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MM1F27
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Cards (69)
What are the main types of business form? (4)
Sole Trader
Partnership
Limited Liability Partnership
Limited Liability Company
(
Private
and
Public
)
Accounting is concerned with ..., ... and ... financial info
Collecting
Analyzing
Communicating
What does the Statement of Financial Position shows?
Position of accumulated wealth
What does Income Statement show?
Performance
in
creating
wealth
What does Statement of Cashflows show?
Prospect in staying
in
business
What does Balance Sheet include?
Assets
Liabilities
Equity
What does Income Statement Include?
Revenue
Expenses
Profit
What does Statement of Cashflows include?
Cash Inflow
Cash Outflow
What are fundamental characteristics of accounting info?
Relevance
Faithful Representation
What are the enhancing characteristics of accounting info?
Comparability
Verifiability
Understandability
Timeliness
What does relevance mean?
Accounting information
has to have
predictive
and
confirmatory
value
What does faithful representation mean?
Accounting info
has to be
complete
,
neutral
and
unbiased
,
free from error
What does comparability mean?
Accounting info can be used to make valid comparisons
What does verifiability means?
Accounting info
can be
proven
and there is
evidence behind
it
What does timeliness mean?
Accounting info is made available in time
What does understandability mean?
Accounting info should be presented in clear and concise way
Underestimated liabilities lead to
Overstated performance
and
overstated assets
Expense is
A
decrease
in
economic benefits
resulting in a
decrease
in
equity
Revenue is
Economic benefit
generated by a
business
Revenue Recognition
Revenue
should be
recognized
when control of
goods
has been transferred to the
customer
Accruals
Revenues and
expenses
are
recognized
when earned or incurred
Matching Principle
Expenses
should be
matched
to the
revenues they help generate
Going Concern
Assumption that the
business
will
operate
in
foreseeable future
Consistency
The measurement and presentation of similar transactions and other events is carried out in a consistent way each accounting period
Prudence
Gains and assets are not overstated and losses and liabilities are not understated
Business Entity Principle
Business and its owners are treated separately for accounting purposes
Historic Cost Method
Method of valuing assets and liabilities based on their original cost without adjustment to changing prices
Dual Aspect
Each transaction has 2 aspects both of which will affect the balance sheet
Accrual is
When expense is more than cash paid
How accruals are recognized?
Increase
in
expenses
in
Income Statement
Increase
in
Current Liability
in
Balance Sheet
Prepayment is
When amount paid is
more
than the
expense
for the
period
How prepayment is recognized?
Decrease
in
expense
in
Income Statement
Increase
in
Current Assets
in
Balance Sheet
Capital Expenditure is
Expenditure
to
create
,
acquire
or
improve long-term assets
(i.e.,
future benefits
)
Revenue Expenditure is
Expenditure
for
trading purposes
or
long-term asset maintenance
(i.e.,
no future benefit
)
Prime Costs is
Total
of
direct costs
What type of costs are superviser's wage
Stepped cost
Allocation is
Assigning a whole item of cost to a single cost unit or centre
Apportionment
is
Spreading costs
over 2 or more cost units or
centres
Absorption is
Attaching overhead costs to products or services
Cost Centre is
A
production
or
service location
, a
function
, an
activity
or an
item
of
equipment
for which
costs
are
accumulated
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