Accounting IGCSE 0452 General Revision

These flashcards cover essential definitions and concepts in accounting, particularly aimed at preparing for the IGCSE 0452 exam.

Assets

Items of value owned by a company.

Liabilities

Creditors’ claims on assets reflecting obligations to provide goods or services.

Carriage inwards

Shipping costs incurred when receiving goods from suppliers, recorded as cost of purchases.

Carriage outwards

Shipping costs incurred when sending goods to customers, recorded as other expenses.

Accounting

An information system for recording, classifying, and communicating the financial condition and performance of a business.

Bookkeeping

The process of recording daily transactions of a business in chronological order.

Error of principle

A transaction entered using the correct amount but in the wrong account class.

Error of commission

A transaction entered using the correct amount but placed in the wrong class.

Debit Note

A document sent to a supplier requesting an allowance for unsatisfactory goods.

Credit Note

A document sent to a customer indicating an allowance given for unsatisfactory goods.

Gross Profit

Profit achieved without considering operating expenses; calculated as Net Sales minus Cost of Sales.

Net Profit

Final profit after deducting all expenses from revenue.

Service Business

A business that provides services rather than goods.

Trading Business

A business that buys goods to resell.

Current Liabilities

Amounts payable within a period of 12 months from the balance sheet date.

Non-Current Liabilities

Amounts payable after a period of more than 12 months from the balance sheet date.

Trade Payables

The amount due to suppliers for inventory provided on credit.

Trade Receivables

Amounts owed by customers for goods sold on credit.

Capital Expenditure

Money spent on acquiring or improving non-current assets.

Revenue Expenditure

Money spent to run a business, recorded as expenses in the income statement.

Bad Debts

Amounts trade receivable cannot collect, considered an expense.

Provision for Doubtful Debts

An estimate of money the business may not collect from trade receivables.

Bank Statement

A document showing transactions of a business as recorded in the bank's records.

Bank Reconciliation Statement

A statement reconciling the bank statement balance with the cash book.

Margin

Gross profit expressed as a percentage of the selling price.

Mark-Up

Gross profit expressed as a percentage of the cost price.

Partner's Capital Account

Records the initial contributions and changes made by partners in the business.

Partner's Current Account

Records amounts owed by or to partners in any given year.

Prime Cost

The total of direct labor, direct material, and direct expenses involved in production.

Cost of Production

Total cost of manufacturing after adding factory overhead to prime cost.

Called Up Share Capital

Total value of shares requested from shareholders.

Paid Up Share Capital

Portion of called up capital that has been received from shareholders.

Preference Shares

Shares that provide fixed dividends without voting rights.

Ordinary Shares

Shares that can provide variable dividends and carry voting rights.

Capital Owned

Total amount and resources belonging to the owner of the business.

Capital Employed

Total assets less current liabilities.

Current Ratio

Measures current assets against current liabilities to show liquidity position.

Quick Ratio

Measures current assets excluding stock against current liabilities.

Liquidity Ratios

Assess a business's ability to pay short-term debts.

Profitability Ratios

Measure a firm's ability to generate profits with available resources.

Efficiency Ratios

Show how effectively a company is utilizing its assets.

Statement of Financial Position

Final account assessing a business's financial position at a specific date.

Income Statement

Account showing net profit or loss during an accounting period.

Trade Discount

A reduction given by a supplier for bulk purchases, not shown in accounts.

Cash Discount

Encouragement for early payment, reflected in accounts.

Prudence Principle

Do not anticipate profits but provide for all potential losses.

Going Concern

Assumes a business will continue to operate indefinitely.

Accrued Expense

Expenses incurred but not yet paid.

Prepaid Income

Revenue received before it has been earned.

Depreciation

Estimated loss in value of non-current assets over time.

Bad Debt Recovered

Amount previously written off as uncollectible that is now repaid.

Narrative in Journal Entry

Explanation reason for a journal entry, ensuring clarity.

Control Account

Account verifying accuracy of sales and purchase ledgers.

Accumulated Fund

Net surplus or deficit accumulated by a club or organization over time.

Goodwill

Intangible asset representing a firm's reputation.

Direct Expenses of Manufacturing

Costs directly linked to the production of goods.

Appropriation Account

Shows how profit for the year has been distributed.

Collection Period for Trade Receivables

Time taken to collect money owed by customers.

Rate of Turnover

Frequency of inventory sold and replaced during a time period.

Dividends

Payments to shareholders from a company's profits.

Authorized Share Capital

Maximum share capital a business is authorized to issue.

Issued Share Capital

Share capital that has been actually sold to shareholders.

Use of general ledger

• Correct errors

• Purchase on non current asset on credit

• Year end transfer

• Transaction not in other prime books

Why cash book is both a ledger and prime book

• It’s written up from business documents

• Part of double entry system acting as a ledger account for cash and bank