Accounting Book 2

Question 1

open bank balance

Answer 1

how much cash was available in the business banks account at the start of the reporting period

Question 2

Closing bank balance

Answer 2

how much cash should be available in the business bank account at the end of the reporting period

Question 3

Cash Surplus

Answer 3

an excess of cash receipts over cash payments leading to an increase positive bank balance or a decrease in bank overdraft

Question 4

Cash Deficit

Answer 4

an excess of cash payments over cash receipts leading to a decrease In a positive bank balance or an increase in bank overdraft

Question 5

statement of receipts and payments

Answer 5

a statement of receipts and payments is a report that summarises the financial information that has been sorted, classified and recorded in the cash journals

Question 6

cash

Answer 6

the business immediately receives or makes payment for the transaction

Question 7

journal

Answer 7

an accounting record that classes and summaries transaction during a particular reporting period

Question 8

service business

Answer 8

a small business that operates by providing its time, labour, or expertise In return for a fee e.g hairdressers

Question 9

Single entry accounting system

Answer 9

a system that allows financial data to be sorted, classified, and recorded so that financial information need to complete accounting reports (e.g Balance sheet) can be generated

Question 10

Cash Receipts journal

Answer 10

A journal which shows the amount of money coming into a business and what for

Question 11

Cash payments journal

Answer 11

a journal which shows the amount of money going out of the business and what forpp[

Question 12

GST

Answer 12

a 10% tax levied by the federal government on sales of goods and services

Question 13

GST received

Answer 13

classified on a cash receipts journal, the get amount received is passed onto the Australian taxation office (ATO)

Question 14

GST paid

Answer 14

classified on cash payments journal, the money paid on GST for its supplier this money is then deducted from total owed to ATO

Question 15

GST payable

Answer 15

Get owed by the business to the ATO when the amount of GST the business has reached on its fees is greater than the GST it has paid to its suppliers (Classified as current liability)

Question 16

GST receivable

Answer 16

GST owed to the business by the ATO when the amount of GST the business has paid to its suppliers is greater than the GST it has been received from customers (Classified as current asset)

Question 17

GST settlement

Answer 17

a payment made to the ATO by a small business to settle GST payable (cash payment)

Question 18

GST refund

Answer 18

a cash receipt for the ATO to clear

Question 19

GST Receivable

Answer 19

cash receipt

Question 20

If results is a cash deficit (negative bank balance)

Answer 20

1. Effective advertising to boost cash fees / sales
2. reduce loan repayments
3. reduce drawings
4. purchase more inventory of supplies using credit facilities
5. ask the owner to make a cash capital contribution
6. borrow cash from bank (loan)
7. organise a bank overdraft facility

Question 21

If results is a cash surplus (positive bank balance)

Answer 21

1. higher loan repayments to reduce debt
2. the owner can take greater drawings in cash from business
3. upgrade/ purchase newer non-current assets
4. expand the business operations or open a new store in new location

Question 22

Calculation for Net profit

Answer 22

cash receipts minus cash payments

Question 23

profit calculation

Answer 23

revenue - expenses

Question 24

net profit

Answer 24

represents a net increase in owners equity

Question 25

Net loss

Answer 25

represents a net decrease in owners equity

Question 26

Calculation owners equity

Answer 26

capital $$$
plus net profit/ or minus net loss $$$
total $$$
less drawings $$$. Money remaining $$$

Question 27

strategies to improve profitability

Answer 27

1. renegotiate with existing supplier to secure a cheaper price for supplies/material
2. change suppliers to access a cheaper price for supplies/materials
   3.buy materials in bulk order to access a discount making materials
3. review staff rostering in order to minimise wage expenses
4. effective marketing/ advertising that will boost sales by a greater amount that the amount spent on marketing/ advertising
5. improve service delivery in order to build positive word of mouth in the market = boost to sales