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Accounting terms
General accounting terms
| Question | Answer |
|---|---|
| Mark up | Relationship between cost of sales and sales |
| Margin | Relationship between gross profit and sales |
| Accrual | Period end adjustment which increases the expense and goes as current liability on b/s |
| Prepayment | Period end adjustment which decreases the expense and goes as current asset on b/s |
| Depreciation | Reduction in cost of asset due to wearing out |
| Prudence | Concept of taking no profit and anticipating all losses |
| Matching | Concept of making period end adjustments so that income and expenses occur in the same period |
| Asset | Something the business owns - debit on statement of financial position |
| Liability | Something the business owes - credit on statement of financial position |
| Income | Money coming into the business - credit in income statement |
| Expense | Money paid out of the business - debit in income statement |
| Bad debt | Known amount of money that will not be paid to the business |
| Provision for doubtful debt | Guess/estimation of money that will not be received from debtors |
| Reducing balance | Method of depreciation where the expense for the year is calculated on the NBV brought forward |
| Net book value | Cost of asset minus accumulated depreciation |
| Accumulated depreciation | Depreciation that has been accrued over a period of time against the cost of an asset |
| Non-current asset | Asset which is expected to have use in the business of more than one year |
| Current asset | Asset which is expected to be used in the business within one year |
| Current liability | Amount of money which is expected to be paid by the business within one year |
| Drawings | Money taken out of the business by the owner |
| Share capital | Money invested in the company by shareholders |
| Inventory | Assets held by the business for resale |
| Goods returned inwards | Sales returns sent back by the customer |
| Goods returned outwards | Purchases returned by the business to the seller |
| Discount allowed | Reduction in the amount to be collected by the business from debtors - expense |
| Discount received | Reduction in the amount owing to creditors - income |
| Opening capital | Opening assets less opening liabilities |
| Closing capital | Closing assets less closing liabilities |
| Sole trader | One owner/investor in the business. But may still employ others |
| Limited company | Business financed by share capital from shareholders. |
| Limited liability | Investors can only lose the amount they have invested and their other assets are safe in case of debt. |
Created by:
amandacavanagh
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