Cameroon GCE A-Level Accounting flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Going concern

The assumption that an entity will continue in operation for the foreseeable future, so assets are measured on a going-concern basis rather than at break-up values.

Prudence convention

Accounting convention requiring that gains are not anticipated, while all known liabilities and reasonably foreseeable losses are recognised immediately in the financial statements.

Business entity concept

The principle that the business is accounted for separately from its owner, so owner drawings reduce capital and are never treated as a business expense.

Sales day book

A book of prime entry recording credit sales only, from which periodic totals are posted by debiting trade receivables and crediting sales.

Imprest petty cash

A petty cash system where the float is fixed and restored at intervals by a transfer from bank equal to the vouchers spent.

Contra entry

A set-off between two accounts in the same ledger, recorded on both sides of the cash book so that total debits still equal total credits.

Suspense account

A temporary account opened with the difference in a trial balance, cleared once all one-sided errors causing the difference have been corrected.

Error of principle

An error where a transaction is entered in the wrong class of account, such as capital expenditure debited to repairs; it does not affect trial balance agreement.

Compensating errors

Two or more errors of equal amount on opposite sides of the ledger that cancel out, leaving the trial balance in agreement despite incorrect records.

Unpresented cheque

A cheque issued and entered in the cash book but not yet cleared through the bank; it is deducted from the bank statement balance in a reconciliation.

Receivables control account

A nominal ledger account summarising total trade receivables, whose closing balance should equal the sum of the individual receivables ledger balances.

Dishonoured cheque

A customer's cheque refused by the bank; it is debited back to the customer's account and credited to the cash book, restoring the debt.

Cost of goods sold

Opening inventory plus purchases less returns outwards plus carriage inwards, less closing inventory; it is deducted from net sales to give gross profit.

Accrued expense

An expense incurred but not yet paid at the reporting date; it is debited to the expense account and shown as a current liability.

Drawings

Cash or goods withdrawn by the owner for personal use, deducted from capital in the balance sheet rather than charged as a business expense.

Appropriation account

The partnership account that distributes profit through interest on capital, partners' salaries and interest on drawings, then shares the residual in the profit-sharing ratio.

Sacrifice ratio

The difference between a partner's old profit share and new profit share; it determines how an incoming partner's premium for goodwill is allocated.

Garner v Murray rule

On dissolution, a deficiency in an insolvent partner's capital account is borne by the solvent partners in proportion to their last agreed capitals, not their profit-sharing ratio.

Share premium

The excess of the issue price of shares over their nominal value; it is credited to a non-distributable reserve in the equity section.

Debenture interest

The finance cost of borrowed debenture capital, charged to profit or loss on an accruals basis whether or not it has been paid in cash.

Bonus issue

A capitalisation of reserves by issuing fully paid shares to existing shareholders at no cost, converting reserves into share capital without raising cash.

Prime cost

The total of direct materials, direct labour and direct expenses incurred in a manufacturing period before factory overheads are added.

Net realisable value

The estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale.

Reducing balance depreciation

A depreciation method applying a fixed percentage to the reducing net book value, producing higher charges in early years and lower charges later.

Disposal account

A temporary account receiving the asset cost and accumulated depreciation plus disposal proceeds, whose balance is the profit or loss on disposal.

Contribution per unit

Selling price less variable cost per unit; it is used to cover fixed costs, and any excess after fixed costs represents profit.

Overhead absorption rate

Budgeted total overheads divided by a budgeted activity base such as labour hours or machine hours, used to charge overheads to production.

Relevant cost

A future, incremental cash flow that differs between alternatives; sunk costs and apportioned fixed costs are excluded from the decision.

Operating cash flow

Cash generated from trading, computed indirectly as profit adjusted for non-cash items and movements in working capital such as inventory and receivables.

Return on capital employed

Operating profit divided by capital employed expressed as a percentage; capital employed equals total assets less current liabilities.

Income and expenditure account

The accruals-based operating statement of a not-for-profit entity, matching income earned with expenditure incurred to show a surplus or deficit.

Professional confidentiality

The ethical duty not to disclose client information obtained through professional work, except where legally required or permitted by the client.