Week 2 Flashcards
(12 cards)
What type of transaction is a cash purchase?
The entity receives goods and/or services in exchange for a cash payment made at approximately the same time
- Dr Purchases (e.g. Dr Rent)
- Cr Bank
What type of transaction is a cash sale?
The entity dispatches/sells goods and/or services in exchange for a cash receipt at approximately the same time
- Dr Bank
- Cr Sales
What type of transactions is a credit purchase/payable?
The entity purchases goods and/or services but does not pay for them immediately. It therefore owes money to the supplier
Payables Set-up (when goods are purchased)
-Dr Purchase
-Cr Payables
At some future date the entity needs to settle its liability by paying cash to the supplier
Payables Discharge (when payment is made)
-Dr Payables
-Cr Bank
What type of transaction is a credit sale/receivable?
The entity dispatches/sells goods and/or artifices in return for a promise of a cash receipt some time in the future. It is therefore owed money by its customers.
Receivables Set-up (when goods are sold)
-Dr Trade Receivable
-Cr Sales
At some future date the entity will receive cash from the customer
Receivables Discharge (when cash is received)
-Dr Bank
-Cr Trade Receivables
What type of transactions are investment and loans FROM the entity?
Investment Setup
- Dr Investment
- Cr Bank
Loan Setup
- Dr Loan
- Cr Bank
Investment Income
- Dr Bank
- Cr Dividend received
Loan Income
- Dr Bank
- Cr interest received
Investments discharge
- Dr Bank
- Cr Investment
Loan Discharge
- Dr Bank
- Cr Loan (asset)
What type of transaction are capital FOR and loans TO the entity?
Capital Setup
- Dr Bank
- Cr Capital
Loan Setup
- Dr Bank
- Cr Loan
Dividend Expense
- Dr Dividends Paid
- Cr Bank
Loan Interest Charge
- Dr Loan Interest
- Cr Bank
Capital Repayment
- Dr Capital
- Cr Bank
Loan Repayment
- Dr Loan
- Cr Bank
What type of transaction are Grants and taxes paid BY the entity?
The entity makes a cash payment but receives nothing directly and obviously in return
- Dr Grants or Taxes account
- Cr Bank
What type of transaction are Grant TO the entity?
Cash is received by the entity in recognition of or in expectation of certain aspects of activity. No direct, obvious output is made by the entity
- Dr Bank
- Cr Grants Received
What are the purposes of primary financial statements?
Statement of Financial Position
-Purpose is to report financial position
Income Statement
-Purpose is to report financial performance
Statement of cash flows
-Purpose is to report financial adaptability
What is the statement of cash flows?
Statement of cash flows shoes your cash changes over the accounting period.
Liquidity is measured by the cash and near cash-assets and the change in those assets
CASH INFLOW-CASH OUTFLOW=CHANGES IN EQUITY
What is the difference between profit and cash?
It is possible for a potential business to fail due to a lack of working capital
What is the working capital cycle
Cash → Payables(creditors) → Inventory →Receivables(debtors) →Back to the start
