A-Level Accounting Flashcards

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Accounting Records
Accounting records store information about all the financial transactions and events of a business
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Financial Statements
Financial statements are summaries of accounting records that are drawn up to satisfy the information needs of owners and other stakeholders in the business
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Balance Sheet
Balance sheets show the financial state of affairs of a business at a specific date
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Profit & Loss Account
The profit and loss account is a financial statement which sets out the results of the trading activities of an enterprise in a detailed breakdown of income generated and expenses incurred
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Nominal Ledger
A nominal ledger is the main place where accounting transactions are recorded. It contains profit and loss, balance sheet and the nominal account – a complete set of accounting records
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Assets
Assets are the economic resources belonging to a business. Assets could be money in a cash register or bank account, or items such as property, fixtures and furniture, equipment, motor vehicles, and stock or goods for resale
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Capital
Capital is the value of the investment in the business by the owner(s). It is that part of the business that belongs to the owner; hence it is often described as the owner’s interest
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Liabilities
Liabilities are the debts owed by the firm. The main types of liabilities are creditors (money owed by the business to suppliers of goods and services), bank overdrafts and bank loans
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Accounting Equation
Assets = Liabilities + Capital
Assets = Capital + Liabilities
Assets - Liabilities = Capital
Assets - Capital = Liabilities
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Creditor
Creditors are individuals/businesses that have lent funds to another company and are therefore owed money
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Debtor
Debtors are individuals/companies that have borrowed funds from a business and therefore owe money
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Double-entry bookkeeping
The transaction recorded in two accounts reflect the debit in the account that receives value and credit in the other account that has given value. The main rule for the double-entry system entry is 'debit the receiver and credit the giver'
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T-Account
A T-account is an informal term for a set of financial records that uses double-entry bookkeeping
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T-Account Rules
Asset and expense account - Increases on debit side

Capital, liability and income account - Increases on credit side
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Trial Balance
A trial balance is a list of all the balances in the nominal ledger accounts. It serves as a check to ensure that for every transaction, a debit recorded in one ledger account has been matched with a credit in another
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Balance Carried Down
Balance carried down is the closing balance of a ledger account that is carried forward to the next accounting period
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Balance Brought Down
Balance brought down is the opening balance of a ledger account that is brought into the books from a previous accounting period
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Accounting Equation
(once income & expenses are included)
Assets - Liabilities = Capital + (Income - Expenses)
Assets + Expenses = Capital + Liabilities + Income
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Manufacturing concern
Manaufacturing products to then be sold
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Non-Manufacturing concern
Either buying goods for resale or selling a service for a fee
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Net/overall profit
The increase in the financial value or worth of a business after all expenses have been deducted from income
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Gross profit
The difference between sales and the cost of the goods or stock sold, known as the cost of sales. Gross profit is thus the profit earned by a business before the overheads or general expenses of running the business are deducted
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Closing stock
Stock remaining at the end of a period
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Business Entity Concept
The accounting records for even the simplest business must be kept separate from the personal affairs of the owner or owners. This concept that the business stands apart from the owners is known as the business entity concept
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Dual Aspect Concept
The dual aspect concept is that every transaction has two aspects which must be equal in order to keep in balance the accounting equation, A – L= C
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Money Measurement Concept
Only transactions that can be expressed in monetary terms are to be recorded
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Historic Cost Concept
All transactions are recorded at their cost to the business
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Realisation Concept
Profits are realised (actually earned) when cash or a debtor replaces the goods or services. A transaction is not realised when an order is received or when a debtor pays their debt
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Consistency Concept
Transactions of a similar nature should always be recorder in the same (or consistent) way. This is to ensure that the Profit and Loss Accounts and Balance Sheets can be meaningfully compared each year
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Materiality Concept
This concept implies that you should not waste time recording transactions that are trivial (involving very small amounts of money)
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Accruals (Matching) Concept
The Trading and Profit and Loss Account should only include the income earned and expenses incurred for the current financial year
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Prudence Concept
This concept states that profits must not be overstated, and the value of assets must not be shown to be too high. The accountants' duty is to ensure that the readers of the final accounts get a true picture of the financial state of the business
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Going Concern Concept
It is assumed that a business will continue to exist for a long period of time
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Substance Over Form Concept
The practical view (the substance) is preferred to the legal view (the form) in accounting
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Other cards in this set

Card 2

Front

Financial statements are summaries of accounting records that are drawn up to satisfy the information needs of owners and other stakeholders in the business

Back

Financial Statements

Card 3

Front

Balance sheets show the financial state of affairs of a business at a specific date

Back

Preview of the back of card 3

Card 4

Front

The profit and loss account is a financial statement which sets out the results of the trading activities of an enterprise in a detailed breakdown of income generated and expenses incurred

Back

Preview of the back of card 4

Card 5

Front

A nominal ledger is the main place where accounting transactions are recorded. It contains profit and loss, balance sheet and the nominal account – a complete set of accounting records

Back

Preview of the back of card 5
View more cards

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