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Accounting Concepts

Key topics for SS2 Accounting

Journal Entries

Practice recording transactions

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Accounting Quiz

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Question 1

Key Formulas

Essential accounting equations & ratios

Accounting Equation

Assets = Liabilities + Owner's Equity

The fundamental equation that underpins all accounting

Profit & Loss

Profit = Revenue - Expenses

Calculate net profit or loss for a period

Gross Profit Margin

GP% = (Gross Profit / Sales) × 100

Measures profitability before operating expenses

Stock Turnover

Stock Turnover = COGS / Average Stock

How many times stock is sold and replaced

Mark-up

Mark-up% = (Profit / Cost) × 100

Percentage added to cost to get selling price

Margin

Margin% = (Profit / Selling Price) × 100

Profit as a percentage of selling price

Current Ratio

Current Ratio = Current Assets / Current Liabilities

Measures ability to pay short-term debts

Quick Ratio

Quick Ratio = (Current Assets - Stock) / Current Liabilities

Stricter test of liquidity (acid test)

Capital

Capital = Assets - Liabilities

Owner's stake in the business