{"appState":{"pageLoadApiCallsStatus":true},"authorState":{"author":{"headers":{"timestamp":"2024-11-22T08:49:07+00:00"},"authorId":8972,"data":{"name":"Jane Kelly","slug":"jane-e-kelly","description":"Jane Kelly is a chartered management accountant, bookkeeping teacher, and business author.","photo":{"src":null,"width":0,"height":0}}},"authorLoadedStatus":"success"},"listState":{"list":{"count":2,"total":2,"items":[{"headers":{"creationTime":"2016-03-27T16:47:26+00:00","modifiedTime":"2023-07-06T13:25:46+00:00","timestamp":"2023-07-06T15:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226}],"title":"Bookkeeping & Accounting All-in-One For Dummies Cheat Sheet (UK Edition)","strippedTitle":"bookkeeping & accounting all-in-one for dummies cheat sheet (uk edition)","slug":"bookkeeping-accounting-all-in-one-for-dummies-cheat-sheet-uk-edition","canonicalUrl":"","seo":{"metaDescription":"Accounting can be overwhelming at times. This cheat sheet gives you some useful checklists, ratios and rules that you can use both in bookkeeping and accounting","noIndex":0,"noFollow":0},"content":"Accounting can be overwhelming at times. This cheat sheet gives you some useful checklists, ratios and rules that you can use both in bookkeeping and accounting roles. Keep them to hand.","description":"Accounting can be overwhelming at times. This cheat sheet gives you some useful checklists, ratios and rules that you can use both in bookkeeping and accounting roles. 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They help to keep you on track for the day-to-day and month-to-month tasks that you need to carry out. Here is a list of tasks which you can adapt to create your own checklist.</p>\n<ul>\n<li>Enter sales invoices.</li>\n<li>Enter purchase invoices.</li>\n<li>Enter cheque payments.</li>\n<li>Enter bank receipts.</li>\n<li>Enter petty cash receipts.</li>\n<li>Reconcile bank accounts.</li>\n<li>Reconcile credit card accounts.</li>\n<li>Enter prepayments and accruals journals.</li>\n<li>Enter depreciation journals.</li>\n<li>Enter payroll journals (if required).</li>\n<li>Enter stock journals (if required).</li>\n<li>Run VAT return (if required).</li>\n<li>Run aged debtor and aged creditor reports.</li>\n<li>Run Profit and Loss statement.</li>\n<li>Run Balance Sheet.</li>\n<li>Check all reports for accuracy.</li>\n</ul>\n"},{"title":"Following the Golden Rules of Bookkeeping","thumb":null,"image":null,"content":"<p>Some people find double-entry bookkeeping a bit tricky to start with, but stick to these simple golden rules and you’ll never be stuck when you need to create a journal.</p>\n<ul>\n<li>To increase an asset, debit the asset account.</li>\n<li>To decrease an asset, credit the asset account.</li>\n<li>To increase a liability, credit the liability account.</li>\n<li>To decrease a liability, debit the liability account.</li>\n<li>To record an expense, debit the expense account.</li>\n<li>To reduce an expense, credit the expense account.</li>\n<li>To record income, credit the income account.</li>\n<li>To reduce income, debit the income account.</li>\n</ul>\n<p class=\"Remember\">Debit on the left, credit on the right.</p>\n"},{"title":"Remembering Important Ratios for Bookkeeping","thumb":null,"image":null,"content":"<p>For bookkeeping purposes, there may come a time when you need to see how a company is doing. If you need to check the financial health of a company, you can analyse the accounts by using some or all of the following ratios.</p>\n<ul>\n<li><b>Net profit ratio:</b> This indicates how much profit was earned for every £100 of sales revenue. The equation is as follows:\n<ul>\n<li>Net profit ÷ Sales revenue = Net profit ratio</li>\n</ul>\n<p>For example, a business earns £1.9 million net profit and has sales revenue of £52 million. The net profit ratio is 1.9 million divided by 52 million, which is £3.65 net profit for each £100 net profit.</li>\n<li><b>Return on equity:</b> Tells you how much profit a business earned in comparison to the book value of the shareholder’s equity. Here’s the maths:\n<ul>\n<li>Net profit ÷ Owners’ equity = Return on equity</li>\n</ul>\n<p>If the net profit is £1.9 million and the owners’ equity is £15.9 million then the return on equity is 0.119 (£1.9 million ÷ £15.9 million), or 11.9 per cent expressed as a percentage.</li>\n<li><b>Current ratio:</b> This ratio is a rough indicator as to whether the business has enough cash in hand (including the cash to be converted from stock and debtors) to pay off the liabilities within the next year. Here’s the equation:\n<ul>\n<li>Current assets ÷ Current liabilities = Current ratio</li>\n</ul>\n<p>Businesses are expected to maintain a ratio of 2:1, meaning they have twice as many assets as liabilities. As an example, if the business has £17.2 million in current assets and £7.9 million in current liabilities, the ratio would be £17.2 million divided by £7.9 million, which equals 2.2. The business wouldn’t need to worry because the financial position is fine.</li>\n</ul>\n"},{"title":"Classifying Costs within a Business for Bookkeeping","thumb":null,"image":null,"content":"<p>Accountants must be aware of the different types of costs. Many different cost types exist within businesses, particularly manufacturing businesses. Following, you’ll find a selection of costs that an accountant might look at and analyse, as part of their role.</p>\n<ul>\n<li><b>Fixed cost:</b> A cost that remains the same over a specified period, regardless of the level of production output; for example, rent.</li>\n<li><b>Variable cost:</b> A cost that varies depending on the level of sales or production output. For example, if you increase the number of books sold, the cost of paper and ink increases.</li>\n<li><b>Direct cost:</b> A cost that you can clearly attribute to either a product or service. For example, a direct cost in the book publishing industry is paper.</li>\n<li><b>Indirect cost:</b> A cost you can’t specifically attribute to a product or service. For example, in the book publishing industry the cost of heating the building where the books are produced is an indirect cost of producing the books. It’s a cost of doing business, but you can’t specifically allocate it to a product.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2023-07-03T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207557},{"headers":{"creationTime":"2016-03-27T16:46:41+00:00","modifiedTime":"2023-04-17T14:30:14+00:00","timestamp":"2023-04-17T15:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"Bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"},"slug":"bookkeeping","categoryId":34228}],"title":"Bookkeeping For Dummies Cheat Sheet (UK Edition)","strippedTitle":"bookkeeping for dummies cheat sheet (uk edition)","slug":"bookkeeping-for-dummies-cheat-sheet-uk-edition","canonicalUrl":"","seo":{"metaDescription":"There are several steps to understanding bookkeeping and maintaining a good record of your business’s finances throughout the year. It’s advantageous to get you","noIndex":0,"noFollow":0},"content":"There are several steps to understanding bookkeeping and maintaining a good record of your business’s finances throughout the year. It’s advantageous to get your head around the trickier bits of keeping the books and to know the process in order to better check and control those incomings and outgoings.","description":"There are several steps to understanding bookkeeping and maintaining a good record of your business’s finances throughout the year. It’s advantageous to get your head around the trickier bits of keeping the books and to know the process in order to better check and control those incomings and outgoings.","blurb":"","authors":[{"authorId":8972,"name":"Jane Kelly","slug":"jane-e-kelly","description":"Jane Kelly is a chartered management accountant, bookkeeping teacher, and business author.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8972"}},{"authorId":8973,"name":"Paul Barrow","slug":"paul-barrow","description":" <p><b>Jane Kelly,</b> a Chartered Management Accountant and author of <i>Bookkeeping & Accounting All-In-One For Dummies,</i> teaches bookkeeping courses for small businesses. <b>Paul Barrow</b> is a Chartered Accountant with more than 20 years' consulting, training and writing experience. <b>Lita Epstein</b> designs and teaches online investing, finance and tax courses. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8973"}},{"authorId":8974,"name":"Lita Epstein","slug":"lita-epstein","description":" <p><b>Lita Epstein, MBA,</b> is the author of more than 35 books, including <i>Bookkeeping For Dummies</i> and <i>Reading Financial Reports For Dummies</i>.</p> <p><b>Grayson D. Roze</b> has worked in the financial services industry for StockCharts.com since 2012. He now serves as a business manager at the company. He is the author of <i>Tensile Trading: The 10 Essential Stages of Stock Market Mastery</i>.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8974"}}],"primaryCategoryTaxonomy":{"categoryId":34228,"title":"Bookkeeping","slug":"bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":[{"articleId":172026,"title":"Repurposing Items for Beautiful Holiday Decorating","slug":"decorating-for-the-holidays-with-what-you-already-have","categoryList":["home-auto-hobbies","crafts","gifts-holidays"],"_links":{"self":"/articles/172026"}},{"articleId":192609,"title":"How to Pray the Rosary: A Comprehensive Guide","slug":"how-to-pray-the-rosary","categoryList":["body-mind-spirit","religion-spirituality","christianity","catholicism"],"_links":{"self":"/articles/192609"}},{"articleId":193770,"title":"How to Play Rummy: All You Need to Know","slug":"rummy-understanding-the-rules-and-starting-a-game","categoryList":["home-auto-hobbies","games","card-games","general-card-games"],"_links":{"self":"/articles/193770"}},{"articleId":153792,"title":"Format Numbers in Thousands and Millions in Excel Reports","slug":"format-numbers-in-thousands-and-millions-in-excel-reports","categoryList":["technology","software","microsoft-products","excel"],"_links":{"self":"/articles/153792"}},{"articleId":147241,"title":"How to Use the Z-Table","slug":"how-to-use-the-z-table","categoryList":["academics-the-arts","math","statistics"],"_links":{"self":"/articles/147241"}}],"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275290,"title":"Break-Even Point Formula for Businesses","slug":"break-even-point-formula-for-businesses","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275290"}},{"articleId":265567,"title":"Accounting and Financial Reporting Standards","slug":"accounting-and-financial-reporting-standards","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265567"}},{"articleId":265558,"title":"Internal Profit Reporting","slug":"internal-profit-reporting","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265558"}},{"articleId":209083,"title":"Nonprofit Bookkeeping & Accounting For Dummies Cheat Sheet","slug":"nonprofit-bookkeeping-accounting-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/209083"}},{"articleId":208436,"title":"Bookkeeping For Dummies Cheat Sheet","slug":"bookkeeping-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208436"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":298353,"slug":"bookkeeping-for-dummies-4th-uk-edition","isbn":" 9781119189138","categoryList":["business-careers-money","business","accounting","bookkeeping"],"amazon":{"default":"https://www.amazon.com/gp/product/1119189136/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119189136/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119189136-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119189136/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119189136/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/bookkeeping-for-dummies-4th-uk-edition-cover-9781119189138-203x255.jpg","width":203,"height":255},"title":"Bookkeeping For Dummies, 4th UK Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b data-author-id=\"35157\">Jane Kelly</b>, ACMA is a Chartered Management Accountant and Sage trainer. She writes the Sage Made Simple blog, which offers support for businesses using Sage accounting packages.</p> <p><b>Jane Kelly,</b> a Chartered Management Accountant and author of <i>Bookkeeping & Accounting All-In-One For Dummies,</i> teaches bookkeeping courses for small businesses. <b><b data-author-id=\"8973\">Paul Barrow</b></b> is a Chartered Accountant with more than 20 years' consulting, training and writing experience. <b>Lita Epstein</b> designs and teaches online investing, finance and tax courses. <p><b><b data-author-id=\"8974\">Lita Epstein</b>, MBA,</b> is the author of more than 35 books, including <i>Bookkeeping For Dummies</i> and <i>Reading Financial Reports For Dummies</i>.</p> <p><b>Grayson D. Roze</b> has worked in the financial services industry for StockCharts.com since 2012. He now serves as a business manager at the company. He is the author of <i>Tensile Trading: The 10 Essential Stages of Stock Market Mastery</i>.</p>","authors":[{"authorId":35157,"name":"Jane Kelly","slug":"jane-kelly","description":" <p>Jane Kelly, ACMA is a Chartered Management Accountant and Sage trainer. She writes the Sage Made Simple blog, which offers support for businesses using Sage accounting packages.</p> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/35157"}},{"authorId":8973,"name":"Paul Barrow","slug":"paul-barrow","description":" <p><b>Jane Kelly,</b> a Chartered Management Accountant and author of <i>Bookkeeping & Accounting All-In-One For Dummies,</i> teaches bookkeeping courses for small businesses. <b>Paul Barrow</b> is a Chartered Accountant with more than 20 years' consulting, training and writing experience. <b>Lita Epstein</b> designs and teaches online investing, finance and tax courses. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8973"}},{"authorId":8974,"name":"Lita Epstein","slug":"lita-epstein","description":" <p><b>Lita Epstein, MBA,</b> is the author of more than 35 books, including <i>Bookkeeping For Dummies</i> and <i>Reading Financial Reports For Dummies</i>.</p> <p><b>Grayson D. Roze</b> has worked in the financial services industry for StockCharts.com since 2012. He now serves as a business manager at the company. He is the author of <i>Tensile Trading: The 10 Essential Stages of Stock Market Mastery</i>.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8974"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{"key":"cat","values":["business-careers-money","business","accounting","bookkeeping"]},{"key":"isbn","values":[" 9781119189138"]}]\" id=\"du-slot-643d5f2ed9425\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{"key":"cat","values":["business-careers-money","business","accounting","bookkeeping"]},{"key":"isbn","values":[" 9781119189138"]}]\" id=\"du-slot-643d5f2eda4e8\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":138457,"title":"The Flow of Credits and Debits in Double-Entry Bookkeeping","slug":"the-flow-of-credits-and-debits-in-double-entry-bookkeeping","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138457"}},{"articleId":138452,"title":"Building Blocks of a Bookkeeping System","slug":"building-blocks-of-a-bookkeeping-system","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138452"}},{"articleId":138455,"title":"Key Steps to Keeping the Books","slug":"key-steps-to-keeping-the-books","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138455"}},{"articleId":138453,"title":"Tips for Controlling Your Business Cash","slug":"tips-for-controlling-your-business-cash","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138453"}},{"articleId":138456,"title":"Getting to Grips with Bookkeeping: The Current Ratio","slug":"getting-to-grips-with-bookkeeping-the-current-ratio","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138456"}},{"articleId":138454,"title":"Stricter Bookkeeping Methods: The Acid Test Ratio","slug":"stricter-bookkeeping-methods-the-acid-test-ratio","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/138454"}}],"content":[{"title":"Double-entry bookkeeping","thumb":null,"image":null,"content":"<p>In double-entry bookkeeping you enter all transactions in the books <i>twice:</i> once as a debit and once as a credit. To keep your debits and credits straight follow this table which shows you how both impact on your various business accounts.</p>\n<p>Put a copy of this up by your desk to check back to for quick reference:</p>\n<table>\n<tbody>\n<tr>\n<th>Account Type</th>\n<th>Debits</th>\n<th>Credits</th>\n</tr>\n<tr>\n<td>Assets</td>\n<td>Increase</td>\n<td>Decrease</td>\n</tr>\n<tr>\n<td>Liabilities</td>\n<td>Decrease</td>\n<td>Increase</td>\n</tr>\n<tr>\n<td>Income</td>\n<td>Decrease</td>\n<td>Increase</td>\n</tr>\n<tr>\n<td>Expenses<br />\n_______________</td>\n<td>Increase<br />\n_______________</td>\n<td>Decrease<br />\n_______________</td>\n</tr>\n<tr>\n<td>Capital</td>\n<td>Decrease</td>\n<td>Increase</td>\n</tr>\n</tbody>\n</table>\n"},{"title":"Building blocks of a bookkeeping system","thumb":null,"image":null,"content":"<p>At the root of any system you’ll find the essential elements that form the basis of that system. In the world of bookkeeping, the three most fundamental building blocks to any bookkeeping system are:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Chart of Accounts:</b> Lists all accounts in the books and is the road map of a business’s financial transactions</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Journals:</b> Place in the books where transactions are first entered</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Nominal Ledger:</b> The book that summarises all a business’s account transactions</p>\n</li>\n</ul>\n"},{"title":"Key steps to keeping the books","thumb":null,"image":null,"content":"<p>Bookkeeping involves following a set procedure of major stages. Take a look at these steps that detail the processes involved – from start to finish in the bookkeeping sequence:</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Transactions:</b> The purchases or sales of items start the process of bookkeeping, but there are other financial transactions such as nominal journals that will be posted too.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Reconciliations:</b> Once all transactions are posted, you need to reconcile each of the bank accounts including credit cards.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Trial balance:</b> A review of the Trial Balance will discover any anomalies or adjustments that exist or need to be made in the Nominal Ledger.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Adjusting journal entries:</b> Once you have reviewed the Trial Balance, you may need to make correcting entries to the Nominal Ledger by posting journals. There may also be standard journals such as depreciation and stock journals that need to be completed.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Financial statements:</b> Prepare the balance sheet and Profit and Loss Account using the corrected account balances.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Closing:</b> Close the books for the revenue and expense accounts, and start the entire cycle again with zero balances in both accounts.</p>\n</li>\n</ol>\n"},{"title":"Tips for controlling your business cash","thumb":null,"image":null,"content":"<p>If keeping the books is your responsibility, the good news is that you can implement the following function separations to control your business cash much more easily:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Separate cash handlers.</b> Be sure that the person who accepts cash isn’t also recording the transaction.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Separate authorization responsibilities.</b> Be sure that the person who authorizes a payment isn’t also signing the cheque or dispersing the cash.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Separate the duties of your bookkeeping function to ensure a good system of checks and balances.</b> Don’t put too much trust in one person — unless it’s yourself.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Separate operational responsibility (actual day-to-day transactions) from record-keeping responsibility (entering transactions in the books).</b></p>\n</li>\n</ul>\n"},{"title":"The current ratio","thumb":null,"image":null,"content":"<p>The current ratio compares your current assets to your current liabilities, providing a quick glimpse of your business’s ability to pay its bills. The formula for calculating the current ratio is</p>\n<blockquote><p>Current assets ÷ Current liabilities = Current ratio</p></blockquote>\n<p>The following is an example of a current ratio calculation:</p>\n<blockquote><p>£5,200 ÷ £2,200 = 2.36 (current ratio)</p></blockquote>\n<p>Lenders usually look for current ratios of 1.2 to 2, so any bank would consider a current ratio of 2.36 a good sign. A current ratio under 1 is considered a danger sign because that indicates the business doesn’t have enough cash to pay its current bills. However, some business sectors have traditionally lower acceptable current ratio values, so find out about these before you leap to a judgement.</p>\n"},{"title":"The acid test ratio","thumb":null,"image":null,"content":"<p>Many lenders prefer the acid test ratio when deciding whether to give you a loan because of the test’s strictness. Stock isn’t included in calculating the ratio.</p>\n<p>To calculate the acid test ratio you must do a two-step process:</p>\n<p><b>Determine your quick assets.</b> Cash + Debtors (Accounts Receivable) + Marketable securities = Quick assets</p>\n<p><b>Calculate your quick ratio.</b> Quick assets ÷ Current liabilities = Quick ratio</p>\n<p>The following is an example of an acid test ratio calculation:</p>\n<blockquote><p>£2,000 + £1,000 + £1,000 = £4,000 (quick assets)</p></blockquote>\n<blockquote><p>£4,000 ÷ £2,200 = 1.8 (acid test ratio)</p></blockquote>\n<p>Lenders consider a business with an acid test ratio around 1 to be in good condition. An acid test ratio less than 1 indicates that the business may have some difficulty settling its day-to-day liabilities.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five 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Jane Kelly

Jane Kelly

Jane Kelly is a chartered management accountant, bookkeeping teacher, and business author.

Articles From Jane Kelly

Accounting Bookkeeping & Accounting All-in-One For Dummies Cheat Sheet (UK Edition)

Cheat Sheet / Updated 07-06-2023

Accounting can be overwhelming at times. This cheat sheet gives you some useful checklists, ratios and rules that you can use both in bookkeeping and accounting roles. Keep them to hand.

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Bookkeeping Bookkeeping For Dummies Cheat Sheet (UK Edition)

Cheat Sheet / Updated 04-17-2023

There are several steps to understanding bookkeeping and maintaining a good record of your business’s finances throughout the year. It’s advantageous to get your head around the trickier bits of keeping the books and to know the process in order to better check and control those incomings and outgoings.

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