Assets, Revenue, Liability and Expenses

Question 1

Definition of Assets

Answer 1

Items of value to the business

Question 2

Definition of a non current assets

Answer 2

1. Items bought for use in the business
2. Not bought to be resold
3. Lasting longer than one year
4. Land and buildings
5. Computers

Question 3

Definition of current asset

Answer 3

1. Items bought to be resold for profit
2. Cash, or can be converted to cash
3. Customers who owes us money - trade receivables

Question 4

Definition of a liability

Answer 4

Amounts the business owes

Question 5

Definition of current liabilities

Answer 5

Amounts we owe - payable within one year

Debt, Overdraft

Question 6

Definition of Non current Liabilities

Answer 6

Amounts we owe - to be paid back over more than one year

Bank Loans

Question 7

Definition of expenses

Answer 7

Rent, Wages
Regular ongoing ‘daily/weekly/monthly/yearly’ costs of managing/running the business
Consumer to keep the business operating to generate revenue

Question 8

Definition of Revenue

Answer 8

Bank Interest received
Sales revenue - income from selling goods or services
Other Revenue- other revenues have the word received in their name - rent received, income received

Question 9

What are the special accounts

Answer 9

Capital Account- used to record any money put in to the business by the owner
Drawings Account- Used to record any amounts (cash or goods) withdrawn by the owner

Question 10

Accounting Equation

Answer 10

Assets = Capital (L) + Liabilities

Question 11

Dual Aspect Concept

Answer 11

Every transaction affects two accounts

Question 12

Business Entity Concept

Answer 12

The owners finances should be kept separate from the business finances

Question 13

Debiting an Account

Answer 13

making an entry in the left side of the account

Question 14

Crediting an Account

Answer 14

Making an entry in the right side of the account

Question 15

4 types of inventory and if they are debits or credits

Answer 15

Purchases account - AID
Sales account - ADC
Sales Returns account - AID
Purchases Returns account - ADC

Question 16

Purchases

Answer 16

• Buying Inventory
• From customers
• Inventory Increases

Question 17

Sales

Answer 17

• Selling inventory
• To customers
• Inventory decreases

Question 18

Purchases Return

Answer 18

• We return inventory to suppliers
• Inventory decreases
• We receive a credit note

Question 19

Sales Return

Answer 19

• We have inventory returned to us by customers
• Inventory increases
• We send a credit note

Question 20

Revenues when recording transactions

Answer 20

They are always entered on the credit side.

Revenues on the right

Question 21

Expenses when recording transactions

Answer 21

They are always entered on the debit side.

Expenses on the left

Question 22

What is a trial balance?

Answer 22

A list of all the balances brought down from all the individual accounts

Question 23

What is a Income statement?

Answer 23

A financial statement to show the calculation of the gross profit and to show the calculation of the profit or loss for the year

Question 24

How do you work out the profit or loss for the year

Answer 24

Gross Profit + Other Revenues - Expenses = Profit or loss for the year