Final Ones

Question 1

Fundamental Qualitative Characteristics

Answer 1

Relevance

Faithful representation

Question 2

Enhancing Qualitative Characteristics

Answer 2

Comparability
Verifiability
Timeliness
Understandability

Question 3

Vertical presentation of the SFP

Answer 3

Assets
Non current assets
Current assets
TOTAL

Capital and liabilities
Capital
Non current liabilities
Current liabilities
TOTAL

Question 4

Working capital/ net current assets

Answer 4

Current assets - current liabilities
If positive = net current assets
If negative = working capital

Question 5

Errors of commission

Answer 5

One side of the transaction has been entered into the wrong account

Question 6

Errors of principle

Answer 6

The correct and incorrect amounts are of different types I.e. Dr has gone to SFP instead of SPL

Question 7

Error of original entry

Answer 7

Wrong amount has been used for both debit and credit entries

Question 8

Carriage outwards (sales)

Answer 8

carriage on goods sold by the organization

treated as an expense against gross profit

Question 9

Carriage inwards (purchases)

Answer 9

carriage charged by the supplier on purchases

treated as an expense in cost of sales

Question 10

Cash discounts

Answer 10

referred to as a settlement discount

MUST BE ACCOUNTED FOR

Question 11

TAX employers

Answer 11

DR Wages payable
CR HMRC
DR Wages expense
CR wages payable

Question 12

DR Entries

Answer 12

Increase in assets
Decrease in liabilities
Decrease in capital
Increases in expenses
Decreases in revenue

Question 13

CR Entries

Answer 13

Decrease in assets
Increase in liabilities
Increase in capital
Decreases in expenses
Increases in revenue

Question 14

Credit sales returns

Answer 14

DR sales returns

CR receivables

Question 15

Cash sales returns

Answer 15

DR sales returns

CR Cash

Question 16

Credit purchase returns

Answer 16

DR payables

CR purchase returns

Question 17

Cash purchase returns

Answer 17

DR cash

CR purchase returns

Question 18

Cash discount allowed

Answer 18

DR Discounts allowed

CR Receivablespart of net profit number in SPL

Question 19

Discount received

Answer 19

DR Payables

CR Discounts receivedpart of the net profit number in SPL

Question 20

Trade discounts

Answer 20

ONLY DEDUCTED FROM QUOTED PRICE AND NOT ACCOUNTED FOR

Question 21

Cash discounts

Answer 21

MUST BE ACCOUNTED FOR

if given both trade and cash discount, trade discount must be applied before the cash discount is calculated

Question 22

Output tax

Answer 22

VAT on sales

CREDIT sales tax account

Question 23

Input tax

Answer 23

VAT on purchases
Can be reclaimed
DEBIT sales tax account

Question 24

Irrecoverable debts

Answer 24

DR Irrecoverable debts expense account (SPL)
CR receivables account (SFP)
DR Bank accountCR receivables account

Question 25

part payment of an irrecoverable debt after write off

Answer 25

Bring CR balance down from receivables Payment CR receivables DR Bank Write off DR irrecoverable debts expenses account CR receivables

Question 26

Double entry for allowance for receivables

Answer 26

DR Irrecoverable debts expense account (SPL) | CR Allowance for receivables account (SFP as liability)

Question 27

Accounting for increase in allowance for receivables

Answer 27

DR irrecoverable debts expense | CR allowance for receivables

Question 28

Capital employed

Answer 28

Capital employed represents the capital investment necessary for a business to function. Consequently, it is not a measure of assets, but of capital investment: stock or shares and long-term liabilities.

Question 29

Valuing inventory

Answer 29

should be valued at the lower of cost and net realizable value

Question 30

Net realizable value

Answer 30

Revenue expected to be earned in the future when the goods are sold, less any selling costs

Question 31

AVCO

Answer 31

previous balance value + new receipts value / previous units + new units

Question 32

Straight line depreciation

Answer 32

original cost - estimated residual value / estimated useful life= depreciation per annumor% x cost

Question 33

reducing balance depreciation

Answer 33

Shown as a reduction against the cost of non current assets Cost x Accumulated depreciation (x) = carrying value x

Question 34

Accounting for disposal step 1

Answer 34

remove the cost from the books and transfer to disposal account DR disposal account CR non current asset cost account

Question 35

Accounting for disposal step 2

Answer 35

remove the accumulative depreciation from the books and transfer to the disposal account DR accumulative disposal account CR disposal account

Question 36

Accounting for disposal step 3

Answer 36

record the cash proceeds DR cash account CR disposal account

Question 37

Disposal through part exchange (PEA)

Answer 37

Steps 1 & 2 same as disposal process Step 3 record the part exchange DR non current asset cost account CR Disposal account Step 4 record the cash proceeds (if any) DR non current asset cost account CR cash payable

Question 38

Purchase daybook double entry

Answer 38

DR purchases DR sales tax CR payables

Question 39

Sales daybook double entry

Answer 39

DR receivables CR sales tax CR sales account

Question 40

Returns in daybook double entry

Answer 40

DR returns inwards DR sales tax CR receivables

Question 41

Returns out daybook double entry

Answer 41

DR payables account CR sales tax CR returns outwards account

Question 42

The Journal

Answer 42

Where you note transactions that don't naturally fall into the normal books of prime entry i.e. year end adjustments, bad and doubtful debts, accruals and prepayments, inventory IS A BOOK OF PRIME ENTRY AND PART OF THE DOUBLE ENTRY

Question 43

Books of prime entry

Answer 43

where transactions are first recorded | daybooks i.e. sales day book list of sales made on credit, purchases daybook list of purchases made on credit

Question 44

records outside of double entry

Answer 44

memorandum accounts

Question 45

Role of an auditor

Answer 45

issue an opinion whether financial statements are true and fair perform control tests to confirm client controls and detect misstatement

Question 46

Role of management

Answer 46

to safeguard assets | act as stewards to the owners

Question 47

historical cost convention

Answer 47

in times of rising costs historical cost convention will overstate profits and understate asset values

Question 48

objective of an internal audit

Answer 48

to assist directors of a company in the effective discharge of their financial responsibilities towards the members

Question 49

role of an internal auditor

Answer 49

to report to management on the accounting systems

Question 50

realisation

Answer 50

revenues should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received

Question 51

capital maintenance

Answer 51

profit is earned only if the value of the organisations net assets or it's operating capability has increased during the accounting period

Question 52

stewardship

Answer 52

is concerned with ensuring that there are procedures in place to safeguard assets, provide properly for liabilities, protect against misuse of assets and report adequately to the shareholders or stakeholders of an organisation

Question 53

not for profit company accumulated fund

Answer 53

equivalent of owners capital

Question 54

prime cost

Answer 54

total of direct costs

Question 55

Capital in single entities

Answer 55

is equity | Accounting equation is assets = equity + liabilities