Grade 12 Accounting Cheat Sheet Vocabulary Flashcards

Comprehensive vocabulary flashcards covering South African CAPS Grade 12 Accounting concepts including company theory, financial statements, cash flow, analysis, inventory, manufacturing, fixed assets, VAT, and reconciliations.

Limited Liability

A major benefit of a company where the owners (shareholders) are not held liable for the debts and losses of the company.

Separate Legal Entity

The legal status of a company under the Companies Act No. 71 of 2008, meaning it has its own legal personality and can own assets, incur liabilities, and pay tax.

Prospectus

A document used by public companies to invite the public to buy shares.

Memorandum of Incorporation (MOI)

The document that sets out the rights, duties, and responsibilities of shareholders, directors, and others within and in relation to a company.

Executive Directors

Board members like the CEO who manage the day-to-day operations and running of the company.

Non-executive Directors

Industry professionals and advisors who do not work in the business daily but act as leaders and advisors on the board.

Business Entity Concept

The GAAP principle stating that the financial affairs of the business must be kept separate from the financial affairs of the owners.

Going Concern

An IFRS concept where financial statements are prepared on the basis that the business will continue to operate for the foreseeable future.

Materiality

An IFRS concept requiring that all significant or important items must be specifically shown in the financial statements.

No Offsetting

An IFRS concept prohibiting the subtraction of linked income/expenses or assets/liabilities to enter them as a single amount.

King Code

Governance codes in South Africa (current version King IV) that provide guidelines for effective corporate governance, emphasizing transparency and accountability.

Triple Bottom Line

Integrated reporting where a company reports on Financial results (Profit), Impact on environment (Planet), and Impact on community (People).

Internal Auditor

A permanent employee who works continually to identify risks and implement internal controls.

External Auditor

An independent contractor who expresses an opinion on the reliability of Financial Statements after the financial year-end.

Unqualified Audit Report

The best audit opinion, stating that the financial statements present fairly in all material aspects and the auditor cannot find fault.

Qualified Audit Report

An audit opinion identifying a concern relating to the fair presentation of the financial statements due to incomplete information or specific issues.

Disclaimer of Opinion

A situation where the auditor finds major errors or serious problems and refuses to sign off on the financial statements.

Ordinary Share Capital

The total capital raised by a company by selling shares to many part-owners called shareholders.

Share Buy-back

When a company repurchases shares from a shareholder, which decreases the number of issued shares.

Interim Dividends

Dividends usually declared and paid halfway through the financial year.

Final Dividends

Dividends recommended or declared at the end of the financial year, often recorded as 'Shareholders for dividends'.

Retained Income

Profits that the company has not paid out, kept as equity to fund future expansions or cover losses.

Statement of Comprehensive Income

An accounting document containing only income and expenses to calculate the final Net Profit for the year.

Statement of Financial Position

Formerly known as the balance sheet, it shows the value of assets, equity, and liabilities at the end of the year.

Liquidity

A company's ability to convert current assets into cash to meet short-term obligations and current liabilities.

Solvency

The ability of a company to meet long-term financial obligations, achieved when Total Assets are greater than Total Liabilities.

Gearing

A measure of the financial risk a company faces by comparing borrowed funds (debt) to the company's own funds (equity).

Net Asset Value (NAV)

The value of each share according to the financial statements of the company, calculated as $\frac{\text{Shareholders' Equity}}{\text{Number of Shares Issued}} \times 100$.

Perpetual Inventory System

A system where cost of sales is calculated on every sale transaction, allowing for accurate and up-to-date balances.

Periodic Inventory System

A system where accurate balances for Trading Stock are only determined by a physical stock count, typically used for low-value goods in bulk.

FIFO (First In, First Out)

An inventory valuation method assuming the oldest stock bought is the first sold, meaning closing stock is valued at the most recent purchase prices.

Weighted Average Method

An inventory valuation method that calculates the average price of one unit based on the total cost of opening stock and net purchases divided by the number of units.

Prime Cost

The sum of Direct Material cost and Direct Labour cost in a manufacturing entity.

Factory Overheads

All indirect manufacturing costs incurred in production that do not form part of the final product, such as factory rent or supervisor salaries.

Fixed Costs

Manufacturing costs that remain the same regardless of the level of production, such as administration costs.

Variable Costs

Manufacturing costs that change as the level of production changes, such as direct materials and direct labour.

Break-even Point

The number of units that must be produced and sold for a business to cover all costs and avoid a loss.

Work-in-progress

Products that are currently in the production process and are half-made or not yet completed.

Carrying Value

The current value of a fixed asset in the books, calculated as $\text{Cost Price} - \text{Accumulated Depreciation}$.

Depreciation

The value written off a fixed asset in the current year, representing the cost of using the asset.

Output VAT

The VAT that a business charges and receives when selling goods or services, which must be paid to SARS.

Input VAT

The VAT paid by a business on its purchases and operations, which can be claimed back from SARS.

Zero-rated Goods

Goods subject to 0% VAT, such as fresh fruit, vegetables, milk, and brown bread.

Exempted Goods

Services and goods that do not have VAT added, such as interest, public road transport, and educational services.

Bank Reconciliation Statement

A document used to record transactions the business has recorded that the bank has not yet processed, such as outstanding deposits or EFTs.

Creditors' Reconciliation

The process of comparing the Creditors' Ledger in the business's records with the Statement received from a supplier.

Debtors' Age Analysis

An internal control tool identifying how long debtors' debt has been outstanding to manage the risk of bad debts.

Cash Budget

A financial plan showing expected future cash receipts and payments to predict the bank balance.