Accounting Principles and Transactions Flashcards

This set covers core accounting concepts, financial statement transaction analysis, GST calculations, and NZ IAS 2 inventory standards based on the provided mock exam and lecture transcript.

Accounting conservatism

The accounting concept or principle based on the claim 'not to estimate profits but to estimate all losses'.

Bad Debt Counter Entry

The account recorded as the counter entry for a Bad Debt transaction, which is the Allowance for Doubtful Debt.

Matching principle (Depreciation)

The principle that explains why accountants depreciate non-current assets (e.g., equipment) by matching the resource cost to the revenue generated.

NZ IAS 2 Inventory Costing Methods

The accounting standard that permits the use of FIFO, Weighted average cost, and Specific identification, but specifically prohibits LIFO.

Capital expenditure

An expenditure that results in the creation of an asset, such as inventory costs which accumulate as an asset and are discharged as COGS only when a sale occurs.

GST Consumption Responsibility

The economic entity that ultimately bears the cost of the Goods and Services Tax (GST) is the consumer of the goods.

GST Content Factor (20% Rate)

The factor used to find the GST content within a total price when the tax rate is $20\%$; calculated as Price $\times \frac{1}{6}$.

Normal Debit (DR) Balances

The categories of accounts that normally maintain debit balances, specifically Assets and Expenses.

Matryoshka approach (Partitioning)

The partition approach to the structure of the Balance Sheet where the Owners' Equity T-account can be opened to reveal subaccounts such as Drawings.

Net Loss Closing Entry

The journal entry required to close the Net Income account in the event of a net loss: DR Retained Earnings and CR Net Income.

Inventory Cost Exclusions

Costs that are not added to inventory value, such as airline freight incurred when shipping goods overseas to customers.

COGS (Calculated from Turnover)

The formula used to find Cost of Goods Sold when given inventory data: $\text{Average Inventory} \times \text{Inventory turnover}$. For example, $11,310 \times 17.4 = 196,794$.

Sole Trader Profit Calculation

The calculation to determine profit: $\text{Ending Equity} - (\text{Beginning Equity} - \text{Drawings})$. For example, $185,000 - (100,000 - 15,000) = 100,000$.

Sales Return Journal Entry (New Zealand)

The entry required to record a faulty product return of $115$: DR sales return $100$, DR GST-clearing $15$, and CR debtors $115$.

Credit Sale Revenue Entry (New Zealand)

The first step in recording a credit sale (e.g., $2,300$): CR sales $2,000$, CR GST-clearing $300$, and DR debtors for $2,300$.