LGCSE Accounting (0187) flashcards
LGCSE Accounting (0187) · 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. It shows that a business's resources equal the owner's claim plus outside claims.
- Drawings
- Withdrawals by the owner for personal use. They reduce capital and are not treated as a business expense.
- DEAD CLIC
- Debit Expenses, Assets, Drawings; Credit Liabilities, Income, Capital. A mnemonic for double-entry rules.
- Trial balance
- A list of ledger balances to check that total debits equal total credits. It does not detect all errors.
- Source document
- The original record of a transaction, such as an invoice, receipt, or credit note, used to make accounting entries.
- Books of prime entry
- Day books, cash book, petty cash book, and journal where transactions are first recorded before posting to ledgers.
- Imprest system
- A petty cash method where a fixed float is restored periodically by reimbursing the exact amount spent.
- Journal
- A book of prime entry used for non-regular transactions such as opening entries, corrections, and credit purchases of fixed assets.
- Bank reconciliation
- A statement that explains differences between the cash book bank balance and the bank statement balance, e.g., unpresented cheques and uncredited deposits.
- Suspense account
- A temporary account opened when the trial balance does not agree; its balance is cleared when errors are corrected.
- Error of principle
- An error where a transaction is recorded in the wrong class of account, e.g., capital expenditure treated as revenue expenditure.
- Control account
- A summary account in the general ledger that totals entries in a subsidiary ledger, such as the sales ledger control account.
- Cost of sales
- Opening inventory + Purchases − Purchase returns + Carriage inwards − Closing inventory. It is deducted from revenue to find gross profit.
- Accrued expense
- An expense incurred but not yet paid. It is added to the expense and shown as a current liability.
- Prepaid expense
- An expense paid in advance. It is deducted from the expense and shown as a current asset.
- Straight-line depreciation
- Annual depreciation = (Cost − Residual value) / Useful life. It allocates an equal expense each year.
- Reducing balance depreciation
- Depreciation = Net book value × fixed percentage. The expense decreases each year as the asset's book value falls.
- Partnership appropriation account
- An account showing how net profit is shared: interest on capital, partners' salaries, interest on drawings, and residual profit in the profit-sharing ratio.
- Partners' current accounts
- Accounts recording each partner's share of profit, interest on capital, salaries, drawings, and interest on drawings.
- Share premium
- The amount received for shares above their nominal (par) value. It is part of a company's equity.
- Statement of changes in equity
- A financial statement showing movements in equity: opening balance + profit + share issues − dividends = closing balance.
- Gross profit margin
- Gross profit divided by revenue, expressed as a percentage. It measures profitability before operating expenses.
- Return on capital employed
- Profit before interest and tax divided by capital employed, expressed as a percentage. It measures the return generated on invested capital.
- Current ratio
- Current assets divided by current liabilities. It indicates a business's ability to pay short-term obligations.
- Quick ratio
- (Current assets − Inventory) divided by current liabilities. It tests liquidity without relying on selling inventory.
- Inventory turnover period
- (Average inventory / Cost of sales) × 365 days. It shows the average number of days inventory is held before sale.
- Earnings per share
- Profit for the year attributable to ordinary shareholders divided by the number of ordinary shares. It shows profit per share.
- Going concern
- The assumption that a business will continue operating for the foreseeable future, so assets are not valued at break-up value.
- Accruals concept
- Revenue and expenses are recognised when earned or incurred, not when cash is received or paid.
- Prudence concept
- Accounting treatment that avoids overstating assets and income or understating liabilities and expenses, e.g., inventory at lower of cost and NRV.
- Business entity concept
- The business is treated as separate from its owner, so personal transactions of the owner are not recorded in the business books.
- Materiality
- The principle that items significant enough to influence decisions should be disclosed separately, while immaterial items may be aggregated.