Lecture 6a and 6b Flashcards
(15 cards)
What is accrual?
Accrual is money still owed at the end of a fiscal year, such as an electric bill, which is added on as an expense.
What is prepayment?
Prepayment is money that is paid in advance, like rent, and is removed from an expense.
What is the accounting treatment for telephone bills paid during the accounting year?
Telephone (Expense on Income Statement) £1,110 + £260 = £1,370
Accrual (Current Liability on Statement of Financial Position) £260
What is the accounting treatment for Dawn’s insurance premiums?
Insurance (Expense on Income Statement) 3 months only £1,200 - £300 = £900
Prepayment (Current Asset on Statement of Financial Position) £300
What is a bad debt?
A bad debt is a customer that still owes us money and is unlikely to pay, so it is removed as a debtor.
What is a doubtful debt?
A doubtful debt is a concern that a customer may not pay, so a provision is set up just in case.
What is the accounting treatment for Dawn Fisher’s Trade Receivables?
Remove from the Trade Receivable (on Statement of Financial Position) £10,857 - £337 = £10,520
Create a Bad Debt Expense (on Income Statement) £337
What is a master budget?
A master budget is a budget that is fixed and never changes.
What is a flexible budget?
A flexible budget changes costs at different levels of activity.
What are fixed costs?
Fixed costs are total costs that remain the same.
What are variable costs?
Variable costs are unit costs that remain the same.
What are semi-variable costs?
Semi-variable costs have total costs and unit costs that are different and require the high-low technique.
How do you calculate variable cost per unit?
The variable cost per unit is calculated as £18,000 / 2,000 = £9 per unit.
What is the total variable cost for 8,000 units?
If the variable cost is £9 per unit, then the total variable cost for 8,000 units is: 8,000 * £9 = £72,000.
How do you calculate fixed costs?
Fixed Costs = Total cost – Total Variable cost.
Fixed Cost = £115,000 - £72,000 = £43,000.
