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Financial Accounting > Key Words (Lectures 11-22) > Flashcards

Key Words (Lectures 11-22) Flashcards

(62 cards)

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1
Q

Bad debts

A

Those u no longer receive payment for (unrecoverable)

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2
Q

Doubtful debt

A

A debt that is possibly unrecoverable

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3
Q

Allowance for doubtful debts

A

Should be set up when a debt is possibly unrecoverable

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4
Q

Where do investments go on the SOFP

A

under non- current assets

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5
Q

Written Down Value (WDV)/ Net Book Value (NBV)

A

Historical cost of a NCA- accumulated depreciation

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6
Q

Useful life

A

Period where an assets expected to be available for use by the business

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7
Q

Residual value

A

Estimated amount business would get from disposal of asset at end of its useful life (- cost of disposal)

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8
Q

Straight line depreciation formula

A

Cost- residual value / useful life (years) OR given % rate x historical cost

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9
Q

Reducing balance method depreciation formula

A

Cost of asset x rate of depreciation CUMULATIVE

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10
Q

Rate of depreciation (RBM)

A

100- (UL x (square root of RV/Cost) x 100

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11
Q

What are the posting entries for Accruals?

A

Dr Expenses
Cr Accruals liability account

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12
Q

What are the posting entries for prepayments?

A

Dr prepayments
Cr expenses

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13
Q

Net Realisable Value (NRV)

A

Expected sales proceeds - associated costs to be incurred to make the sale

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14
Q

If the cost of an item is £27 and the NRV of an item is £32 which do you choose for the inventory figure?

A

Cost- £27

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15
Q

FIFO

A

First goods purchased are to be sold
Closing inventory consists of most recent purchases

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16
Q

LIFO

A

Latest goods purchased are to be sold first
Closing inventory consists of earliest purchases

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17
Q

Simple Average

A

Total cost/ no. of units sold

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18
Q

Outstanding cheques + outstanding lodgements

A

Cheques + cash received, paid into bank + entered in cash book but not yet credited on bank statement

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19
Q

Unpresented cheques + unpresented lodgements

A

Cheques drawn + entered in cash book which’ve not yet been presented for payment, thus don’t appear on bank statement

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20
Q

What are the errors that don’t change the trial balance?

A

Error of principle
Error of commission
Error of omission
Error of prime entry
Compensating error
Double posting error
COPPCD

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21
Q

Correct: Plant that was acquired at a cost of £5000 has been credited in the cash book but debited to the purchases account in error

A

Dr- Plant 5000 Cr- Purchases 5000

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22
Q

Correct: The purchase of consumable tools for £50 has been debited to repairs account in error

A

Dr- 50 Consumable tools Cr- 50 Repairs account

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23
Q

Correct: Bank charges of £27 shown on the bank statement have not been entered in the cash book

A

Dr- 27 Bank charges Cr- 27 cash book

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24
Q

Correct: a purchase invoice received from A. Creditor for £1,100 has been entered in the purchases day book as £100

A

Dr- 1000 Purchases Cr- 1,100 Payables

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25
Correct: Wages paid of £40 have not been posted to wages account + debit side if purchases account has been overcast by £40
Dr- 40 Wages + Cr 40 Purchases
26
Correct: Rent received of £400 has been entered in both cash book + ledger as rent paid
Dr- 400 cashbook Cr- 400 Rent paid + Dr 400 Rent received + Dr 400 cashbook
27
What are the types of errors that cause a trial balance to disagree?
Arithmetic error Posting error Extraction error
28
Correct: the debit side of a cashbook has been overcast by £1,000
Credit- 1000 cashbook Debit- suspense account 1000
29
Correct: goods bought by cheque for £200 have been credited in cashbook but also not entered in purchases account
Dr- 200 Purchases Cr- 200 suspense account
30
Correct: rent paid of £50 has been credited in cash book but also credited in error to rent account
Debit- 100 rent account Credit- 100 suspense account
31
Correct: car repairs of £23 shown in cashbook have been debited to motor expenses as £32 in error.
Cr- motor expenses 9 Dr - suspense account 9
32
Correct: the sales account contains a balance of £2000 but this has been entered in the trial balance as £200
Dr- 1800 suspense account Cr- sales 1800
33
Sum of Year Digits Depreciation method
Annual depreciation expense= years of remaining useful life at start of year/ sum of years digits x depreciable amount *depreciable amount = cost- residual value
34
Return on assets
Profit from operations/ total assets x 100
35
Profit margin/ gross profit margin/ operating profit margin
Profit/ revenue x 100 Gross profit/ revenue x 100 Operating profit/ revenue x 100
36
Markup
Profit/ cost of sales x 100
37
ROCE
Profit from operations/ assets - liabilities x 100 OR Profit from operations/ share capital + reserves + long term loans x 100
38
Return on shareholders’ fund ROSF
Net profit after tax + preference dividend/ share capital + reserves x 100
39
Earnings per share
Net profit after tax + preference dividend / number of shares issued
40
Current ratio
Current assets/ current liabilities
41
Acid test
Current assets- inventories/ current liabilities
42
Inventory holding period
Inventories/ cost of sales x 365
43
Trade payables
Trade payables / cost of goods sold x 365
44
Trade receivables
Trade receivables/ revenue x 365
45
Asset turnover
Revenue/ total assets
46
Gearing
Non- current liabilities/total capital + non current liabilities x100
47
Interest cover
Profit from operations/ interest charges
48
What are the components of the appropriation account?
Interest on drawings Interest on capital Partners salaries Share of profit
49
What are the postings for the current account?
Dr Cr Bal b/d. Interest on capital Interest on drawings. Salaries Drawings. Share of profit
50
What does the capital section of the SOFP consist of? (Partnerships)
Capital accounts + current accounts
51
Write the SOPL+ SOCI for companies.
Turnover Less cost of sales Gross profit Other income Distribution expenses Administrative expenses Finance costs Profit before tax Tax expense Profit after tax Other comprehensive income: Revaluation reserve Total comprehensive income
52
What are distribution costs?
Anything relating to warehouse or sales costs
53
What are administrative costs?
Anything other, e.g rents + rates, wages, telephone
54
Write out a SOCE.
Share capital Share premium Reval reserve Retained earnings Total Bal at XX/XX/XX Shares issued Dividends Total comprehensive income Bal at XXX/XXX/XXX
55
Write out a cash flow statement
Profit before tax Adjustments: Depreciation Income from disposals of NCA’s Finance costs Increase/ decrease in inventory Increase/ decrease in payables Increase/ decrease in receivables Cash flow generated from operating activities Taxation Interest charges Net cash flow from operating activities Cash flow generating from investing activities Acquisition of NCAS Proceeds from disposal of NCAS Net cash flow from investing activities Cash flow generated from financing activities Dividends paid Share capital Proceeds from Loan Net cash flow from financing activities Total change in cash during period + Beginning cash bal Ending cash bal
56
How do you work out dividends paid in the CF statement
Retained earnings from previous year + net profit after tax from current year - retained earnings from current year
57
Working capital
Current assets- current liabilities
58
Name all the profitability ratios
Return on assets Gross profit margin Operating profit margin Expense/ revenue % ROCE ROSF Earnings per share
59
name all the Liquidity ratios
Current ratio Acid test
60
Name all the efficiency ratios
Inventory holding period Trade receivables period Trade payables period Asset turnover
61
Name all the position ratios
Gearing Interest cover
62
Tax paid
Taxation from current year - tax expense from current year - taxation from previous year

Financial Accounting (2 decks)

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