MC

If credit sales for the year are $120,000 and the accounts receivable balance has increased by $10,500 over the year how much cash was received from accounts receivable during the year?

$109,500 (120 000-10500)

Accounting Entities: Company properties (4)

- Limited Liability - Owners (Shareholders) are separate to the company - are expensive to start up/ run and wind down -Greater access to funding - Access to significant capital - Seperation of ownership and management

Accounting Entities: Sole trader properties

- Unlimited liability - Simple/ inexpensive to set up/operate/ windup - No sharing of responsibility or profits -Single owner -Limited capital requirements - combined ownership and management -Taxation advantages

Accounting Entities: Partnership properties (3)

-Unlimited liability -Limited Life -Shared responsibility/profits -Access to additional capital -Flexible management

6) A firm has total assets of $800,000 and total liabilities of $300,000. Earnings before interest and taxes are $100,000. Interest is $21,000 and taxes are $34,000. The return on shareholders' funds is:

9.0%. 100 000 (21,000+340000) / (800000-500 000) x100

Statement of financial position formula

Assets= Liabilities +Owners Equity

5) A firm has total assets of $800,000 and total liabilities of $200,000. If profit after tax and interest is $120,000, the return on shareholders' funds is:

B) 20%. 120,000/(800 000-200 000) x100

What is contribution margin

Balance of sales revenue per unit after variable costs have been deducted Contributes to fixed costs and then profit CM per unit = sales per unit - variable costs per unit

OE is

Claim of owner(s) against the business Residual interest in the assets of entity after deducting liabilities

What is an expense

Expense Decrease in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those related to distributions to equity participants'. The difference between this and expenditure being the part about decreases in equity.

What is the break even formula

Fixed costs (Sales revenue per unit - Variable cost per unit)

What are fixed costs

Fixed: stay the same when the volume of activity changes E.g. rent, insurance, supervisor salaries

Another name for a profit/loss sheet (2)

Income statement Statement of financial performance

What is income

Is the comprehensive term used for both revenue and gain

Formula for income statement/ profit

Revenue- Expenses = profit

Name the three entity structures

Sole Parntership Company

Another name for Balance sheet

Statement of financial position

General info

The income statement and balance sheet are accrual based and the cash flow statement is cash based.

the relationship between the income statement and the balance sheet is:

The income statement explains the change in owners' equity that arises from operating activities

What is revenue

This is that component of income that related to the specific trading or operating of the entity. Eg. Sales rent, fees, commission, fares, interest, royalties, dividends, donations. It is a gross measure from which expenses will be deducted.

What is the break even point

Total costs at zero activity level = fixed costs Variable costs increase as activity increases

What are variable costs

Variable: vary in accordance with the volume of activity E.g. materials, wages of factory workers

Liabilities are

You have a future obligation that you have to settle eg. Paying someone Recognition criteria: Probability of occurrence - obligation arises Past event or transaction Reliability of measurement Outflow of resources

A budget is best defined as:

a financial plan for a future period of time.

Assets are

anything you have control over, don't need to have full ownership

) 'How companies manage the business process to produce an overall positive impact on society', is a definition of:

corporate social responsibility.

The cash flow statement allows management to assess:

efficiency in managing cash flows.

The asset turnover period ratio:

indicates how efficiently the assets of the firm are being employed to generate sales.

what is Accrual accounting:

it recognises expenses when they have been incurred (economic benefits used up) regardless of whether the cash has or hasn't been paid.

Working capital is a measure of a firm's:

liquidity. - is the business liquid enough to continue operating?

2) Which of the following groups are users of financial information?

owners , managers , lenders

Aspects of corporate social responsibility are: (3)

pollution. health and safety. impact on employment and job creation.

In evaluating the business perspective under the balanced scorecard approach, possible measures that could be employed are: (3)

production days lost. percentage of systems automated. percentage of production completed which meets the set standards.

The most important function of an accounting system is to:

provide information for decision-making. (for internal and external purposes)

What is proift

represents the positive net figure after deducting from income the expenses for the period.

The ratio which is considered to be the best measure of overall profitability when judging the performance of internal management is:

return on total assets.

income statement formula

sales - cost of sales = gross profit - expenses = net profit

The total impact of business actions on society at large is known as:

social responsibility.

common features of most cash budgets are (2)

the budget period is broken into months. a columnar format.

a balance sheet shows:

the financial position at the end of the period.

Items which comprise inventory are: (3)

work-in-process.  finished goods. raw materials.