net profit
Total expenses
64
What does the profit and loss account summarize
Business fortunes over time
65
What financial statement shows assets liabilities and capital
Balance sheet
66
What two account types are only in the profit and loss account
Income and expenses
67
What three account types are in the balance sheet
Asset liability capital
68
What is the balance sheet relevant to
Given date
69
What is a balance sheet often described as
Snapshot
70
What date is on the top of a balance sheet
Last day of accounting period
71
What phrase is always in a balance sheet heading
As at
72
What does the top half of a balance sheet show
Net worth
73
What is another term for net worth
Net asset value
74
What does the bottom half of a balance sheet show
Capital invested
75
What must the net worth and total capital figures do
Balance
76
What trial balance entries go into the balance sheet
Asset liability capital
77
What is an example of an asset entry
Debtors or receivables
78
What is an example of a capital entry
Capital at start of year
79
How many main sections are in the example balance sheet
Three
80
What are assets categorized as
Fixed or current
81
What takes into account asset depreciation
Net book value
82
What are liabilities categorized as
Current or long term
83
What are long term liabilities also called
Non-current
84
What equals current assets minus current liabilities
Net current assets
85
What plus net current assets minus long term liabilities equals NAV
Fixed assets net book value
86
What is recorded in the bottom part of the balance sheet
Capital invested
87
What must always be the same as total capital
Net asset value
88
What does a balanced balance sheet demonstrate
How capital has been used
89
What is another term for fixed assets
Non-current assets
90
What are modifications to trial balance account entries
Year-end adjustments
91
What concept requires matching income and expenditure
Accruals or matching concept
92
How many year-end adjustments are there
Five
93
What is the first year-end adjustment discussed
Depreciation
94
What type of asset typically depreciates
Fixed asset or non-current asset
95
What is the decline in an assets value over time
Depreciation
96
Why is depreciation important for accounts
True reflection of business position
97
How should depreciation be carried out
Systematic or regular way
98
What should the depreciation method mirror
How asset loses value
99
What are the two main depreciation methods
Straight-line and reducing balance
100
What method suits consistent asset use
Straight-line method
101
What method suits assets losing value faster early on
Reducing balance method
102
What is the yearly depreciation amount called
Depreciation charge
103
How does straight-line method spread depreciation
Evenly over assets life
104
Does straight-line method have the same charge each year
Yes
105
What type of asset might use straight-line depreciation
Shelving
106
How is reducing balance depreciation calculated
Percentage of reducing balance
107
Is more depreciation charged earlier with reducing balance
Yes
108
What type of asset might use reducing balance depreciation
Van or motor vehicle
109
What is original cost minus accumulated depreciation
Net book value
110
Where does the yearly depreciation charge appear
Profit and loss account as expense
111
What type of account is accumulated depreciation
Liability account
112
Where does accumulated depreciation appear
Balance sheet
113
What does net book value estimate
Current value of the asset
114
What is cost minus accumulated depreciation
Net book value
115
What are modifications to trial balance entries
Year-end adjustments
116
What concept requires matching income and expenses
Accruals or matching concept
117
What arises when an expense is incurred but not yet paid
Accrual
118
In what period should an accrued expense be charged
Current year
119
Why might an accrued expense not be on the trial balance
Invoice not received
120
What happens if accruals are not adjusted
Profit is artificially high
121
Where does an accrual appear on the profit and loss account
Expense account
122
Where does an accrual appear on the balance sheet
Current liability
123
What arises when an expense is paid in advance
Prepayment
124
In what period should a prepaid expense be charged
Future year
125
What happens if prepayments are not adjusted
Profit is artificially low
126
What is the opposite of an accrual
Prepayment
127
Where does a prepayment appear on the profit and loss account
Reduction in expense
128
Where does a prepayment appear on the balance sheet
Current asset
129
How many year-end adjustments are discussed in this element
Two
130
What are the two year-end adjustments discussed
Accruals and prepayments
131
Do year-end adjustments relate to the accruals concept
Yes
132
Do accruals involve receiving benefit before payment
Yes
133
Do prepayments involve payment before receiving benefit
Yes
134
Are accruals a current liability
Yes
135
Are prepayments a current asset
Yes
136
Do accruals increase reported expenses
Yes
137
Do prepayments decrease reported expenses
Yes
138
Are accruals and prepayments necessary for accurate financial statements
Yes
139
Do accruals and prepayments ensure correct period matching
Yes
140
What are modifications to trial balance entries
Year-end adjustments
141
What concept requires anticipating potential losses
Accruals or matching concept
142
What type of debt is known with certainty to be uncollectible
Bad debt
143
What happens when a bad debt is recognized
It is written off
144
Which account is reduced by the value of bad debts
Receivables
145
Where does bad debt expense appear
Profit and loss account
146
What is the account name for bad debt expense in companies
Impairments
147
What type of debt has a possibility of not being paid
Doubtful debt
148
Is a doubtful debt written off completely
No
149
What are the two types of doubtful debts
Specific and general
150
What is a provision for doubtful debts
Estimate of uncollectible amounts
151
What type of account is provision for doubtful debts similar to
Liability account
152
Does provision for doubtful debts reduce net asset value
Yes
153
Is cash literally set aside for doubtful debts
No
154
Where does the increase in doubtful debt provision appear
Profit and loss account as expense
155
Where does the decrease in doubtful debt provision appear
Reduction in profit and loss expense
156
How is provision for doubtful debts shown on balance sheet
Deducted from receivables
157
Does provision for doubtful debts provide a financial cushion
Yes
158
Are bad debts a cost to the business
Yes
159
Are doubtful debts potential future costs
Yes
160
Is the whole provision for doubtful debts an expense
No only the increase
161
What was the provision for doubtful debts at Nightingales start
Zero
162
What was the increase in provision in Nightingales Year 1
Two thousand five hundred
163
What was the expense in Nightingales Year 2 profit and loss
Five hundred
164
What happened to Nightingales doubtful debt expense in Year 3
It reduced
165
Are partnership accounts generally similar to sole trader accounts
Yes
166
Are year-end adjustments the same for partnerships
Yes
167
Where are the main differences in partnership accounts
Bottom half of Balance Sheet
168
Why is the capital section different in partnerships
Multiple owners
169
What intermediate step is needed for partnership capital
Profit appropriation statement
170
What does the profit appropriation statement record
Division of profits
171
What are partner withdrawals of profit called
Drawings
172
Are drawings usually based on estimated profit share
Yes
173
How many accounts commonly exist for each partner
Two
174
What is the account for long-term partner investment
Capital account
175
Can capital account funds be easily withdrawn
No
176
What is the account for withdrawable partner capital
Current account
177
What does the current account record
Share of profits and drawings
178
What A/L/C/I/E classification are partner accounts
Capital accounts
179
When are partnership profits divided among partners
After profit and loss account
180
What is allocated to partners first from profit
Interest on capital
181
What else might be allocated to partners before profit share
Salaries
182
Is notional interest an expense in profit and loss
No
183
What is notional interest considered
Appropriation of profit
184
Is notional salary an expense in profit and loss
No
185
What are notional salaries for partners treated as
Drawings
186
What are profits remaining after interest and salary
Residual profits
187
How are residual profits distributed
Agreed profit share ratio
188
Must the profit appropriation statement be done before balance sheet
Yes
189
Is the top half of a partnership balance sheet like a sole trader
Yes
190
Does the bottom half of a partnership balance sheet differ
Yes
191
Why do companies prepare accounts
Statutory obligation
192
What standard must company accounts meet
True and fair view
193
Who uses company accounts
Shareholders investors HMRC
194
What is a common method of analysing accounts
Financial ratios
195
What is the date accounts are ruled off called
Accounting Reference Date
196
What law governs company accounting reference date
Companies Act 2006
197
How often can a company change its ARD
Provisions apply
198
When must a private company file accounts
Nine months after ARD
199
When must a public company file accounts
Six months after ARD
200
Do year-end adjustments apply to companies
Yes equally
201
How many main differences in company financial statements
Three
202
What is the first main difference in company balance sheets
Capital accounts format
203
What does company capital consist of
Share capital reserves retained earnings
204
What is the second main difference in company accounts
Tax
205
Do sole traders pay corporation tax
No personal tax
206
Do partnerships pay corporation tax
No partners personal tax
207
Do companies pay corporation tax
Yes on profits
208
Where is corporation tax shown
Profit and loss account
209
What is the third main difference in company accounts
Dividends
210
Who are the owners of companies
Shareholders
211
What is a shareholders return on investment
Dividend
212
Are dividends an expense of the business
No appropriation of profit
213
Where do dividends usually appear
Statement of equity
214
What is another name for statement of equity
Statement of changes in equity
215
Where are dividends included for this topic
Statement of Changes in Equity
216
What does SoCiE show
Profits brought forward current profit dividends
217
What is the resulting balance in SoCiE
Retained Earnings
218
Where does retained earnings appear
Bottom half of Balance Sheet
219
What are accounts for groups of companies called
Consolidated accounts
220
Are subsidiaries always required to prepare own accounts
No exemptions exist
221
What is the bottom portion of company balance sheet called
Total Equity or Equity and Reserves
222
Can companies adjust accounts for decreased asset value
Yes
223
What does the bottom half of a companys balance sheet show
Equity
224
What must the bottom half of the balance sheet balance with
Net Asset Value
225
What is the aggregate amount shareholders have paid called
Called up share capital
226
Does called up share capital include any premium paid
No
227
Is called up share capital always the same as nominal value
No if not fully paid
228
What is capital in excess of called up share capital
Reserves
229
What are the two main categories of reserves
Capital and revenue
230
Can assets representing capital reserves be distributed as dividends
Generally no
231
Can assets representing revenue reserves be distributed as dividends
Yes
232
What does the share premium account represent
Excess paid over nominal value
233
Does market price after issue affect share premium account
No
234
What type of reserve is the share premium account
Capital reserve
235
Can share premium account assets be distributed as dividends
Except in exceptional circumstances
236
When is a revaluation reserve created
To show up to date non-current asset values
237
What happens to net assets when an asset is revalued upwards
They rise
238
What corresponding change happens in the balance sheet bottom half
Increase in revaluation reserve
239
What type of profit does revaluation reserve represent
Notional unrealised profit
240
What type of reserve is a revaluation reserve
Capital reserve
241
Can revaluation reserve be distributed as dividend before asset sale
No
242
What can subsequent reductions in revalued asset value offset
Revaluation reserve
243
Does the bottom half of balance sheet show the companys equity
Yes
244
Are there different entries in the bottom half of balance sheet
Yes
245
Is called up share capital the paid nominal value
Yes
246
Are there different kinds of reserves
Yes capital and revenue
247
Does share premium represent excess over nominal value paid
Yes
248
Is revaluation reserve for showing updated non-current asset values
Yes
249
What is a shareholders return on investment
Dividend
250
Are dividends an expense of the business
No
251
Where do dividends usually appear
Statement of equity
252
What is another name for statement of equity
Statement of changes in equity
253
Where are dividends included for this topic
Statement of Changes in Equity
254
What is the reserve account for retained profits
Retained Earnings
255
What does retained earnings represent
Undistributed past profits
256
Where is profit for the year carried before balance sheet
Statement of Changes in Equity
257
What does SoCiE stand for
Statement of Changes in Equity
258
What is deducted from profit brought forward in SoCiE
Dividends paid
259
What are dividends paid from
Available profits
260
What determines available profits
Completed financial statements
261
What A L C I E type are dividends
Capital
262
Where are dividends not recorded
Profit and Loss account
263
When does a declared dividend show in SoCiE
When declared
264
What are the two types of ordinary dividends
Final and interim
265
When is a final dividend declared
After year end
266
When is an interim dividend paid
During the accounting period
267
Who proposes the final dividend size
Directors
268
Who approves the final dividend
Shareholders ordinary resolution
269
What is a proposed dividend
Recommended but not approved
270
Is a proposed dividend an enforceable debt
No until approved
271
When does an approved final dividend appear in accounts
Period it is declared
272
What is an approved final dividend called
Declared dividend
273
Is a declared dividend an enforceable debt
Yes
274
Where does an unpaid declared dividend appear
Current liabilities
275
Where does a paid declared dividend appear
SoCiE
276
Who decides to pay interim dividends
Directors usually
277
Is shareholder approval needed for interim dividends
No usually
278
Is an unpaid interim dividend an enforceable debt
No
279
When are interim dividends reflected in accounts
When actually paid
280
Where is a paid interim dividend deducted from
Assets cash
281
Where is a paid interim dividend shown
SoCiE
282
What happens to after tax profits not paid as dividends
They are retained
283
Does a final dividend appear in the period it relates to if declared later
No
284
Where does a paid final dividend impact the balance sheet
Retained Earnings via SoCiE
