Y10 TERM 1

Question 1

Bookkeeping

Answer 1

A process of detailed recording of all the financial transactions of a business in the books of account

Question 2

Accounting

Answer 2

A process of selecting, classifying and summarizing financial data in order to assist stakeholders/proprietors in making decisions

Question 3

Expenses

Answer 3

The payments made to run the business on a day-to-day basis

Question 4

Trial balance

Answer 4

A list of closing balances of ledger accounts on a certain date

Question 5

Narrative

Purpose of a narrative in a journal entry

Answer 5

A brief description on what is being recorded and why the entry is being made
Purpose: Useful because it may be necessary to recall the reasons / it can contain non-regular transactions

Question 6

Items of information you can expect to find on a statement of account

Answer 6

1. Customer’s name and address
2. Invoice number
3. Sales returns items
4. Amount due
5. Terms of business

Question 7

Reasons a business uses a purchases journal

Answer 7

1. Segregation of duties
2. To minimize details in the general ledger account
3. To provide up-to-date details on the balances of each subsidiary account

Question 8

Advantages of dividing the ledger into these three areas - general, purchases, sales ledgers

Answer 8

1. Segregation of duties
2. Additional control and can prevent from fraud
3. Easier for reference as the same type of accounts are kept together

Question 9

Difference between a debit note and a credit note

Answer 9

1. A debit note is usually issued by the purchaser to state that he is overcharged or there are defective products included in his purchase.
2. A credit note is issued by the seller to the purchaser stating that the seller would credit any overcharged amount.

Question 10

Explain why no entry is made in the accounting records when a statement of account is issued.

Answer 10

A statement of account is not a transaction record, but a reminder to the customer of the amount due.

Question 11

Why are trade discounts offered?

Answer 11

1. To reward customer for buying in bulk
2. To maintain customer’s loyalty/encourage repeat business
3. Customer is in the same trade

Question 12

Why are cash discounts offered?

Answer 12

1. To encourage customer to pay promptly

2. To encourage customer to pay before the due date

Question 13

Why is a statement of account issued by a credit supplier?

Answer 13

1. To provide a summary of transactions
2. To remind the customer of the amount due
3. To allow customer to check their records against it

Question 14

Explain why the cash book is both a book of prime entry and also part of the double entry system.

Answer 14

1. It is a book of prime entry because it is written up from business documents.
2. It is part of the double entry system as it acts as a ledger account for cash account and bank account.

Question 15

Explain what is meant by the imprest system in relation to petty cash books.

Answer 15

A petty cashier starts each period with the same amount of money. At the end of the period the money spent is reimbursed so the cash remaining is equal to the imprest amount.

Question 16

Suggest 2 reasons for the difference in the actual amount of cash in the petty cash box and the amount which should be there.

Answer 16

1. Error in recording petty cash vouchers

2. Cash was stolen

Question 17

Advise the petty cashier about the importance of keeping a record of business expenditure.

Answer 17

1. Always complete (get) a petty cash voucher with an invoice or receipt for expenditure
2. Record all petty cash transactions

Question 18

Why do you maintain a petty cash book in addition to the main cash book?

Answer 18

1. To reduce the number of entries in the main cash book
2. To avoid recording small cash payments in the main cash book
3. Segregation of duties

Question 19

3 advantages of the imprest system of petty cash

Answer 19

1. Allows chief cashier to keep track of petty cash expenditure
2. The cash remaining and the vouchers received should equal the imprest amount
3. Can help to prevent fraud

Question 20

Explain what is meant by double entry system.

Answer 20

A system that involves making a debit entry and a credit entry for each transaction.

Question 21

Why is a cheque dishonoured by the bank?

Answer 21

1. Insufficient balance in the bank account

2. Drawer’s signature differs

Question 22

Use of an invoice

Answer 22

To inform the customer of the amount due

Question 23

Asset

Answer 23

An item that is owned by a business or owed to a business

Question 24

Liability

Answer 24

An amount owed by a business to other businesses, organisations or individuals

Question 25

Capital

Answer 25

An amount owed by the business to the owner

Question 26

Non-current assets

Answer 26

Assets that should be of benefit to the business in the long term (more than one year)

Question 27

Current assets

Answer 27

Assets that are quickly turned into cash and are of benefit to the business for a short term (less than one year)

Question 28

Non-current liabilities

Answer 28

Liabilities that will be settled in the longer term (longer than one year)

Question 29

Current liabilities

Answer 29

Liabilities that will be settled in the near future (in less than one year)

Question 30

Drawings

Answer 30

The withdrawal of money by the owner of a business for private use

Question 31

State 2 differences between a bank overdraft and a bank loan.

Answer 31

1. A bank overdraft is a short-term loan while a bank loan is long-term loan. 2. A bank overdraft is a facility allowed to an account holder to withdraw more than what they have in their savings account. A bank loan is a fixed amount borrowed from the bank for a fixed amount of time.

Question 32

2 purposes of measuring business profit and loss

Answer 32

1. So that the owner of the business will know whether there is a return on his investment 2. So that the owner of the business will know whether there is fund available to expand/improve the business

Question 33

2 uses of a trial balance

Answer 33

1. To check the arithmetical accuracy of the double-entry bookkeeping / To check for errors 2. As a basis for the preparation of the financial statements

Question 34

Limitations of a trial balance

Answer 34

The balancing of the trial balance is not a proof that the entries in the ledgers are free from errors

Question 35

3 differences between a trading business and a service business

Answer 35

1. TB buys and sells goods; SB provides a service instead 2. TB produces a trading account; SB does not 3. TB holds inventory; SB holds no inventory

Question 36

Role of accounting

Answer 36

Accounting provides information for monitoring progress and decision-making. Since accounting is prepared using a set of rules (accounting principles), accounting users are confident with the accounting information.