PDF Notes: QKS41 Term 3 (Handouts) [Print full class] (3)

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    What is the purpose of a statement of financial position?

    It shows the financial position of a business at a specific date.

    What does a trial balance indicate?

    It summarizes all ledger balances to check for errors.

    How does gross profit differ from net profit?

    Gross profit excludes operating expenses, while net profit includes them.

    What happens if accrued expenses are not adjusted?

    Expenses will be understated, affecting profit and liabilities.

    What is the effect of prepayments on financial statements?

    Prepayments lead to overstated expenses and understated assets.

    What is included in the income statement?

    It includes revenues and expenses to determine profit or loss.

    What does inventory represent in financial statements?

    It reflects the value of unsold goods at a specific date.

    What is the significance of trade payables?

    They represent amounts owed to suppliers for goods or services.

    How do drawings affect the capital account?

    Drawings reduce the owner's equity in the business.

    What is the role of bank reconciliation?

    It ensures that cash book records match bank statements.

    What does the term 'accrued income' mean?

    Income that has been earned but not yet received.

    What is the impact of unrecorded bank charges?

    They can lead to an inaccurate cash balance in the books.

    What does a capital account reflect?

    It shows the owner's investment in the business.

    What is the consequence of not adjusting for outstanding wages?

    Wages will be understated, affecting liabilities and expenses.

    What does the term 'drawings' refer to?

    Withdrawals made by the owner from the business for personal use.

    What is the purpose of preparing an income statement?

    To summarize revenues and expenses over a specific period.

    How does the valuation of inventory affect profit?

    Higher inventory values can lead to higher reported profits.

    What is the difference between current liabilities and long-term liabilities?

    Current liabilities are due within a year, while long-term are due later.

    What does a bank overdraft indicate?

    It shows that the account balance is negative, indicating borrowed funds.