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78 Cards in this Set
- Front
- Back
Nominal (or General) Ledger
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where all accounts relating to revenue and expenses are recorded – including capital accounts
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Capital
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the worth of the business
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Accounting equation
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Capital is calculated as Assets less Liabilities
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Assets
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items owned by the business
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Liabilities
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debts owed by the business
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Fixed Assets
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Items which are used in the running of a business and for more than a year
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purchases
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Supplies to be resold in a business
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Sales
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Any money charged by a business for a job
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Balance
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The amount you have in an account at any given time and the difference between the Debit and Credit sides of the account
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Balancing the Account
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The process of calculating the Balance
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double underline
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indicates that the figure is the final total and so the amounts shown above the line will not be included in the next set of entries
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Capital Income
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money received from the Sale of a Fixed Asset or Capital invested by the owner
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Capital Expenditure
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money spent on buying or increasing the value of a Fixed Asset. This includes the Delivery and Installation costs of a new fixed asset
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Revenue Income
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money received from the sale of stock etc
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Revenue Expenditure
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money spent on the day to day running of the business. Generally these costs are for items that will last under a year and will not add any value to a Fixed Asset.
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Is repainting the office Capital or Revenue Expenditure?
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This would normally be classed as a maintenance charge and as such is a Revenue Expenditure.
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Is Staff training on a new computer Capital or Revenue Expenditure?
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Capital Expenditure
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Single Entry Error
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only one half of entry made (Error identified by extracting a Trial Balance)
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Casting Error
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adding up error in account or trial balance (Error identified by extracting a Trial Balance)
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Transposition error
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two digits swapped round (Error identified by extracting a Trial Balance)
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Extraction Error
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error copying figures from accounts to trial balance (Error identified by extracting a Trial Balance)
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Errors of Original (or Prime) Entry
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wrong figures entered into both sides of accounts (Error NOT identified by extracting a Trial Balance)
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Compensating Errors
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where two errors on either side of the trial balance cancel each other out and cause the trial balance to balance (Error NOT identified by extracting a Trial Balance)
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Error of Principle
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where posting is made to the wrong type of account, e.g. a Fixed Asset Account instead of an Expense account (Error NOT identified by extracting a Trial Balance)
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Omission Error
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transaction completely omitted from accounts (Error NOT identified by extracting a Trial Balance)
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Reversal Error
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transaction entered the wrong way round (Error NOT identified by extracting a Trial Balance)
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Commission Error
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similar to error of principle but posting made to the wrong account but the same type of account (Error NOT identified by extracting a Trial Balance)
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Subsidiary Sales (or Customer) Ledger
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contains the accounts of all people who owe the business money; these are called Assets and are Debit Balances
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Subsidiary Purchase (or Supplier) Ledger
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contains the accounts of all people the business owe money to; these are called Liabilities and are Credit Balances
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Day Books
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list of each invoice issued or received
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Output Tax
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VAT on Sales
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Input tax
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VAT charged on Purchases
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What must be on Invoice or receipt to reclaim VAT?
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VAT amount separately
VAT registration number of the seller |
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What is 5% rate (reduced rate) VAT charged on?
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household utilities - not applicable to businesses
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What are Zero rated items?
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Chancellor of the Exchequer has decided that the VAT rate at the moment for these items is 0%. Books and newspapers are currently zero rated.
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What are Exempt Supplies?
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Some items have been granted exemption from charging VAT. Royal Mail services are exempt from VAT as is Insurance and Rent.
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What is an example of goods or services are 'Outside the Scope’ of VAT?
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MOT & Road Tax
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When is VAT registration mandatory?
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When turnover (Sales) is above the VAT registration limit which is currently £70,000
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What is Annual Accounting for VAT?
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Being allowed to submit Annual VAT Returns. To do this the business must reach a set turnover (sales) threshold. The business must also make monthly payments on account based on an estimated VAT amount payable.
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What is Accrual (Standard) Accounting for VAT?
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VAT will become due based on the date of the invoice raised or received
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What is Cash Accounting for VAT?
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businesses calculate their VAT return based on invoices actually paid during the period
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What is a Flat rate scheme for VAT?
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Businesses charge normal VAT on their invoices but do not account for VAT on Purchases, they will pay a smaller percentage to HMRC for VAT collected from Sales.
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When might a special VAT scheme be used?
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Some retailers will find it impossible to keep details of every single transaction, especially smaller traders who deal mostly in Cash, for these cases there are special schemes which allow these businesses to calculate VAT in a way that suits their circumstances
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VAT Input Account
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VAT on Purchases, Purchase Returns and Expenses
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VAT Output Account
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VAT on Sales and Sales Returns
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A Purchase Order must include what pieces of information?
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- unique sequential number
- delivery and invoice addresses - product names and, if applicable, product codes along with the quantity - price - date - signed by an authorised person |
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Standard Invoice
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an invoice issued by a NON Vat registered Business
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VAT Invoice
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an invoice issued by a VAT registered Business.
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What legally required information must a Standard Invoice include?
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- unique invoice number
- The word INVOICE - Supplier’s business name, address and contact information - Customer’s name and address - description of goods supplied - date goods supplied - Invoice date - amount(s) being charged for items - Total amount owed |
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What legally required information must a VAT Invoice include?
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- unique and sequential invoice number
- The word INVOICE - Supplier’s business name, address and contact information - Customer’s name and address - description of goods supplied - date goods supplied - Invoice date - Quantity of Goods with a Unit Price of Goods Excluding VAT - Total amount owed - Supplier’s VAT Registration Number - VAT Rate - The Net total for goods EXCLUDING VAT - VAT amount |
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What information should a credit note show?
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- unique credit note number
- original invoice number - customer account number - reason for the issue of the credit note - Net amount excluding VAT - Any discounts - VAT amount - Gross total |
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Discounts Allowed Account
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used for recording settlement discounts taken in accounts
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Pro-Forma invoice
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an invoice which requests payment BEFORE the goods will be delivered to the Customer
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Payment Run
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some businesses make payments on a set day of the week or month
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What sort of errors might there be on a Purchase Invoice?
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- The invoice is arithmetically wrong
- Some of the agreed terms are incorrect, such as trade discount not applied, prices being different. - When checking the delivery note (goods received note) with the invoice the quantities or prices may differ. - Our business details being incorrect, for example name and address of someone else. |
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How is the Mark-up % calculated?
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Mark Up % = (Profit / Cost Price) x 100
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Drawer
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the person writing the cheque
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Drawee
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the bank that issued the cheque book.
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Payee
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the person to whom the cheque is being paid
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What are the timescales for a cheque clearing?
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o Day 0 – You pay a cheque into your account
o Day 2 – Earning of Interest/Reducing Overdraft interest. o Day 4 – Withdrawing Money o Day 6 – Certainty |
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PIN
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Personal Identity Number
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EFTPOS
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Electronic Funds Transfer at the Point Of Sale
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What is a floor limit for a business accepting credit card payments?
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the amount that can be spent on one credit card in one transaction without requiring additional authorisation from the credit card issuer
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What is the difference between a standing order and a direct debit?
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A standing order requires the customer’s bank to send the payment, whereas a direct debit requires the Supplier to claim the payment.
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What is a Credit Transfer?
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a Bank Giro Credit with all the suppliers bank details filled in, the customer can then use this to pay bills at post offices or at the bank
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BACS
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The Bankers' Automated Clearing Services is a UK system for the electronic processing of payments. BACS payments take three working days to be processed. They are used to make a variety of payments including Payments to Suppliers for outstanding invoices.
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CHAPS
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The Clearing House Automated Payments System is a very similar means of electronic payment. Except that it is most often used for high value transactions. Once made it cannot be cancelled.
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Faster Payment
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This new system has improved money transfer speeds between different banks in the UK enabling account holders with one bank to make virtually instantaneous payments to those with another bank. Faster Payments are intended for low value transactions.
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contract
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an agreement that commits you or your business to an agreed course of action
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What are the conditions for a contract?
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o An offer must be made
o An acceptance must be given o There must be consideration o There must be intention to create legal relations |
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When can an offer cease to exist?
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o By a lapse of time
o By the offer being withdrawn before an acceptance is given |
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invitation to treat
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tempting a person into making an offer. E.g. invitations for tender
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Sale of Goods Act 1979
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when you buy a product it should be:
o as described o fit for purpose o of satisfactory quality • You can get your money back if an item is: o Faulty o incorrectly described o not fit for purpose |
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Name 3 of the protection principles from the Data Protection Act 1998
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personal data must be:
1. Processed fairly and lawfully. 2. Processed only for one or more specified and lawful purposes 3. Adequate, relevant and not excessive for those purposes 4. Accurate and kept up-to-date 5. Kept for no longer than is necessary 6. Processed in line with the rights of individuals 7. Secured against accidental loss, destruction or damage and against unauthorised or unlawful processing 8. Not transferred to countries outside the European Economic Area |
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Data controller
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someone who ensures that the data protection act is adhered to
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Name 3 ways you can keep data secure
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o Ensure you install a firewall and virus checking software to all your computers.
o Keep your operating system up to date. o Allow staff to only access information that they require for their work and ensure that they do not share passwords. o Encrypt any personal information kept electronically o Ensure that any old computer equipment has all information wiped before disposal. o Shred all confidential paperwork o Ensure your premises are secure and keep all documentation, files and backup disks securely locked away. |
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Money Laundering
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exchanging criminally obtained money or other assets for 'clean' money or other assets with no obvious link to their criminal origins. It also covers money which is used to fund terrorism.
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Name 3 areas businesses registered under the Money Laundering Regulations need to address
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o Senior management responsibilities
o Internal control and risk management o Due diligence and monitoring o Reporting and record keeping o Staff awareness and training |