Week 4 Financial Accounting Principles

Flashcards covering key concepts, terminology, and definitions related to Financial Accounting principles as outlined in the Week 4 lecture notes.

Statement of Financial Position

A financial statement showing assets, liabilities, and capital of a business at a specific point in time.

Income Statement

A financial statement summarizing revenues and expenses to show net income or loss over a period.

Trial Balance

A list of all account balances in a double-entry bookkeeping system.

Liabilities

Obligations or debts a company owes to external parties.

Capital

Financial resources owners invest in the business.

Non-Current Assets

Long-term assets not expected to be converted into cash within one year.

Current Assets

Assets expected to be converted into cash or consumed within one year.

Current Liabilities

Obligations a company expects to settle within one year.

Non-Current Liabilities

Obligations due after one year.

Net Assets

Total assets minus total liabilities, representing the owners' residual interest.

Returns Outwards

Goods returned to suppliers, deducted from Cost of Sales.

Returns Inwards

Goods returned by customers, deducted from Sales revenue.

Carriage Inwards

Delivery charge on goods purchased, added to the cost of purchases.

Carriage Outwards

Delivery charge on goods sold, treated as an operating cost.

Prepayments

Expenses paid in advance for a future period, recorded as an asset.

Accruals

Expenses incurred but not yet paid, recorded as a liability.

Revenue

Income generated by a business from its normal operations, typically from selling goods or services.

Expenses

Costs incurred to generate revenue.

Drawings

Funds or assets withdrawn by the owner for personal use.

Depreciation

Systematic allocation of a tangible asset's cost over its useful life.

Working Capital

Current assets minus current liabilities, indicating short-term liquidity.

Bookkeeping

The systematic recording of financial transactions.

Ledger

A book or computer file where financial transactions are posted from a journal entry.

Journal

The book of original entry where daily financial transactions are first recorded.

Double-Entry Bookkeeping

An accounting system where every transaction affects at least two accounts with equal debits and credits.

Credit Note

A document issued by a seller to a buyer to reduce a previous invoice amount.

Debit Note

A document issued by a buyer to a seller to request credit for returned goods, or by a seller to increase the amount owed by a buyer.

Materiality Concept

An accounting principle stating an item is material if its omission or misstatement could influence users' economic decisions.

Consistency Concept

An accounting principle requiring the same accounting methods to be applied consistently from period to period.

Prudence Concept

An accounting principle requiring assets and income not to be overstated