Korea Accounting Manager Level 2 flashcards

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

Accounting Equation

Assets equal liabilities plus equity. Every transaction keeps this equality intact because each entry has equal debits and credits affecting at least two accounts.

Accrual Basis

Revenue is recognized when the performance obligation is satisfied and expenses when incurred, regardless of when cash is received or paid.

Normal Balance

The side (debit or credit) on which an account increases. Assets and expenses are debit-normal; liabilities, equity, and revenue are credit-normal.

Trial Balance

A listing of all ledger account balances at a date. Total debits must equal total credits; it detects arithmetic errors but not all misstatements.

Closing Entries

Period-end entries that transfer temporary account balances (revenues, expenses, dividends) to retained earnings so permanent accounts carry forward to the next period.

Going Concern Assumption

Financial statements are prepared assuming the entity will continue operating for the foreseeable future absent evidence of liquidation or cessation.

Prudence

A qualitative characteristic requiring caution so assets and income are not overstated and liabilities and losses are recognized when probable.

Consistency Principle

The same accounting policies are applied each period unless a standard requires a change or a new policy gives more relevant information; changes are disclosed.

Materiality

Information is material if omitting or misstating it could influence users' economic decisions. Assess in context rather than by a single fixed threshold.

Substance Over Form

Transactions are accounted for according to their economic substance rather than merely their legal form, ensuring faithful representation.

Credit Sale Entry

Debit Accounts Receivable and credit Sales Revenue when goods are sold on credit; collection later debits Cash and credits Accounts Receivable.

Depreciation Journal Entry

Debit Depreciation Expense and credit Accumulated Depreciation. Carrying amount equals cost minus accumulated depreciation.

Bad Debt Write-Off

Under the allowance method, debit Allowance for Doubtful Accounts and credit Accounts Receivable to remove a specific uncollectible balance.

Unearned Revenue Adjustment

Debit Unearned Revenue and credit Revenue as the performance obligation is satisfied, converting a liability into earned income.

Prepaid Expense Adjustment

Debit Expense and credit Prepaid Expense for the portion of a prepayment consumed during the period, matching cost to the period benefited.

Current Ratio

Current assets divided by current liabilities. It measures short-term liquidity and the ability to settle obligations due within one year.

Quick Ratio

Current assets minus inventory, divided by current liabilities. It excludes less liquid inventory to test immediate liquidity.

Gross Margin

Gross profit divided by revenue. Gross profit equals revenue minus cost of sales and shows profitability before operating expenses.

Return on Equity

Net profit divided by average equity. It measures the return generated for shareholders on their invested capital.

Inventory Turnover

Cost of sales divided by average inventory. Days inventory equals 365 divided by turnover, showing how long stock is held.

Cash Flow Statement

A statement classifying cash flows into operating, investing, and financing activities, reconciling opening and closing cash balances.

Prime Cost

Direct materials plus direct labor. It excludes manufacturing overhead and represents the directly traceable product costs.

Conversion Cost

Direct labor plus manufacturing overhead. It represents the cost of converting raw materials into finished goods.

Predetermined Overhead Rate

Estimated total manufacturing overhead divided by the estimated allocation base (such as direct labor hours or machine hours) for the period.

Underapplied Overhead

Occurs when applied overhead (rate times actual base) is less than actual overhead incurred; the difference is charged to cost of sales.

Contribution Margin

Sales minus variable costs. The contribution margin ratio equals contribution margin divided by sales and is used in break-even analysis.

Break-Even Point

Fixed costs divided by unit contribution margin in units, or fixed costs divided by contribution margin ratio in revenue.

Sunk Cost

A cost already incurred that cannot be recovered. It is irrelevant to future decisions and should be excluded from relevant-cost analysis.

Korean VAT Rate

Korea applies a 10% value-added tax standard rate to taxable supplies, with zero-rating for exports and exemptions for specified goods and services.

VAT Taxable Period

Korea's VAT periods run January 1 to June 30 and July 1 to December 31, with returns and payment generally due within 25 days after period end.

Withholding Tax

Tax deducted at source on specified income such as interest, dividends, and royalties at statutory rates, reduced by treaty where applicable.

Legal Reserve Requirement

A Korean stock company must set aside a legal reserve of at least 10% of cash dividends until the reserve reaches half of capital.

Director Duty of Loyalty

Directors owe duties of care and loyalty to the company; interested-director transactions require board approval and disclosure under the Commercial Code.