Accounting

• Sole trader


  business owned and operated by one person
• Partnership

  a business owned by two or more people
• company


  Owned by number of shareholders;operated by directors
• What is statement of profit or loss


  Reflects performance over a period of time and important to users
• What is the statement of financial position?


  Reflects business position at a point and time (like a photo)
• Types of profit making business entities


  Sole trader

  Partnership

  Company
• Who is liable for losses of sole trader/partnership/company

  Themselves.
• Where profit goes for sole traders/partnership/companies


  Themselves,shared between partners,company
• Types of financial statements


  P&l

  SFP

  Statement of cash flows

  Statement of changes and equity
• What does a sfp consist of


  Assets and liabilities and capital and drawings/dividends
• Non-current assets


  Owned >12 months
• current assets


  Owned <12 months
• Examples of non current assets


  PP&E, investment property, intangible assets, goodwill, financial assets
• Examples of current assets


  Things expected to be turned into cash within the next year. inventory, cash, accounts receivable, prepaid expense
• How to calculate equity


  Assets - Liabilities = Equity
• What is equity equivalent to


  NET ASSETS
• What is in p&l


  Revenue (sales/income)

  Gross profit

  Dist/admin (rent,electricity, legal fees, wages/other type of business income)

  Expenses
• Capital expenditure acquires


  Non current assets

  Improve/enhances earning capacity

  (One off)
• Revenue expenditure


  Maintains existing earning capacity

  Trade

  Includes three rs

  Ongoing expenses
• What are three rs

  Repairs, Renewals and Repaints
• Ethical considerations


  Technical/prof competence

  Objectivity

  Prof behaviour

  Integrity

  Confidentiality
• What are receivables


  Owed to business
• What are liabilities?


  what a company owes
• Business Entity Concept


  financial information is recorded and reported separately from the owner's personal financial information
• Capital of sole trader formula

  A=C+L
• How to calculate capital of sole trader

  Bf+profit+injections-drawings
• Statement of fp for sole trader

  PPE SEPARATE

  capital is equity

  Top half assets

  Bottom half liabilities and capital
• What is duality concept

  each transaction has an equal but opposite effect
• P&L of sole trader

  First part- gross profit

  Second part- net profit (left after other expenses
• DEAD CLIC (increase on account)


  Debit if

  Expense

  Asset

  Drawing/dividend

  
  

  Credit if

  Liability

  Income

  Capital
• Credit transaction of sales return


  Dr sales

  Cr TR
• Credit transaction of purchase return


  Dr TP

  Cr Purchases
• Cash transaction of sales return


  Dr sales cr cash
• Cash transaction of purchase return


  Dr cash

  Cr purchases
• Two types of discounts

  Trade

  Bulk buy
• How to calculate discount on purchase vs settlement


  Use expectation vs reality
• How to adjust ledger if expects to not take discount and doesn't take


  Purchase:

  Dr Ourchase

  Cr Payable

  
  

  Settlement

  Dr payable

  Cr cash
• Adjust ledger if expect to take discount but illegible

  Purchase

  Dr ourchase

  Cr payable

  
  

  Settle

  Dr payable

  Cr cash

  Dr purchases
• How to calculate total staff costs


  Gross salaries+ employees national insurance contribution
• How to calculate what employer pays to gov as tax

  Income tax of paye+employees nic+employees nic