Chapter 1 & Some Of 2

Question 1

What are the types of transactions

Answer 1

Cash sales
Cash expenditure
Credit sales
Credit expenditure

Question 2

What is the general ledger

Answer 2

AKA nominal ledger

Has separate record of each type of transaction.

Question 3

What are payables also known as

Answer 3

Creditors

Question 4

What are receivables known as

Answer 4

Debtors

Question 5

What does DEAD CLIC stand for

Answer 5

DEAD
expense
Asset
Drawing

CLIC
liability
Income
Capital

Question 6

Ok which side of the T account is the debit and credit

Answer 6

The credits are on the right because we cRash on the Right

Question 7

What is the narrative heading on the T account

Answer 7

In this column should be entered the name of the opposite account to show where the second entry for the transaction would be found

Question 8

What is interest received in the other income section of the P&L

Answer 8

This is anything which is earned and not in their trade e.g renting out a section of the office

Question 9

What does the statement of profit and loss contain

Answer 9

Income such as sales to customers or bank interest received

Expenditure such as purchases of inventory rent or salaries

Question 10

What elements does the statement of financial position contain

Answer 10

Assets owned by the business such as property, vehicles and cash

Liabilities owed by the business such as bank loans or unpaid tax this also includes amounts owed to the owner of the business

receivables are treated as an asset

payables are treated as a liability

Question 11

What period of time do assets need to be to fall into non current assets

Answer 11

Over 12 months

Question 12

Gross profit

Answer 12

Sales income - COGS (purchase costs)

Question 13

Net profit

Answer 13

Sales revenue - all costs

Question 14

What are the accounting concepts (7)

Answer 14

Accruals
Going concern
Business entity
Materiality
Consistency
Prudence
Money measurement

Question 15

What are accruals

Answer 15

Accruals should be matched together and included in the period which they relate to

Question 16

What is going concern

Answer 16

The assumption that the business will continue trading for the foreseeable future by considering the next 12 month period

Question 17

Business entity concept

Answer 17

The idea that the business and the owner are completely separate and should be treated separately

Question 18

Materiality

Answer 18

Financial statements should show a true and fair view. Information is material if omitting, misstating or obscuring would influence decisions

Question 19

Consistency

Answer 19

The concept that we treat similar items in the same way in he current accounting period so that comparisons can be drawn

Question 20

Prudence

Answer 20

Exercising caution when making judgments

Question 21

Money measurement

Answer 21

To be recognised in the financial statement it needs to be measured in money

Question 22

What are the fundamental qualitative characteristics

Answer 22

Relevance
Relevance if it is can make a difference to the decision this will be predictive value which is used to predict future outcomes or if confirmatory value which provides feedback

Faithful representation
Complete, neutral, free from error

Question 23

What are the enhancing qualitative characteristics (4)

Answer 23

Comparability
Verifiability
Timeliness
Understandability

Question 24

Users of financial statements

Answer 24

Investors
Employees
Lenders
Suppliers
Customers

Question 25

Ethical principles - fundamental

Answer 25

Integrity, objectivity, professional competency and due care, confidentiality and professional behaviour

Question 26

ASSET, LIABILITY, EXPENSE, INCOME ‘Wages paid for the week’

Answer 26

Expense

Question 27

ASSET, LIABILITY, EXPENSE, INCOME ‘Cash in the petty cash tin’

Answer 27

Asset - it is something that the business owns

Question 28

ASSET, LIABILITY, EXPENSE, INCOME ‘Customer outstanding balance owed to the business’

Answer 28

Asset - this is owed to the business so will be a benefit in the future when the cash is received

Question 29

ASSET, LIABILITY, EXPENSE, INCOME ‘supplier outstanding balance owed by the business’

Answer 29

Liability - this is owed by the business

Question 30

ASSET, LIABILITY, EXPENSE, INCOME ‘Premises where production takes place’

Answer 30

Asset - owned

Question 31

ASSET, LIABILITY, EXPENSE, INCOME ‘Sales of units to a customer’

Answer 31

Income - this is revenue for the business

Question 32

ASSET, LIABILITY, EXPENSE, INCOME Machinery for the factory

Answer 32

Asset - owned and will create future benefit

Question 33

ASSET, LIABILITY, EXPENSE, INCOME Loan from an investor

Answer 33

Liability - owed

Question 34

ASSET, LIABILITY, EXPENSE, INCOME A bank overdraft

Answer 34

Liability - owed

Question 35

ASSET, LIABILITY, EXPENSE, INCOME Stock if materials used in production

Answer 35

Asset - owned by the business and will benefit the business

Question 36

Are the premises an asset or liability

Answer 36

Asset - as they are owned by the business

Question 37

Is a loan from the bank an asset or liability

Answer 37

Liability - owed

Question 38

Is cash in the bank an asset or a liability

Answer 38

Asset - owned by the business

Question 39

Is VAT owing to HMRC an asset or liability

Answer 39

Liability

Question 40

Is machinery an asset or liability

Answer 40

Asset - owned by the business

Question 41

BOOKS OF PRIME ENTRY what does the cash book receipts deal with

Answer 41

A list of all receipts into the business bank account *the cash book deals with transactions through the business bank account*

Question 42

BOOKS OF PRIME ENTRY What does the cash book payments deal with

Answer 42

A list of all payments made out of the business bank account * the cash book deals with transactions through the business bank account*

Question 43

BOOKS OF PRIME ENTRY what does the sales say book deal with

Answer 43

A list of all credit sales made by the business *this is a list of all the credit sales invoices raised*

Question 44

BOOKS OF PRIME ENTRY What does the purchase day book deal with

Answer 44

All credit purchases made by the business *this is a list of all the credit purchase invoices received*

Question 45

When the business makes a transaction involving paying for goods what would one of the effects be

Answer 45

Purchases would be debited

Question 46

What is the first step in the sales cycle

Answer 46

Step 1 customer requests a quote - quotation

Question 47

What is the second step in the sales cycle

Answer 47

Order placed by customer - sales order

Question 48

What is the third step in the sales cycle

Answer 48

Goods delivered to customer - delivery note

Question 49

What is the fourth step in the sales cycle

Answer 49

Payment requested from customer - sales invoice

Question 50

What is step five in the sales cycle

Answer 50

Payment received from customer - remittance advice note