Module 2 Flashcards
Profit and loss shows?
The performance of the entity for one period
Gross profit calculated by?
Sales-cost of sales
Net profit calculated as?
Gross profit - operating expenses
What is the balance sheet?
Statement of the business’s assets and liabilities as at a specific date
What is the accounting equation?
Capital = Assets - Liabilities
Capital can be broken down into
Capital = capital introduced + profit - drawings
Profit = income - expenditure
What is the double entry concept?
For every transaction there’s a double sided effect within the business
All assets are what type of balances?
Debit
Use the funding is put to e.g purchase of assets
All capital and liabilities are what type of balances?
Credit
Sources of finding, capital introduced owner etc are credit
What is DEAL?
DEBIT Drawings Expanses Assets Loss
What is CLIP?
CREDIT Capital Liability Income Profit
In accounting terms, a positive bank balance is an
Asset, so therefore a debit
To credit this would be to reduce the balance
Depreciation does what?
Reduced assets (BS) Increases expenses (P&L)
Depriciation calculation?
Depreciable cost/ useful life
What is accountancy?
The measurement, disclosure or provision of financial information used by decision makers to make resource allocation decisions
