Fundamentals of Financial Accounting

430

Note. Key terms and their page references are given in bold.

Accounting concepts, 322 Business equation, 291
Business transactions, 48, 58
Accounting controls, 335
Accounting convention, 108 Called up share capital, 258, 259
Accounting for sales tax, 216
Accounting information, 5 Capital, 10, 17, 28, 109
Accounting Standards Board (ASB), 323 Capital employed, 372
Accounting Standards Committee (IASC), 324 Capital expenditure, 39
Accounting standards, 323 Capital income, 40
Accruals and prepayments, 278, 289 Capital transactions, 40
Accruals, 116, 122 Carriage, 167
Accruals concept, 9, 11, 102 Carriage inwards, 167
Accumulated depreciation, 130 Carriage outwards, 167
Accumulated fund, 307 Cash and cash equivalents, 351
Acid test ratio, 383 Cash book, 49, 52, 58, 77, 278
Administration expenses, 37 Cash cycle, 375
Administrative controls, 335 Cash discount, 196
Advantages of cash flow accounting, 364 Cash discounts, 196, 197
Advantages of gearing, 385 Cash equivalents, 351
Allowance for receivables, 157 Cash flows, 351
Asset, 8, 15, 28, 109 Cash, 31, 351
Asset turnover, 368, 371 Charities, 298
Audit, 328 Chartered Association of Certified Accountants (ACCA),
Audit report, 328
Audit trail, 339, 344 323
Audited, 322 Chartered Institute of Management Accountants
Auditing Practices Board, 332
Auditing Practices Committee, 332 (CIMA), 323
Auditing standards, 332 Chartered Institute of Public Finance and Accountancy
Authorised share capital, 258
Average cost, 177, 178 (CIPFA), 323
Clubs, 298
Bad debts, 154, 216, 280 Coding, 55
Coding data, 55
Bank charges, 186 Companies Act 2006, 129, 322, 328
Bank overdraft, 29 Company law, 322, 325
Bank reconciliation, 186, 190, 193 Compensating errors, 88, 232, 233, 240
Bank statements, 54 Consistency concept, 105
Bar trading account, 300, 303, 310 Consultative Committee of Accountancy Bodies, 323
Benefits of cash flow information, 351 Control account, 199
Block codes, 56 Controls, 332
Bonus issues, 264 Corporation tax, 273
Books of prime entry, 49, 58, 71 Correction of errors, 72, 234
Break-up value, 102 Cost, 283
Business, 14 Costs and values, 108
Business as a separate entity, 15 Credit, 63, 87
Credit note, 48
Credit sales and debtors, 278

Index 431

Cumulative weighted average costs, 180 Expenditure, 8, 11
Cumulative weighted average pricing method, 178 External audit, 328, 329
Current assets, 30, 31, 36, 374 External auditors, 330
Current cost accounting, 110
Current liabilities, 29, 374 Faceted codes, 56
Current ratio, 382
Fall in asset, 140
Day book analysis, 72 FIFO (first in, first out), 177
Final dividend, 259
Debit, 63, 87 Finance expenses, 37
Debt capital, 386 Financial accountants, 7
Debt collection period, 378 Financial accounting, 7
Debtor, 21 Financial analysts, 6
Deductions, 224 Financial statements, 8, 328
Depreciable amount, 129 Financing activities, 351, 354
Depreciation, 128, 263 Format of a ledger account, 62
Depreciation charge, 130 Fraud, 340
Depreciation method, 137
Detect controls, 335 Gearing, 384
Detection and prevention of fraud, 340
Direct factory costs, 314, 319 General ledger, 62
Direct method, 355 Ghost employees, 340
Director, 329, 330, 344 Going concern, 102, 103
Disadvantage of gearing, 386 Going concern concept, 102
Disclosure requirements of IAS 16, 134 Goods destroyed, 283
Discount, 196 Goods received notes, 48
Disposal of fixed, 142 Goods written off, 170
Disposal of non-current assets, 144 Gross pay, 224
Dividends, 37, 259 Gross profit, 36
Double entry bookkeeping, 63 Gross profit margin, 282
Double entry, 87
Drawings, 18, 278, 290 Hierarchical codes, 56
Duality, 63
Historical cost, 108, 111
EC directives, 322 Historical cost accounting, 110
HM Revenue and Customs, 220
Employer's National Insurance, 225
Entity concept, 15, 106 IAS 1 Disclosure of accounting policies, 356
Equity, 261, 275
Error of commission, 232, 233, 236, 240 IAS 7 Cash flow statements, 350
Error of omission, 232, 236, 240 Impersonal accounts, 77
Error of principle, 232, 240 Imprest system, 54, 58
Error of transposition, 232 Income, 8, 11
Errors of transposition, 232, 240 Income and expenditure account, 9, 299, 300, 305,
Essential elements of internal audit, 330
European Community (EC), 322 310
Evaluation of internal controls, 338 Income statement, 36, 37, 216
Excluding inventories, 383 Incomplete records, 278, 292
Exempt activities, 215 Indirect factory, 314, 319
Indirect method, 355
432 Index Indirect versus direct, 355

Input and output sales tax, 214 Market value, 258
Input sales tax, 214, 215 Mark-up, 282
Institute of Chartered Accountants in England and Material, 105
Membership subscriptions, 300, 310
Wales (ICAEW), 323 Methods of depreciation, 131
Institute of Chartered Accountants in Ireland (ICAI), 323 Modified historical cost accounts, 110
Institute of Chartered Accountants of Scotland (ICAS), Money measurement concept, 106

323 National Insurance contributions (NIC) control
Intangible assets, 17
Intangible non-current asset, 30 account, 226
Interest, 267 Net book value, 128, 129
Interim dividend, 259 Net current assets, 36
internal audit, 328, 329 Net pay, 224
Internal auditing, 329 Net profit, 36
Internal auditor, 330, 342 Net realisable value, 169
Internal check, 201 Netting off expenditure against income for like items,
Internal control, 330, 344
Internal control system, 334 299, 310
International accounting standards, 322, 324, 325 Nominal ledger, 62
Inventories, 172 Nominal value, 258
Inventory valuations, 181 Non-current asset, 128, 130
Inventorytaking, 175 Non-current assets, 31
Investing activities, 351, 354 Non-current assets register, 148
Investment, 31 Non-current asset disposals, 142
Invoice, 48 Non-current liabilities, 29
Irrecoverable sales tax, 215 Non-deductible inputs, 215
Issued share capital, 258 Non-registered persons, 215
Items in company accounts formats, 386 Non-statutory, 329
Non-statutory regulation, 323
Journal, 49, 58, 71 Non-statutory reserves, 261
Not for profit organisations, 9
Journal entries, 234 NRV, 176

Ledger accounts, 63 Objectives of internal audit, 330

Ledger accounts of limited companies, 274 Omission of a transaction, 88
Liabilities, 8, 16, 28, 29, 109 Opening statement of financial position, 278
Life membership, 299, 300, 303, 310 Operating activities, 351, 353
LIFO (last in, first out), 177 Operating cycle, 375
Limited companies, 322 Ordinary shares, 259, 275
Limited liability, 15, 258 Output sales tax, 214, 215
Liquidity, 380
Loan stock, 267 Paid up share capital, 258
Long-term funds, 381
Long-term liabilities, 29 Payable, 21, 66, 204
Payable control account, 200
Management accounting, 7 Payables' turnover period, 377
Pay-as-you-earn, 224
Management fraud, 343 PAYE, 224, 225
Managers of the company, 5 PAYE control account, 226
Manufacturing account, 314, 319
Index 433

Personal accounts, 77, 82 Revaluation reserve, 263, 275
Petty cash book, 49, 54, 58 Revenue expenditure, 39
Physical capital, 109 Revenue HM & Customs, 214
Preference shares, 259, 275 Revenue income, 40
Prepayments, 117, 118 Revenue reserve, 261
Prepayments, 32, 120, 123 Rights issues, 265
Prevent controls, 335
Prime cost, 314, 319 Sales, 48
Private companies, 258
Production overheads, 314, 319 Sales and purchase ledgers, 77
Profit, 14, 24 Sales day book, 49, 58, 77, 78
Profit and loss appropriation statement, 268 Sales ledger, 77, 82
Profit margin, 285, 368 Sales returns day book, 49, 50, 58
Profit or loss on the disposal of a non-current asset, Sales tax, 214
Sales tax on motor cars, 215
143 Segregation of duties, 333
Providers of finance, 6 Selling and distribution expenses, 37
Provision, 263 Sequence codes, 55
Prudence, 103 Settlement discount, 196, 197
Public companies, 258 Share capital, 258, 275
Public sector organisations, 14 Share premium account, 262, 275
Published accounts, 322 Shareholders' funds, 261, 275
Purchase, 48 Shareholders of the company, 5
Purchase day book, 49, 50, 58 Shares, 258, 275
Purchase ledger, 78, 82, 201 Short-term investments, 32
Purchase returns day book, 51 Significant digit codes, 56
Purchases and trade creditors, 278 Source documents, 48, 58
Purchases day book, 50 Standard cost, 177
Purchases returns day book, 49, 58 Statement of affairs, 278
Purchases, stocks and the cost of sales, 278 Statement of affairs, 278
Statement of cash flows, 350
Quick ratio, 383 Statement of financial position, 11, 91, 157, 201
Statement of changes in equity, 268
Ratio analysis, 368 Statutory reserves, 261
Stewardship, 5, 328
Realised, 104 Stock destroyed, 284
Receipts and payments account, 298, 310 Stock Exchange, 324
Receivables, 21, 31, 66, 201 Stocks, 31, 166
Receivables control account, 200 Stolen goods, 283
Receivables ledger, 205 Stolen goods or goods destroyed, 278
Receivables' turnover period, 377 Straight line method, 131
Recognised, 104 Subscriptions, 301
Reducing balance method, 132 Substance over form, 106
Regulatory framework, 322 Suspense account, 235, 237
Replacement cost, 109, 177 System documentation, 338
Reserves, 261, 263, 275
Return, 372
Return on capital employed (ROCE), 369
Revaluation, 138

434 Index

Tangible asset, 17 Uncleared lodgements, 187

Tangible non-current asset, 30 Unpresented cheques, 187, 188
Taxation, 273 Useful economic life, 134
Teeming and lading, 341 Users, 5
Temporary account, 235
Time differences, 186 Valuing inventories, 176
Trade discount, 196
Trade discount, 196 Voluntary deductions, 226
Trade receivables, 32
Transposition error, 208, 236 Wages and salaries, 200, 226
Trial balance, 86, 97, 201
True and fair, 328, 344 Wages control account, 226
True and fair view, 322, 323 Working, 380
Turnover periods, 377, 379 Working capital, 36, 41, 374, 379, 381, 389
Two column cash book, 286 Working capital ratio, 382
Types of error, 232 Wrong account, 88

Index 435

436 Index

Notes

Notes

Notes

Notes

Notes

Notes

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