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Definitions (Accounting Period:The period for which the financial…
Definitions
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Accruals: Costs that have not so far been taken into account at the end of a period because they have not yet been invoiced but are to be invoiced in arrears for example gas or electricity
Accrued expense:An expense that has been incurred and the benefit received during an accounting period which remains unpaid at the end of the accounting period
Acid test: A ratio that compares the current assets less stock against the current liabilities, also known as the quick ratio
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Bad debt: A debt that or is considered to be uncollectible and is therefore written off as a charge to the profit and loss account
Balance sheet: A statement of the financial position of an entity at a given date, disclosing the assets, liabilities and accumulated funds
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Books of prime entry: A first record of transactions, such as sales or purchase, from which details or totals, as appropriate, are transferred to the ledgers
Business entity concept: The principle that financial accounting information relates only to the activities of the business entity and not to the activities of its owner(s)
Capital employed: The total of the long-term debt and shareholders' funds that is employed in a company to conduct its operational expenses
Capital expenditure: Expenditure that is likely to provide a benefit to the organisation for more than one accounting period / financial year
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Collection of trade receivables:A ratio that measures how long a business takes to receive payment from its debtors
Consistency concept: The principle that there is uniformity of accounting treatment of like items within each accounting period and from one period to the next
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Cost of sales: The sum of variable cost of sales plus factory overhead attributable to the turnover. It may also be revered to as production cost of sales or cost of goods sold
Credit: An entry on the right-hand side of an account in the double-entry bookkeeping that dentures an income in the profit and loss account or a liability in the balance sheet
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Current liabilities: Persons or businesses to whom money is owed and falls due and payable within 12 months
Current ratio: A ratio that compares the current assets against the current liabilities. Also known as the working capital ratio
Debit: An entry on the left-hand side of an account in the double entry bookkeeping that denotes an expense in the profit and loss account or an asset in the balance sheet
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Depreciation: The measure of wearing out, consumption or other reduction in the useful economic life of a fixed asset
Double entry: A method of recording transactions in ledger accounts so that the monetary value of the debits and credits always balance each other
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Financial statements: A set of documents produced by a business to show financial performance and position of the business, including a trading profit and loss account and a balance sheet