FAP Flashcards Preview

Advanced BS > FAP > Flashcards

Flashcards in FAP Deck (100)
Loading flashcards...
1

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%.

2

What is the Margin?

Margin is a calculation on the sales price.
It is included in the sales amount.

3

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

4

What is Opening Inventory?

Inventory in our stores at the beginning of the financial period.

5

What are Purchases?

The cost of purchases made throughout the financial period.

Add to Opening Inventory

6

What are Purchase Returns?

Cost of purchases we've returned to suppliers during the financial period.

Subtract from (Opening Inventory + Purchases)

7

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)

8

What is the cost of sales?

The result of the calculations of Inventory and purchases.

9

How are Credit Sales calculated from incomplete records?

Payment received from customers

+

Closing balance of Trade Receivables

-

Opening balance of Trade Receivables

10

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.

11

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

12

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.

13

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.

14

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

15

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.

16

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.

17

Why are financial statements produced?

Internal accuracy control;

Measuring performance;

Obtaining finance or credit;

Legal requirements.

18

What are the main areas of the framework of accounting?

Accounting Principles;

Accounting Policies and Characteristics (fundamental and enhanced);

and

Ethical Principles in Accounting

19

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.

20

What does the SPL show?

Income

minus

Expenses

equals

Net Profit

21

Explain the SPL account in somewhat more detail.

Sales Income (Revenue)

less

Cost of Sales
Opening Inventory
plus
Purchases
minus
Closing Inventory
equals

Gross Profit

less

Expenses

equals

Net Profit

22

What other names is the SPL known by?

Profit and Loss Account

and

Income Statement

23

What other name is the SFP known by?

Balance Sheet

24

What does the SFP show?

Assets

minus

Liabilities

equal

Capital

25

Current Assets minus Current Liabilities is equal to...

Net Current Assets

26

(Non-Current Assets + Current Assets) - (Non-Current Liabilities + Current Liabilities) equals to...

Net Assets

27

By which other name can Capital be know as?

Equity

Specially in ltd companies and LLPs.

28

Which value will Capital be equal to?

Net Assets

29

Explain the Balance Sheet in somewhat more detail.

Non-Current Assets

plus

Net Current Assets

minus

Non-Current Liabilities

equals

Net Assets = Capital

30

On which statements will Opening and Closing Inventory appear?

Opening Inventory will only appear on the SPL since it is part of the Cost Of Sales calculation;

Closing Inventory, on the other hand, while still needed for the Cost Of Sales calculation in the SPL, will also be recorded as a current asset on the SFP.