Incomplete records

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  • Created by: apple87
  • Created on: 11-04-16 12:13
How can opening and closing capital be calculated?
Statement of affairs: Assets - Liabilities = Capital
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How can profit for the year be calculated by using the capital figures?
(Capital at start of year - Capital at end of year) + Drawings
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How is the cash book summary prepared?
Dr: BBD, Receipts from trade receivables. Cr: Payments to trade payables, Drawings, Expenses, BCD(missing figure)
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How are purchases for the year be calculated?
Payments to trade payables, less Trade payables at the beginning of the year, plus Trade payables at the end of the year
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How are sales for the year calculated?
Receipts from trade Receivables, less Trade receivables at the beginning of the year, plus Trade receivables at the end of the year
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How are purchases calculated using the Purchases ledger control account
Dr; Payments to trade payables, BCD(Trade payables at year end.) CR: BBD(Trade payables at year start), Purchases(missing figure.)
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How are sales calculated using the Sales ledger control account
DR: BBD(Trade receivables at year start), Sales(missing figure.) CR: Receipts from trade receivables,Bad debts written off, BCD(Trade receivables at year end.)
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Which 3 pieces of information are needed to calculate sales and purchases?
Opening balance, Closing balance, payments or receipts for the year
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How are expenses for the year calculated?
Bank and cash payments, less Accruals or plus Prepayments at beginning of the year, plus Accruals or less Prepayments at year end
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What is mark-up?
The percentage profit added to cost price.
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What is margin?
A percentage profit based on the selling price
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How is mark-up calculated?
Gross profit/Cost price x 100
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How is margin calculated?
Gross profit/Selling price x 100
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How are sales calculated using markup or margin?
Gross profit= Cost of sales x Markup or Margin/100 Sales= Cost of sales + Gross profit
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How are purchases calculated using mark up or margin?
Gross profit= Sales x Markup or Margin/100 Cost of sales= Sales - Gross profit Purchases= Cost of sales + Closing inventory - Opening inventory
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How do you convert from a mark-up to a margin?
Margin= Mark-up %/(100+Mark-up %) x 100
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How do you convert from a margin to a mark-up?
Mark-up= Margin %/(100-Margin %) x 100
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How do you calculate cash loss using the cash account?
Dr: BBD(Cash at year start), Cash sales. Cr: Bank, Expenses, BCD(Cash at year end), Amount of cash stolen(missing figure.)
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How do you calculate cash loss using the sales ledger control account?
Step 1: Opening inventory + Purchases less Closing inventory =Cost of sales + Gross profit markup or margin =Sales Step 2: Dr: BBD(Opening TR), Sales Cr: Bank(missing figure,) BCD(Closing TR.) Step 3:Cash expected to be banked - Cash actually banked
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What can be done to keep accurate records and prevent cash losses?
Keep a detailed cash book, keep a copy of all cash receipts, do bank reconciliations every time a bank statement is received, use margin or markup to compare actual sales with predicted sales.
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What office procedures can prevent cash loss?
Record transactions as they occur, empty tills regularly and put cash in safe, bank cash regularly to keep cash level low, pay bills by cheques or bank transfer, divide duties, regular cash checks, more security, references, set authorisation limits
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How is inventory loss calculated?
Step 1: Opening inventory + Purchases =Cost of inventory available for sale. Step 2: Sales - Gross Profit = Cost of sales. Step 3: Cost of inventory available for sale - Cost of sales=Est closing stock - Value of remaining stock = Value of stock lost
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What can be done to keep accurate records and prevent inventory losses?
Use store ledger records, keep a copy of all inventory receipts, keep records for the disposal of damaged inventory, carry out inventory counts.
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Which office procedures can prevent inventory loss?
Improve security by controlling access to inventory, carry out inventory reconciliations and compare inventory counts with with inventory records, ensure discrepencies are referred to managers, sett authorisation limits for disposing inventory.
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What are the drawbacks of incomplete records?
Cost- Accountants charge more and it is time consuming. Lack of upto date management info- Financial details not readily available. Satement of account sent to trade rec may be unaccurate making chasing payment difficult.
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What are the drawbacks of incomplete records?
Danger of cash/inventory loss may be difficult to verify if records not kept upto date. Lack of accuracy- a number may be left out. Additional cost- cost of obtaining duplicate bank statements and paid cheques. Reliability questioned- Lenders, HMRC
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How do you comment of the financial statements?
Use accounting ratios eg profit margins, return on capital employed, net current assets, liquid capital ratio, compare years and point out trends. Back up advice with financial figures, Finish with a conclusion to summarise.
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Other cards in this set

Card 2

Front

How can profit for the year be calculated by using the capital figures?

Back

(Capital at start of year - Capital at end of year) + Drawings

Card 3

Front

How is the cash book summary prepared?

Back

Preview of the front of card 3

Card 4

Front

How are purchases for the year be calculated?

Back

Preview of the front of card 4

Card 5

Front

How are sales for the year calculated?

Back

Preview of the front of card 5
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