Flashcards in FAP Deck (100)
What is the Mark-up?
It is a calculation based on the cost of sales.
It puts the PROFIT on top of the cost of sales.
When using mark-up, cost of sales are always 100%.
What is the Margin?
Margin is a calculation on the sales price.
It is included in the sales amount.
What is Gross Profit?
The difference between the sales and the cost of sales (making/buying the product and providing the service).
It is the Mark-up
What is Opening Inventory?
Inventory in our stores at the beginning of the financial period.
What are Purchases?
The cost of purchases made throughout the financial period.
Add to Opening Inventory
What are Purchase Returns?
Cost of purchases we've returned to suppliers during the financial period.
Subtract from (Opening Inventory + Purchases)
What is Closing Inventory?
The cost (value) of the Inventory we've left at the end of the financial period.
Subtract from (Opening Inventory + Purchases - Purchase Returns)
What is the cost of sales?
The result of the calculations of Inventory and purchases.
How are Credit Sales calculated from incomplete records?
Payment received from customers
Closing balance of Trade Receivables
Opening balance of Trade Receivables
What is the first step in dealing with Profit Appropriation for partnerships?
Enter the profit for the accounting period on the Profit Appropriation account.
If the business has made money this is a Cr entry.
What is the second step in dealing with Profit Appropriation for partnerships?
Appropriate (allocate) the partners' salaries to their Current Accounts.
Dr Profit Appropriation Account
Cr each partner's salary to their respective Current Account
What is the third step in dealing with Profit Appropriation for partnerships?
Calculate the residual profit available for appropriation i.e. balance the Profit Appropriation Account.
What is the fourth step in dealing with Profit Appropriation for partnerships?
Calculate each partner's share of the residual profit according to the stipulated profit-sharing ratio.
What is the fifth step in dealing with Profit Appropriation for partnerships?
Enter the shares of residual profit in the Profit Appropriation Account and the partners' Current Accounts.
Dr each partner's profit share in the Profit Appropriation Account
Cr each partner's profit share in their respective Current Accounts
What is the sixth step in dealing with Profit Appropriation for partnerships?
Allocate the balances from each partner's Drawings Account to the Dr side of their respective Current accounts.
By subsequently balancing the Current accounts we establish the amount of Current Capital for each partner.
What's the difference between Capital and Current Capital?
Capital refers to the permanent amount (or stake) a partner has in the business.
Current capital accounts refer to short-term investments that each partner had in the business.
Why are financial statements produced?
Internal accuracy control;
Obtaining finance or credit;
What are the main areas of the framework of accounting?
Accounting Policies and Characteristics (fundamental and enhanced);
Ethical Principles in Accounting
What is Substance Over Form?
It's the doctrine by which the true economic value of an asset is given precedence over legal context.
Part of Faithful Representation.
What does the SPL show?
Explain the SPL account in somewhat more detail.
Sales Income (Revenue)
Cost of Sales
What other names is the SPL known by?
Profit and Loss Account
What other name is the SFP known by?
What does the SFP show?
Current Assets minus Current Liabilities is equal to...
Net Current Assets
(Non-Current Assets + Current Assets) - (Non-Current Liabilities + Current Liabilities) equals to...
By which other name can Capital be know as?
Specially in ltd companies and LLPs.
Which value will Capital be equal to?
Explain the Balance Sheet in somewhat more detail.
Net Current Assets
Net Assets = Capital