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Finance by Mind Map: Finance
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Finance

This is just a demo map that you can delete right away, if you feel like it...

Balance sheets

The record of a company's value at a point in time

Assets

Liabilities

IT MUST BALANCE

Day books and journals

Sales day book / journal

Purchases day book / journal

Sales returns day book / returns in journal

Purchases returns day book / returns out journal

The journal (proper)

Cash book

Why monitor accounts?

Operate legally

Keep track of business accurately e.g. profit and loss

Identify where they are losing and gaining money from

Identify deliberate and accidental accounting

Track of creditors and debtors

Stakeholders want accurate reports

Prepare for cash flow forecasts and final accounts

Info for budgetting

Double entry

Used by ledgers - NOT BOOKS (except cash book)

Every financial action has two effects

Ledgers

Sales

Purchase

General

Cash book

Consequences

Fines for wrong information

Business losses track of itself

Legal implications

Wrong amount paid for tax

Lack of confidence

Creditors not paid

Poor management decisions

Depreciation

Reduction in value of a fixed asset

Shows "book value"

Value decreases due to

Straight line

Stakeholders interested in financial info (& why)

Creditors

Owners

Managers

Customers / pressure group

Government

Competitors

Banks and lenders

Shareholders

Investors

Profit and loss statement

a record of revenues and costs of the business over a period e.g. year

Three parts

measures amount of money a company makes or loses over a period

Trial balance

checking system

all debit should equal credit

if it doesn't balance there are errors

a trial balancing might still have a error

Errors

Commision

Omission

Principle

Compensating error

Original entry

Reversal

Accruals

When item has been used but not yet paid for

Not recorded

decrease profit a business declares

amounts owing added to PL expenses

current liabilitiy in BL

ADD ACCRUALS

Prepayments

Items paid for but not yet used

DO NOT affect profits but will next financial period

increase profit declared

added to current assets of BL

MINUS prepayments

Corrections

Most errors found at later date

When discovered, original accounts cannot be altered

Corrections are made using double entry system. The journal is used as there are no source documents ot prove transaction has occured