Junior Accounting Qualification (China) flashcards

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

Accounting equation

Assets equal liabilities plus owner's equity. The equation stays balanced after every transaction because each entry records equal debits and credits across at least two accounts.

Accrual basis

Revenue is recognised when earned and expenses when incurred, regardless of when cash is received or paid. It is the basis required for enterprise accounting under Chinese standards.

Trial balance

A list of all ledger account balances at a date, used to verify that total debit balances equal total credit balances. Equal totals do not prove the absence of all errors.

Adjusting entries

Entries made at period end to match revenue and expenses to the correct period, such as accruing unpaid expenses, deferring prepaid items, and recording depreciation or bad debt provisions.

Straight-line depreciation

Annual charge equals cost minus estimated residual value, divided by useful life in years. The same amount is charged each full year the asset is in use.

Double-declining balance

An accelerated method using twice the straight-line rate applied to beginning net book value. Residual value is not deducted until the final years of the asset's life.

Allowance for bad debts

A contra-asset account estimating uncollectible receivables. The period charge equals the required ending balance minus any existing credit balance in the allowance account.

Weighted average cost

Inventory method where unit cost equals total cost of goods available for sale divided by total units available. The same unit cost is applied to issues and ending inventory.

Perpetual inventory system

Inventory and cost of goods sold accounts are updated continuously at each purchase and sale. A physical count at period end is used to identify and adjust shrinkage.

Owner's equity components

Paid-in capital or share capital, capital reserve, surplus reserve, and retained earnings. Profit increases retained earnings; dividends and losses reduce owner's equity.

Revenue recognition conditions

Revenue from sale of goods is recognised when control of the goods transfers to the buyer, the amount is reliably measurable, and economic benefits are probable.

Current ratio

Current assets divided by current liabilities. It measures short-term solvency; a ratio above 1 indicates current assets cover current liabilities at the balance sheet date.

Inventory turnover

Cost of goods sold divided by average inventory. A higher ratio generally indicates faster inventory movement and less capital tied up in stock.

Cash flow statement sections

Operating, investing, and financing activities. Operating activities cover main business cash flows; investing covers long-term assets; financing covers capital raising and repayment.

Bank reconciliation

A schedule explaining differences between the bank statement balance and the company's cash book, such as outstanding cheques and deposits in transit, to prove the adjusted balances agree.

VAT taxable scope

Sale of goods, provision of processing, repair and replacement services, and sale of services, intangible assets, and immovable property. Each category has its own rate or levy rate.

VAT general taxpayer

A taxpayer exceeding the small-scale threshold or registering voluntarily. It may credit input VAT against output VAT and must issue special VAT invoices for taxable sales.

Output VAT

Tax charged on a taxpayer's sales, calculated as sales amount excluding VAT multiplied by the applicable rate. It is the starting point for computing VAT payable.

Input VAT deduction

VAT paid on purchases that may be credited against output VAT, supported by a special VAT invoice or permitted voucher. Input VAT on exempt or welfare uses is not deductible.

Consumption tax

A tax levied on specified goods such as tobacco, alcohol, cosmetics, and luxury items, generally collected at production, import, or retail depending on the goods.

Individual income tax rates

Comprehensive income uses progressive rates from 3% to 45%. Business income uses 5% to 35%. Interest, dividends, and property transfers generally use a flat 20% rate.

Annual reconciliation

Resident individuals reconcile comprehensive income with the tax authority between 1 March and 30 June of the following year, settling any refund or additional tax due.

Enterprise income tax rate

The standard rate is 25%. Small low-profit enterprises and qualified high-tech enterprises enjoy preferential rates and deductions under current policy.

Stamp duty

A tax on specified written contracts, property transfer documents, and business books, calculated as the amount stated multiplied by the applicable rate for each category.

Labour contract types

Fixed-term, open-ended, and task-completion contracts. An open-ended contract has no fixed end date and gives the employee greater job security.

Probation period limits

Maximum 1 month for contracts of 3 months to under 1 year, 2 months for 1 to under 3 years, and 6 months for 3 years or more. Probation may be set only once.

Double wage liability

If no written labour contract is concluded within one month of starting work, the employer pays double wages from the second month, up to a maximum of eleven months.

Labour arbitration limitation

One year from the date the party knew or should have known of the infringement. For arrears of labour remuneration during employment, the limitation does not run.

Cheque presentation period

Ten days from the date of issue. Presenting within the period preserves recourse against endorsers; the holder's rights against the drawer are not lost by late presentation.

Administrative reconsideration

A review of an administrative act by a higher authority, generally applied for within 60 days of knowing the act, unless the law sets a different period.

Tax exemption versus zero rate

Exemption means no tax is levied and input VAT is generally not credited. A zero rate applies to exported goods and services and allows input VAT to be credited or refunded.