Flashcards
Accounting
Cards in this deck (59)
- 1Purpose of Accounts-info for shareholders, stakeholders,suppliers
-transparency helps to prevent fraud helps get investment
-business can monitor its activities - 2Accruals- method of ensuring items are recorded for period they relate to and not just when the can flow occurs
- 3Going concern- company not going into liquidation in the foreseeable future usually 12 months
- 4Types of businesses-Sole Traders
-Partnerships
-Limited Companies(Ltds,Plcs) - 5Sole Traders-easy to set up
-keep all profits
-no reports
-full liability
-small scale - 6Partnerships-shared management
-shared liability
-still fully liable though
-profits shared
-responsible for others actions - 7Limited Companies-limited liability
-directors
-transfer of ownership easy
-legal obligations
-set up costs
-administration costs - 8Financial Accountspublished and audited accounts
-published annually
must include - directors report, auditors report, balance sheet, profit and loss account, statement of gains and losses, cash flow statement and note to accounts - 9Management Accounts-in house accounts used for decision making
-produced monthly - 10Assestthings that belong to the company
-fixed assets= buildings, vehicles, fixtures - 11Liabilitiesamount owed to others
- 12Financial Year12 month period over which companies accounts cover
- 13Fiscal (Tax) Year6th April to the 5th April
-set by HMRC - 14Comparativesprevious years accounts
- 15Profit and Lossstatement of income and expenditures over a period of time
- 16Cash Flow Statementstatement of all cash movement over a period of time
adjusted income and expenditure statement not including the effects of accruals and focusing only on cash flow for the year - 17balance sheetstatement of assets and liabilities at a period in time
shows use and source of funds
guide to degree of working capital
guide to level of gearing - 18gearingratio of loan to share capital
- 19Capitalisation policythreshold set by company at which expenditures qualify as fixed assets and below which they are recored as expenses
- 20double entry bookkeepingfor every transaction there is an equal and opposite transaction
debits = credits
debits (assets, expenditure)
credits (liabilities , income) - 21Depreciationcost of asset is not charged to profit and loss in they year as it will last longer
- put in balance sheet at cost and depreciated over the life of the asset
two types - straight line and reducing balance - 22Net Book Valuecost of asset - accumulated depreciation
- 23Straight Line Depreciationsplit cost over life of asset
fully depreciated at end of asset life - 24Reducing Balance Deprecationpercentage deprecation each year
residual asset in the accounts for years - 25Cash Flow Statementadjusted income and expenditure statement not including effects of accruals focusing on actual cash flow for the year
- 26weighted averagecost of production divided by the number of units gives cost per unit
- if stock can't be assigned specific price or stock is identical or system not sophisticated enough for FIFO or LIFO - 27Stockinventory, goods held for sale
- priced at cost of production, weighted average, FIFO or LIFO
- Stock kept by stocktake(at least once a year), constant inventory recording, WIP ( work in progress i.e part finished goods on the factory floor) - 28CashCash at bank and in hand
-current accounts, short term deposit accounts and petty cash
(overdrafts not netted from cash ) - 29Reservesaccumulated profits of company over the years minus any losses
Profits and Loss reserve
profits can be put in another reserve for specific reason - 30SalariesActual cost of employing someone to employer includes gross salary, employers national insurance and employers contribution to pension
- 31LIFO FIFOLast in First out - goods sold at price of last products inventory worth at products first in
First in First out - stock sold at first in prices and the inventory worth taken at last in prices - 32Current Net AssetsCurrent assets - current liabilities
(stock,debtors,cash) - (creditors,accruals,overdraft) - 33Profit and Loss Accountshows T/O or flow of sales and associated costs
-level of profits an losses and whats done with them - 34IncomeT/O
includes sales and investment income
recorded without VAT in accounts - 35Share Capitalrecorded in accounts at face value not at current market value
two most common ordinary and preference - 36Income-turnover (T/O)
- recorded without VAT in accounts
- includes sales, investment income - 37Debtors- receivables
- money owed TO the company within 1 year
-sale of goods, consultancy services, rent of space - 38Cost of Salesproduction costs of goods for resale and direct and indirect costs of production
distribution costs
administration costs - 39Ordinary Sharespart ownership of company and voting rights
share of profits from variable dividend
high if company does well but non existent if company does bad - 40Profit and Loss Accountshows flow of sales or T/O and associated costs
- level of Profit/Loss and whats done with it - 41CreditorsPayables
- money owed BY the company
-suppliers, HMRC, rent, utilities
- Current/Short Term (<1 year)
-Lont Term (>1 year) - 42Distribution Costscosts of selling goods
warehouse costs, carriage outwards, advertising, bad debts, discounts - 43Preference Sharesno ownership or voting rights
fixed dividend - 44Cost of Sales- production cost of goods for resale and direct/indirect costs of production
- 45Administration Costsoffice rent, office utilities, administration salaries, telephone, postage
- 46Distribution Costs-cost of selling goods
- advertising, discounts, warehouse costs, bad debts, carriage outwards - 47Administration Costs- office rent, administration salaries, office utilities, telephone, postage
- 48Salariesactual cost of employing someone
- gross salary, employers national insurance and employers pension contribution - 49Reservesaccumulated profits of company over the years minus any losses
Profit and Loss reserve
- profits can be put in other reserves for specific reasons - 50Cash Flow Statementadjusted income and expenditure statement not including effects of accruals focusing on actual cash flow for the year
- 51CashCash at bank and in hand
- include money in current accounts, short term deposit accounts and petty cash - 52Current Net AssetsCurrent assets minus current liabilities
(stock,debtors,cash) - (creditors,accruals,overdrafts) - 53Share Capitalon balance sheet shares are recorded at face value regardless of current maker value
Ordinary and Preferences two most common - 54Ordinary Sharespart ownership of company and voting
- share of profits from variable dividend
- high if companies doing well non existent if company doing bad - 55Preference Shares-no ownership or voting rights
- fixed rate dividend - 56DebtorsRECEIVABLES
- money owed TO the company within a year
-sale of goods, consultancy services, rent of space - 57CreditorsPAYABLES
- money owed BY the company
- suppliers, HMRC, rent, utilities
- Current/Short Term (<1 year)
Long Term (>1 year) - 58Stockinventory, goods held for sale
priced at cost of production or weighted average
sorted by FIFO or LIFO
kept track by stocktake( at least once a year) , constant inventory recording or WIP ( work in progress part finished goods on factory floor) - 59FIFO and LIFOfirst in first out - sold at first in cost price and inventory worth recorded at last in price
last in first out - sold at last in price and inventory worth recorded at first in price
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- University Professional Studies Flashcards on Accounting , created by tazaboo92 on 12/12/2013.
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- tazaboo92 · Dec 2013
- Updated
- May 17, 2016
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