ITA
0.0 / 5
- Created by: amyclaire
- Created on: 09-05-19 18:18
Stewardship
Recording past events confirming what has happened
1 of 68
Qualitative characteristics of useful financial information
Relevance, Faithful representation, comparability, verifiability, timeliness, understandability
2 of 68
Materiality
A standard can be ignored if the net impact is so small the reader won't be misled
3 of 68
Prudence
Cautiousness
4 of 68
Accruals
Matching, non- cash based assets
5 of 68
Historical Cost
Original monetary value
6 of 68
Going Concern
A company which has resources to continue operating indefinitely until it provides contrary evidence
7 of 68
Asset
A resource controlled by an entity as a result of past events from which future economic benefits are expected to flow to the entity
8 of 68
Liabilities
Present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits
9 of 68
Equity (Capital)
Residual interest in the assets of an entity after deducting all liabilities
10 of 68
Entity approach
Assets= equity + liabilities
11 of 68
Proprietary approach
Assets- Liabilities= Equity
12 of 68
Cost of sales
Opening Inventories + Purchases (+ other manufacturing costs) - Closing Inventories
13 of 68
Gross Profit
Difference between sales revenue and cost of sales
14 of 68
Expenses
Rent, Wages, Depreciation, Directors' fees, audit fees
15 of 68
Realisation concept
PROFIT IS ONLY REALISED WHEN CONTROL OF GOODS PASSES TO THE BUYER
16 of 68
Capital expenditure
One- off, benefits> 12 months, fixed asset on balance sheet, can be for improvements to existing assets
17 of 68
Revenue expenditure
More frequent, benefits< 12 months, expense charged against profit, non- cash items eg. depreciation
18 of 68
Amortisation
Depreciation of intangible non- current assets eg. leases
19 of 68
Inventory
Goods for resale, raw materials, consumables, work in progress, finished product
20 of 68
Closing trade receivables
Opening TR+ credit sales - amounts received - amounts written off- discounts allowed
21 of 68
Credit Sales
Closing receivables- opening R+ receipts + bad debts written off + discounts allowed
22 of 68
Depreciation charge
NBV at start- NBV at end+ cost of acquisitions - disposals
23 of 68
Closing balance
Opening balance+ receipts - payments
24 of 68
Credit purchases
Closing- opening payables+ payments to suppliers + discounts received
25 of 68
Mark- up
(Profit/ Cost Price)x 100
26 of 68
Profit margin
(Profit/ Selling Price)x 100
27 of 68
Debit
Left hand side entry
28 of 68
Credit
Right hand side entry
29 of 68
Return on Capital Employed (ROCE)
Operating profit (before tax and interest)/ (shareholder funds (share capital& reserves) & loans (non- current liabilities & reserves))
30 of 68
Net profit margin (NPM)
Net profit before tax/ turnover
31 of 68
Gross Profit
Turnover- cost of sales
32 of 68
Net profit
Gross profit- expenses
33 of 68
Gross profit margin
Gross profit/ turnover
34 of 68
Capital Gearing
(Long term debt/ NC Liabilitiesx100)/ All finance (shares, retained earnings, NC liabilities)
35 of 68
Earnings per share (EPS)
Annual earnings (profit after tax/ final profit)/ number of ordinary shares in issue
36 of 68
Dividends per share (DPS)
Dividends (interim plus final)/ no of issued ordinary shares
37 of 68
Yield
Latest ordinary dividend (interim + final)/ current market price of share
38 of 68
Price/ Earnings Ratio
Latest market price of share/ latest earnings per share
39 of 68
Current ratio
total current assets/ total current liabilities
40 of 68
Acid Test ratio
Total current assets less stock (inventory, current assets)/ total current liabilities
41 of 68
Debt to equity ratio
Non- current liabilities/ share capital & reserves
42 of 68
Debt collection period
debtorsx365/annual credit sales or receivables/ sales revenue x 365
43 of 68
Creditor payment period
creditorsx365/ annual credit purchases or payables/ cost of sales x365
44 of 68
Rate of inventory turnover (stock turn)
Cost of sales/ average stockholding for year or inventories/ cost of sales x 365
45 of 68
Working capital cycle/ operating cycle
Debtor days + Stockturn days - creditor days
46 of 68
Operating profit margin
operating profit/ sales revenue x 100
47 of 68
Sales revenue to capital employed
Sales revenue/ share capital + reserves + NC liabilities x100
48 of 68
Share of overheads
time spent in department x pre determined absorption rate
49 of 68
Breakeven
Total FC/ Contribution per unit
50 of 68
Contribution per unit
Marginal revenue received (selling price)- marginal cost (total variable cost per unit)
51 of 68
Output to achieve target profit
Total FC + target profit/ contribution p unit
52 of 68
Budget
Operational plan for specified period expressed in quantitative terms
53 of 68
Functions of budgets
Planning, coordinating activities, communicating plans, motivating managers, controlling activities, evaluating performance of managers
54 of 68
3 styles of performance evaluation (budgeting)
Budget constrained, profit conscious, non- accounting
55 of 68
Different types of divisions/ units
Cost centres (high centralisation) , Profit centres (medium decentralisation), Investment Centres (high decentralisation)
56 of 68
Relevant cost/ benefit
Differs between alternative courses of action eg. avoidable costs which can be eliminated, opportunity cost
57 of 68
Irrelevant costs
Are unavoidable eg. sunk costs, future costs that don't differ between alternatives
58 of 68
Contribution
Marginal revenue- marginal cost
59 of 68
Internal Rate of Return
Cost of capital for positive NPV + (positive net present value/ (difference between positive and negative NPV)x difference between COCs)
60 of 68
Accounting Rate of Return on Initial Investment
Average profit of project/ initial capital required x 100
61 of 68
ARR on average investment
Average profit of project/ average investment (mid- point, initial investment/2) x100
62 of 68
Profit
Net cash flow less depreciation
63 of 68
Annuities
Bring in a regular fixed cash inflow for a specified period
64 of 68
Perpetuity
Annual income/ discount rate expressed as a decimal
65 of 68
Period costs
Fixed production costs eg. rent
66 of 68
Blanket absorption rate per unit
Fixed production overheads/ normal output
67 of 68
Profit
new less old capital + drawings – capital introduced
68 of 68
Other cards in this set
Card 2
Front
Qualitative characteristics of useful financial information
Back
Relevance, Faithful representation, comparability, verifiability, timeliness, understandability
Card 3
Front
Materiality
Back
Card 4
Front
Prudence
Back
Card 5
Front
Accruals
Back
Related discussions on The Student Room
- easy lunch ideas »
- Room Available »
- TINY flaccid penis but normal erect »
- I don't know if I'll be able to get an A in my a-level »
- What could cause me to be so tired? »
- Training as CBT psychotherapist »
- A-level timetable »
- OCR A-level Latin Paper 2 (H443/02) - 5th June 2023 [Exam Chat] »
- I let a break up from a 3 day relationship ruin my life »
- Edexcel A Level Business Paper 3 (9BS0 03) - 14th June 2023 [Exam Chat] »
Similar Accounting resources:
2.0 / 5 based on 2 ratings
4.0 / 5 based on 2 ratings
4.0 / 5 based on 2 ratings
4.5 / 5 based on 2 ratings
4.5 / 5 based on 2 ratings
3.0 / 5 based on 1 rating
3.0 / 5 based on 1 rating
0.0 / 5
2.5 / 5 based on 3 ratings
Comments
No comments have yet been made