3. Recording Financial Transactions

Question 1

are computerised accounting systems common or uncommon?

Answer 1

computerised accounting systems are commonplace in most businesses

Question 2

what are inputs?

Answer 2

source documents, standing data

Question 3

what are processes?

Answer 3

ledgers, journals, calculations, record keeping

Question 4

what are outputs?

Answer 4

reports, trial balance, financial statements

Question 5

what are ledgers?

Answer 5

they capture the accounting information from the transactions businesses undertake

Question 6

what is cloud accounting?

Answer 6

cloud accounting allows a business to access accounting records via the internet

Question 7

what is the flow of inputs>processes>outputs?

Answer 7

how sources are converted into processes (e.g. a journal entry/ledger), and then used to create a financial statement

Question 8

what are source documents?

Answer 8

sources from which financial information for a business is found

Question 9

what are examples of source documents?

Answer 9

• invoices (sales & purchases)
• credit notes
• the bank transaction report

Question 10

what is petty cash?

Answer 10

petty cash is cash used for small, meaningless purchases (e.g., stamps, coffee)

petty cash payments and receipts are recorded in a petty cash book

Question 11

define imprest

Answer 11

imprest refers to a type of cash account maintained by a company used to pay for small incidental or routine expenses

Question 12

what is the purpose of the payroll?

Answer 12

wages and salaries costs are entered into the accounting system from the payroll

Question 13

how is salary payable calculated?

Answer 13

gross pay - employees NI contribution - PAYE income tax - employee’s pension contribution = balance paid to employee (net pay)

Question 14

what does the employer pay to HMRC?

Answer 14

employee’s NI contribution + PAYE income tax + employer’s NI contribution