Accounting

• Employers payroll cost = Gross pay + Employers NIC
• Net Pay = Gross pay - PAYE - Employee NIC
• HMRC Liability = PAYE + Employee NIC + Employer NIC
• Gross profit margin = gross profit / sales x 100
• Inventory is valued at the lower of cost and net realisable value
• Error of omission: transaction has been completely omitted from the accounting records
• Error of commission: transaction has been recorded in the wrong account but in the correct financial statement
• Error of principle: transaction has conceptually recorded incorrectly. E.g. debited as an expense rather than a asset
• Compensating Error: coincidently equal and opposite to each other
• Transposition error: correct double entry has been made but two digits in the amounts are recorded the wrong way round
• If an accrual is treated as a prepayment, profit is overstated
• If a prepayment is treated as an accrual profit is understated