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9 Cards in this Set
- Front
- Back
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Accrual Accounting
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accrual accounting is recorded when something has an impact on the business.
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Cash Accouting
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cash accounting is only recorded when the exchange of cash has taken place
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Gross Profit Ratio
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It is an indication of whether the business will have the ability to cover other expenses except for Cost of Goods Sold (COGS) which has already been accounted for
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Net Profit Ratio
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This is an indication of the margin of profitability of the business once all expenses have been accounted for.
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Recommended Return on Owners Equity (RROE)
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is a measure of how effectively the owner’s funds are being employed by the business. It represents the return to the owner from his/her investment.
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Accounting period assumption
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Assumes the life of the business is divided into arbitrary time periods. Usually from 1st july - 30 june.
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Balance day adjustments
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Balance day adjustments are when general journal entries are recorded to ensure the matching principle is applied.
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The Matching Principle
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Profit is obtained by matching Revenue earned for the period with the Expenses incurred in earning that revenue. Profit = R – E
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Balance Day Adjustments
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these are necessary at the end of the accounting period to bring into line all revenue earned and expenses incurred for that period
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