1State and explain why it is important to depreciate non current assets
2Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
3ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
4ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
5nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
6ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
7ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
8ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
9ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
10nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
11s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
12s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
13s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
14s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
15s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
16t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
17f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
18s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
19n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
20s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
21s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
22nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
23s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
24ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
25ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
26ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
27ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
28Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
29ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
30ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
31nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
32ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
33ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
34ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
35ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
36nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
37s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
38s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
39s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
40s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
41s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
42t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
43f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
44s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
45n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
46s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
47s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
48nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
49s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
50ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
51ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
52ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
53ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
54Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
55ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
56ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
57nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
58ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
59ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
60ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
61ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
62nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
63s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
64s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
65s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
66s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
67s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
68t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
69f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
70s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
71n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
72s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
73s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
74nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
75s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
76ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
77ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
78ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
79ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
80Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
81ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
82ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
83nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
84ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
85ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
86ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
87ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
88nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
89s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
90s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
91s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
92s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
93s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
94t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
95f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
96s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
97n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
98s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
99s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
100nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
101s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
102ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
103ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
104ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
105ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
106Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
107ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
108ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
109nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
110ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
111ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
112ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
113ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
114nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
115s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
116s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
117s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
118s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
119s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
120t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
121f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
122s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
123n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
124s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
125s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
126nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
127s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
128ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
129ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
130ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
131ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
132Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
133ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
134ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
135nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
136ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
137ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
138ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
139ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
140nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
141s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
142s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
143s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
144s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
145s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
146t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
147f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
148s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
149n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
150s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
151s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
152nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
153s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
154ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
155ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
156ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
157ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?
158Debit Cards
Transferring money from one account to another. The source document is the printed receipt, authorised through chip and pin.
Income statement
159ncludes revenue items which are from the everyday trading activities that happen on a regular basis like repairs,renewals,redecoration,replacement and rent
Statement of financial position
A financial document which looks at the current financial position of a business to gain an understanding of its future finances. This will give a business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position the business finds itself in
What is included on the statement of financial position?
160ncludes capital items which are medium to long term namely spending on the acquisition and improvements of assets and receipts from the sale of assets as well as capital drawings and liabilities
Usefulness of Trial Balance
Checks to ensure double entry procedure is followed its arithmetical accuracy both the debit and credit sides are totalled so check they agree and if not mistakes can be identified and corrected but not all errors are identified in the trial balance
Sources of finance
161nclude everything the company owns and are reported on a company's balance sheet they are bought or created to increase a firm's value or benefit the firm's operations
Accounting
Once data has been recorded it has to be sorted to provide useful information to a business. Accountants create the income statement which shows how much profit has been made and statement of financial position which shows total assets are equal to total capital and liabilities
Capital
162ndividual customer invoices are entered in the sales day book over a certain period which is then totalled. This total is entered into the sales account in the general ledger as a single entry although each invoice amount will be entered in the respective customer accounts in the sales ledger individually
Process of recording a purchase made on credit.
163ndividual purchase invoices are entered in the purchase day book over a certain period which is then totalled. This total is entered into the purchase account in the general ledger as a single-entry although each invoice amount will be entered in the respective supplier accounts in the purchase ledger individually
Process of recording a return from a customer.
164ndividual credit notes issued to customers are entered in the sales return day book over a certain period which is then totalled. This total is entered into the sales return account in the general ledger as a single entry although each credit note amount will be entered in the respective customer accounts in the sales ledger individually
How the accuracy of the trial Balance is checked?
Accuracy of the book balance is checked by comparing the bank balance as shown in the bank account in the cash book with the balance shown on the latest bank statement
Process of recording a return to a supplier
165ndividual credit notes issued by suppliers are entered in the purchase return day book over a certain period which is then totalled. This total is entered into the purchase return account in the general ledger as a single entry although each credit note amount will be entered in the respective supplier accounts in the purchase ledger individually
Similarities and differences between the cashbook and journal
Both are books of original entry/prime entry, each has a debit column and a credit and differences are that the cashbook is also a ledger account but a journal is not and the cash book deals with cash transactions but the journal deals with credit transactions
Contra
166nclude a description of the service provided the amount owed and the deadline for payment
Sales credit note
A sources document used to reduce or cancel the amount stated on a sale invoice it is raised and sent to a trade receivable following a credit sale typically because there has been a sale return due to a incorrect or damaged/faulty product having been delivered
Debit notes
167s charged on bank overdraft. Like loan interest it is a business expense. DR Bank interest CR Bank
Bank interest received
Some current accounts pay interest to customers. This is a receipt in the bank account and a source of income. DR Bank CR Bank interest
Dishonoured cheque
168s offered to business customers usually in the same line of business to encourage them to buy more, regular or in one large quantities. This means that business customers pay less than the general public and a percentage is deducted from the total invoice
Bank statement
A record of all banking transactions recorded by the bank it is used as an important source document to identify automated banking transactions, dishonoured cheques and bank charges. It is needed to prepare a bank reconciliation to verify the accuracy of the cash book
Cash discounts
169s a current liability and just the amount accrued is shown
What happens on the statement of financial position to prepayments?
170s a current asset and just the amount prepaid is shown
Irrecoverable debt
Occurs when a receivable will probably not pay the amount that is owed so are a business expense
How to treat an irrecoverable debt?
171s the most common depreciation method and when a business first acquires a non-current asset it does not know for certain how long the asset will last and how much it will be sold for on disposal and it must estimate the depreciation
Formula for annual depreciation
Cost of the asset-residual value/expected useful life of the asset
How to calculate the depreciation figure that goes on the statement of financial position?
172t is the net book value at the beggining of the year,the value of the asset depreciates most rapidly in the early years of its life, a more realistic method of valuing assets such as machinery and vehicles.It is calculated as a % of the reduced balance on the asset so that annual charge decreases each year.
Disposal of non current assets
When an asset has a finite life it will be disposed of either for cash/cheque or traded in for a more up to date version and the amount in which the receives is known as the disposal proceeds.
How to know if there is profit on disposal or loss?
173f the proceeds on disposal are greater than net book value there is a profit on disposal.
State and explain why it is important to depreciate non current assets
Value of non-current assets lose value over time i.e. valued higher at an earier point in time, Value of non-current assets lose value due to wear and tear i.e. not as pristine as it once was, Value of non-current assets lose value over time due to it becoming obsolete and/or out of date i.e. typewriters/ pagers
Explain what is meant by a provision and distinguish between the different methods of calculating a provision for depreciation
174s an allowance businesses make for predicted loss in the value of assets so that accounting records are prudent i.e. true value of assets are not overstated. Straight line method depreciates assets based on an agreed percentage of the original assets value ie cost. This means the depreciation amount for this method is linear ie. same amount each year. Reducing balance method depreciates assets based on an agreed percentage of the reduced balance/ NBV i.e. what it is worth now after subtracting the loss in value due to depreciation of previous year/s This means the depreciation amount for this method is non-linear i.e. not same amount each year as the reduced balance NBV of non-current assets decrease each year.
Explain all of the accounting entries that are needed to record the transactions resulting from the disposal of a non-current asset.
At cost is recorded on the debit side of the disposal account.Total depreciation is recorded on the credit side of the disposal account.Proceeds on disposal is recorded on the credit side of the disposal account.Profit on disposal is recorded on the debit side of the account and loss is recorded on the credit side.
Explain the various factors which should be considered when deciding upon the method use for calculating depreciation
175n the trial balance itself or in a general ledger account -Overcasting or Undercasting in totalling a Day Book or an account or incorrect calculation of the Balance cdd on an account
Transposition
where the figures of an amount are transposed- the correct numbers but in the wrong order
10 rules accountants follow to maintain standards
176s spending on the everyday trading activities of a business.Revenue receipts are incomes derived from the usual activities of the business.Revenue items go on the income statement and occur on a regular basis,repairs,renewals,redecoration,replacement,rent both paid and received.
capital expenditures
177s spending on non current assets or the improvements of non current assets,they are not usual activities of the business such as receipts from the sale of assets.Capital items go on the sofp so capital drawings,liabilities are also capital items.
How must inventories be valued in accordance to the prudence concept?
178nventories must be valued at the lower of cost or new realisable value.
What is cost and net realisable value?
Cost-how much the business orginally paid for the goods
Nrv-how much the goods could be sold for,less any costs in making into a saleable condition.
What to include in inventories?
179s treated in exactly the same way as interest on any loan it is an expense (financial cost) in the income statement.It doesn't go on either the appropriation account or current account
Surplus
excess resources available that can be used in the future (CREDIT)
deficit
180ncrease revenue - increase selling price to increase the mark up OR reduce selling price to increase the volume of sales/Offer sales promotions/Offer longer periods of credit/Advertise more/Reduce cost of sales - for example by finding cheaper suppliers or negotiating higher trade discount.
How to improve Mark up?
increase selling price or reduce cost of sales to increase the difference between cost of sales and revenue
How to improve Profit in relation to revenue?
181ncrease Gross Profit (see above) or reduce expenses
How to improve Rate of inventory turnover?
Reduce selling price/special offers to increase sales/Offer other sales promotions
How to improve Current ratio?
182ncrease current assets/Reduce current liabilities
How to improve Liquid capital ratio?
183ncrease liquid assets/Reduce current liabilities
How to improve Trade Receivable days ?
Offer cash discount/Chase up slow paying customers
How to improve Trade Payable days?