TYS Flashcards
(10 cards)
State what is meant by an asset?
An asset is a resource owned by the company for the use in the daily operations of a business
State the difference between a current liability and a non-current liability?
A current liability refers to an amount owed by a business which should be paid within one financial year, whereas a non-current liability refers to an amount due which can be paid in more than one financial year
The following balances were extracted from the books of Lim’s business on 30 April 2017.
Description $
Office equipment- 19,740
Inventory - 5,553
Trade receivables - 4,690
Trade payables - 3,700
Cash at bank - 1,358 Cr
Prepaid expenses - 400
Accrued expenses - 325
Capital at 1 May 2016 - 10,000
A) calculate the profit or loss for the year and 30th April 2017?
B) Lim is now considering transferring his private motor vehicle value 30,000 to the business. Explain how this would affect the business profit?
A) $15000
B) there will be no effect on the profit as the transaction will only increase the owners capital contribution and the value of the non-current asset
Name two principles of professional ethics for an accountant?
1) objectivity
2) integrity
Feng runs a furniture warehouse. His business makes an average annual profit of over $ 200,000. He has decided that his business should treat purchases of office equipment costing less than $500 as a revenue expenditure.
A) name and explain that accounting theory applied by a business when recording purchases of non-current assets of low value as a revenue expenditure?
B) state the journal used to record a purchase of a non-current asset on credit?
A) materiality theory - materiality theory shows the purchase of non-current assets which are of lower value to be recorded as a revenue expenditure instead of capital expenditure. Since the equipment of $500 is low as compared to the companies average annual profit of $200,000, it can be treated as a revenue expenditure.
B) general journal
State two roles of accounting
- Decision-making.
- Stewardship.
Name the accounting theory applied when it is assumed that a business will continue for a foreseeable future?
Going concern theory
State the difference between a cash transaction and a credit transaction
Transaction of which immediate payment is made while a credit transaction is one for which payment is postponed to a future date
Give two reasons why a cheque may be dishonoured by the bank
- The check is post dated.
- The check has a signature error.
On 2 July 2018, june sold goods on credit to Dorothy the list price of goods was $1000. June allow Dorothy a trade discount of 5% a cash discount of 2% was given when Dorothy settled the account by cash on 9 July 2018.
A) state, the entry in June book to record the payment by Dorothy?
B) state, one reason why June allowed Dorothy a trade discount?
A) cash in hand ($1000 X95% X 98%) $931 (Dr)
Discount allowed ( 950×2%), $19 (Dr)
Trade receivable – Dorothy $950 (Cr)
B) to encourage Dority to buy in bulk
