Category: O level Accounts

This topic is basically about learning the definitions and the formulas of the respective ratios. These ratios and the financial statements you learnt about in the previous chapters can be used to compare 2 or more businesses , let’s say, to decide which one to buy when you’re about to buy a business and are given couple of choices.

Goodwill is the money a buyer pays more than your net assets when he buys your successfully running business in order to benefit from your customer base which already is well established.

A partnership is basically a long term commitment to work together in business. Partners share one set of accounting records and share the profit and loss.

Manufacturing account is an account in which the production cost of an item is recorded.

It is difficult to define single entry system because none exists as such. Single entry system is basically a defective double entry system. Any system that falls short of a proper double entry system is termed as single entry system.

Ratio is a comparison between two different items, First is MARK UP and Second is MARGIN.

There are errors which do effect the agreement of trial balance. First, Trial balance is not equal and is wrong because of three accounting errors which do effect the agreement of trial balance. Second, The trial balance is equal and wrong because of six accounting errors which do not effect the agreement of trial balance and third, Trial balance is equal and correct.

Control account is an account which checks the arithmetical accuracy of a ledger. Control accounts enable the errors to be traced down to the ledgers which do not balance and so there wouldn't be any need to check all the books to find a minute error.