Chapter 1 - The Accounting System

Question 1

The Five Stage Accounting System

Answer 1

1. ) Financial Transactions
2. ) Financial Documents
3. ) Books of Prime Entry
4. ) Ledger Accounts
5. ) Trial Balance

Question 2

What are the 3 types of ledger accounts?

Answer 2

1. ) Sales Ledger
2. ) Purchases Ledger
3. ) General Ledger

Question 3

What are control accounts?

Answer 3

‘Total’ accounts which summarise a number of other accounts.

Question 4

What are ledger accounts?

Answer 4

A large book in which each business transaction is entered into individual accounts.

Question 5

What is the trial balance?

Answer 5

It brings together the balances of all the ledger accounts in the general ledger. It sets it out in 2 columns: Debit and Credit.

Question 6

What is the statement of profit or loss?

Answer 6

Income - Expenses = Profit

Question 7

What is the formula for the statement of Financial Position?

Answer 7

Assets - Liabilities = Capital

Question 8

What is a trade receivable?

Answer 8

Debtors - Someone who owes YOU money.

Question 9

What is a Trade payable?

Answer 9

Creditors - a SUPPLIER you owe money to.

Question 10

What is a statement of profit or loss?

Answer 10

A financial statement that calculates profit or loss made by a business.

Question 11

What is a statement of financial position?

Answer 11

A financial statement that shows the value of the owner’s investment.