BGCSE Accounting 0614 flashcards
BGCSE Accounting 0614 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Accounting equation
- Assets = Capital + Liabilities. Every transaction changes at least two elements while the equation stays balanced, so total assets always equal the owner's claim plus outside claims.
- Business entity concept
- The business is treated as separate from its owner. Private transactions are recorded as drawings, not business expenses, so the accounts show only the business's financial position.
- Going concern concept
- Accounts assume the business will continue operating in the foreseeable future. Assets are therefore valued at cost less depreciation rather than at forced-sale values.
- Prudence concept
- Do not overstate assets or income and do not anticipate unrealised profits. Provide for all known losses, such as doubtful debts, as soon as they are foreseeable.
- Sales journal
- Book of original entry for credit sales only. It is written up from copies of sales invoices, and its monthly total is posted to the sales account and the individual entries to debtors.
- Credit note
- Document issued by a seller to reduce the amount owed by a customer. It records returns inwards or overcharges and is entered in the sales returns journal by the seller.
- General journal
- Book of original entry for transactions not recorded elsewhere: opening entries, credit purchase or sale of non-current assets, bad debts written off, and corrections of errors.
- Imprest system
- Petty cash method where a fixed float is set. At period end the cashier reimburses exactly the amount spent, restoring the float to its original level.
- Double-entry rule
- Every transaction has equal debits and credits. Total debits always equal total credits, and the accounting equation remains balanced after each entry.
- DEAD CLIC
- Memory rule for debit balances: Drawings, Expenses, Assets. Credit balances: Liabilities, Income, Capital. It shows which side increases each type of account.
- Contra entry
- Entry recorded in the cash book when cash is deposited into the bank. Bank is debited and cash is credited, so no third ledger account is involved.
- Debtor account
- Asset account in the sales ledger. It is debited for credit sales and returns from the customer, and credited for cash received and discount allowed.
- Trial balance
- List of all ledger balances at a date, with debit and credit columns. It proves arithmetic equality of double entry but does not detect errors of principle or omission.
- Error of principle
- Transaction posted to the wrong class of account, such as vehicle repairs debited to the motor vehicle asset account. The trial balance still balances.
- Suspense account
- Temporary account opened to hold the difference when a trial balance does not balance. It is cleared when the errors causing the difference are found and corrected.
- Error of commission
- Correct amount posted to the wrong account of the same class, such as a sale to A debited to B's account. The trial balance still balances.
- Discount allowed
- Reduction given to a customer for prompt payment. It is an expense, entered in the debit column of the cash book and in the discount allowed account.
- Bank overdraft
- Credit balance shown in the cash book, meaning the bank owes the business money. It appears as a current liability in the balance sheet.
- Unpresented cheque
- Cheque issued and recorded in the cash book but not yet presented at the bank. It is deducted from the bank statement balance in a bank reconciliation.
- Bank reconciliation
- Statement explaining the difference between the cash book bank balance and the bank statement, using unpresented cheques, uncredited lodgements, bank charges and errors.
- Cost of goods sold
- Opening inventory plus purchases, net of returns, plus carriage inwards, minus closing inventory. It is deducted from net sales to find gross profit.
- Gross profit margin
- Gross profit divided by net sales, expressed as a percentage. It shows the proportion of each sales dollar left after the direct cost of goods sold.
- Mark-up
- Gross profit expressed as a percentage of cost of goods sold. Margin equals mark-up divided by (100 + mark-up) multiplied by 100.
- Carriage outwards
- Delivery cost paid by the seller to send goods to customers. It is a selling expense in the profit and loss account, not part of cost of goods sold.
- Accrued expense
- Expense incurred during the period but not yet paid. It is added to the expense in the profit and loss account and shown as a current liability.
- Prepaid expense
- Expense paid in advance for a future period. It is deducted from the expense in the profit and loss account and shown as a current asset.
- Provision for doubtful debts
- Estimated percentage of debtors unlikely to pay. It is deducted from debtors in the balance sheet and adjusted through the profit and loss account.
- Bad debt written off
- Specific debt known to be irrecoverable. It is removed from the debtor's account and charged as an expense in the profit and loss account.
- Straight-line depreciation
- Equal annual charge calculated as (Cost − Residual value) ÷ Useful life. It suits assets that lose value evenly, such as fixtures and fittings.
- Reducing-balance depreciation
- Annual charge calculated as a fixed percentage of net book value at the start of the year. The charge falls each year as book value declines.
- Net book value
- Cost of a non-current asset minus accumulated depreciation to date. It is the carrying amount shown in the balance sheet, not a market value.
- Disposal account
- Account used to calculate profit or loss on sale of an asset. Cost is debited; accumulated depreciation and proceeds are credited; the balance goes to profit and loss.