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18 Cards in this Set
- Front
- Back
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What are the two types of accounting? |
Management accounting (usually monthly for managers to run business more effectively) and Financial accounting (usually annually for outside management / HMRC, owners, banks etc) |
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What are management accounts (or accounting)? |
Usually prepared monthly for managers to help run the business more effectively. |
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What are financial accounts (or accounting)? |
Accounts prepared annually for the benefit of people outside management such as HMRC, banks, suppliers, customers and government. |
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What are the two main financial statements? |
The profit & loss account (summary of business transactions for given period / income and expenses) And The balance sheet (statement of financial position of business at given date inc assets and liabilities / at end of profit & loss account) These statements are the final product of the accounting system of a business. |
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What is a profit and loss account? |
Summary of business transactions for given period (income and expenses). |
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What is the balance sheet? |
A statement of financial position (assets and liabilities) of the business at a given date (this is end of the period covered by the profit and loss account) |
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What is an asset? |
Something owned by the business, for use in business. |
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What is an fixed asset? |
An asset used for long term use in the business (e.g delivery van). Not to be resold. |
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What is a current asset? |
A short term asset to be used in the near future (like stock or a debtor). |
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What is a debtor? |
Someone who owes the business money (e.g of a current asset). |
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What is a liability? |
An amount owed by the business. |
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What is a creditor? |
Someone the business owes money to (e.g of a liability). |
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What is capital? |
Am amount the owner has invested in the business, to be paid back, a special liability of the business. |
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What is capital expenditure? |
Purchase or improvement of fixed assets (van etc). |
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What is revenue expenditure? |
Day to day operating costs of the business. |
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What is the separate entity principle? |
For accounting purposes the owner is a completely separate entity from the business itself. E.g owner pats £5k into business, business has £5k more cash but also a £5k liability (capital). |
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What is the accounting equation? |
Assets = Liabilities + Capital Profit will increase the proprietors capital and drawings will reduce it, so that we can then write the equation as Assets - Liabilities = Capital + Profit - Drawings. |
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What is this an example of? |
The accounting equation. |
