Acg11

Front 1

The Entity Concept

Back 1

the assumption that a business entity is separate and distinct from its owners and from other business entities.

Front 2

The Accounting Period Concept

Back 2

The assumption that the life of a business entity can be divided into arbitrary equal time intervals for reporting periods.

Front 3

The Cost/Historical Costs Principle

Back 3

Historical cost - assets are recorded at the amount of cash or equivalent paid or the fair value of the consideration given to acquire them at the time of their acquisition.

Liabilities are recorded at the amount of proceeds received in exchange for the obligation or for the amounts of cash expected to be paid to satisfy liablitiy in normal course of business.

The measurement basis most commonly adopted by entities in preparing reports is historical cost.

Front 4

The Matching principle

Back 4

The costs of inputs used up to produce outputs that are completed and sold are treated as expenses and subtracted from the proceeds from sales of those outputs

Front 5

The Profit Recognition Principle

Back 5

Profits should be recognised when the sales and any other revenues or gains relating to the relevant activity are "earned" and can be reliably measured.

Front 6

The conservatism (prudence) Approach

Back 6

Anticipate no profits, but expect all losses

Front 7

The going concern principle

Back 7

The assumption that, in the absence of evidency to the contrary, a business will continue in the future and use its assets in operations rather than sell them.

Front 8

Assets

Back 8

1. a resource controlled by the entity.
2. will provide future economic benefit
3. as a result of a past transaction or event.

Are future economic benefits controlled by the entity as a result of past transactions or events

Front 9

Liabilities

Back 9

1. a present obligation
2. to make a future economic sacrafice
3. as a result of a past transaction or event.

are the future sacrifices of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or events

Front 10

Equity

Back 10

The residual of assets once all liabilities have been met.

Equity=Assets - Liabilities

Front 11

Income

Back 11

1. increase in equity
2. results in an increase in assets or decrease in liabilities
3. other than contributions by the owner

are increases in economic benefits, in the form of inflows or enhancements of assets or decreases in liabilities, that result in increases in equity (other than owner contributions)

Front 12

Expenses

Back 12

1. a decrease in equity
2. results in a decrease in assets or increase in liabilities
3. other that a distribution to owners.

are decreases in economic benefits, in the form of outflows of delpetions of assets or increases in liabilites, that result in decreases in equity (other than distributions to owners)

Front 13

Financial report headings

Back 13

Income statement - for week/month/year ending

Changes in Equity: for week/month/year ending

Balance Sheet: as at ....

Trial Balance: as at ...

Front 14

Adjusting entries
(balance day adjustments)

Back 14

properly match income and expenses to the period in which they occur using deferrals and accruals

Front 15

Deferral
(prepayment)

Back 15

the cash transaction occurs first and the recognition of the income or expense comes later.

Example: income received in advance or prepaid expenses

Front 16

Accurals

Back 16

the recognition of the income or expense occurs first and the cash transaction comes later.

Example: accrued income or accrued expenses

Front 17

Perptual Inventory system

Back 17

involves a continous record of the physical quantites and const of inventory on hand, and physical quantities and cost of inventories sold.

There will be the use of Cost of Sales Account

Front 18

Periodic Inventory System

Back 18

a continuous record of the cost of inventory purchased is maintained. The total purchases are added to the cost of opening inventory to determine the cost of goods available for sale.
The cost of goods sold is then determined by deducting the cost of ending inventory from the cost of goods available for sale. Must have a physical stocktake.

There will be the use of the purchases account.

Front 19

Cash flows - Accruals

Back 19

income statement item + the opening balance sheet item - the closing balance sheet item

Front 20

Cash Flows - prepayments

Back 20

income statement item - opening balance sheet item + closing balance sheet item

Front 21

Cost-Volume-Profit analysis
CVP

Back 21

Selling price - variable cost - fied costs = profit

SP? - VC? - fixed cost = profit.

Breakeven point = $0 profit

Front 22

Contribution Margin

Back 22

Selling price - variable cost

Front 23

Contribution Margin Ration

Back 23

Contribution Margin / selling price

Front 24

Breakeven point in $

Back 24

breakeven point in units x sales price

Front 25

Units to acheive target profit

Back 25

sales rev - variable - fixed = Profit

Front 26

Breakeven sales revenue

Back 26

fixed cost + profit / cont. margin ratio

Front 27

weighted average

Back 27

total cont. margin x total sales mix (in units)

sales price per unit
less variable cost per unit
= contribution margin
x sales mix in units
= cont. margin

Front 28

Breakeven sales in total units

Back 28

fixed cost + profit/weighted average cont. margin