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Finance Analyst 2 > 4-8 > Flashcards

4-8 Flashcards

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1
Q

What is the Sales Ledger?

A

The Sales Ledger is a subsidiary Ledger.
Sometimes referred to as the Debtors Ledger.
It is the Sales equivalent of the Purchase Ledger.

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2
Q

In the Sales Ledger, where are invoices and Credit Notes posted?

A

Invoices are posted to the Debit side and Credit Notes are posted to the Credit side.

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3
Q

In a Day Book (Sales or Purchase), how are figures in brackets dealt with?

A

They are subtracted rather than added to the totals.

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4
Q

What is a Returns Day Book?

A

A Day Book for Credit Notes only.

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5
Q

How many Day Books could a business keep, for more efficient Book-keeping?

A

Four:
Purchase Day Book

Purchase Returns Day Book

Sales Day Book

Sales Return Day Book

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6
Q

What does the acronym PEARLS stand for?

A 
Purchases
Expenses
Assets
Revenue (Income)
Liabilities 
Source of funds
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7
Q

In PEARLS, what does the P represent?

A

Raw material purchases;

Purchase of items for resale.

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8
Q

In PEARLS, what does the E represent?

A 
Wages
Stationery 
Petrol
Rent
Rates
Electricity
Telephone
Insurance
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9
Q

In PEARLS, what does the A represent?

A 
Debtors
Equipment
Property 
Vehicles
Cash
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10
Q

In PEARLS, what does the R represent?

A

Sales

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11
Q

In PEARLS, what does the L represent?

A

Loans
Mortgages
Creditors
VAT (when the Balance is owed to HMRC)

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12
Q

In PEARLS, what does the S represent?

A

Capital
Owner’s equity
Retained earnings (profit) from the previous business year.

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13
Q

How do you increase PEA accounts?

A

Post a Debit entry

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14
Q

How do you increase RLS accounts?

A

Post a credit entry.

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15
Q

How do you decrease PEA accounts?

A

Post a credit entry.

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16
Q

How do you decrease RLS accounts?

A

Post a Debit entry.

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17
Q

When calculating VAT, which way do you round?

A

Down

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18
Q

What is the Cash Book?

A

One of the main books of account.

It is a book of prime entry, using information from source documents e.g. till roll listing, cheques received, cheque counterfoils, bank statements detailing electronic transactions, bank charges etc.

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19
Q

What is the Cash Book used for?

A

Record every payment made and every amount received;
Record the reason for each individual receipt and payment;
Total the amount of receipts and payments;
Record the Cash balance

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20
Q

Define “receipts and payments”.

A 
Cheques
Standing orders
Direct debits
Bank Automated Clearing Services (BACS)
Bank notes and coins.
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21
Q

Which three points are crucial when dealing with Cash Books?

A

Accuracy
Completeness
Timeliness

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22
Q

In regards to Cash Books, what does accuracy mean?

A

No transaction is recorded twice.

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23
Q

In regards to Cash Books, what does completeness mean?

A

Every transaction made by the business is recorded;
Each payment or receipt is recorded on a separate line;
The reason for each transaction is properly described.

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24
Q

In regards to Cash Books, what does timeliness mean?

A

The Cash Book is brought up to date frequently and balanced on a regular basis.

25
Q

In Cash Books, where are receipts and payments posted?

A

Receipts are posted to the left while payments are posted to the right.

26
Q

What is a typical layout of the payments side of the Cash Book?

A

Date (the date the entry was signed and posted);
Details of the transaction;
Cash (cash transactions/ paid immediately);
Bank (credit transactions);
Discount Received (cash settlement discounts);
Creditors (credit transactions);
VAT;
Over Heads;
Sundry;
Contra;
Balance.

27
Q

What do b/f and c/f mean?

A

b/f means brought forward and c/f means carried forward.&
Sometimes the “f” can be replaced by “d” for “down”. It is, however, important to be consistent.

28
Q

When posting the totals from the cash Book to the Postings List, which side of the Cash Book is posted first?

A

The receipts side (left side).

29
Q

When posting the totals from the cash Book to the Postings List, on which side (columns) do you start your postings?

A

The analysis columns.

30
Q

What is a typical layout of a Postings List?

A

Date

Account Name (in the GL)

Account Code (in the GL)

Dr (Debit side)

Cr (Credit side)

31
Q

In the Postings List, how are Discounts Allowed dealt with?

A

First, it must be understood that a discount allowed is a decrease in the asset of debt and it must be recorded in the Debtors Control account;
Secondly, and because all entries have a double effect on the accounting books, the same amount must be recorded as a expense that the business incurred to receive funds quicker. This will be recorded in the Discounts Allowed account.

32
Q

When dealing with cash books, the sum of the totals from the analysis columns and balance columns must be equally to…

A

The sum of the cash and bank columns.

33
Q

In cash Book dealings, which columns are not included in the calculations when cross-casting?

A

The discount allowed and discount received columns.

34
Q

When all entries are made to the cash Book for a give period, what should be done?

A

Draw a double-line breath and a line above the totals.

35
Q

When dealing with cash Books, if the two sides (receipts and payments) show different amounts, what should be done?

A

The side with the least money should be brought to be equal to the other side by adding the difference.

36
Q

When dealing with cash Books, when the difference is written on the cash and bank columns what should be written on the details column?

A

Balance c/f

37
Q

What should be done after the cash and bank columns on both sides of the cash Book are balanced?

A

A double-line should be drawn under all four columns.

38
Q

After the cash Book is balanced, what should be done to the side which had the greater amount prior to balancing?

A

First, the date of the beginning of the next accounting period should be written; and then, in the details column, Balance b/f.
In the cash and bank columns the differences between the sides of the cash Book should be written.
Finally, both figures should be added together and the total posted to the Balance column.

39
Q

What is petty cash?

A

It’s a float of cash used to pay for small items of expenditure.

40
Q

Give examples of things bought using petty cash.

A 
Office refreshments;
Stationery;
Postage stamps;
Transportation fares;
Petrol expenses.
41
Q

What is the impress method?

A

A method of dealing with petty cash whereby a fixed amount is drawn from the bank and held in a locked petty bash tin at the start of the period. Cash from the tin will only be issued against an authorised petty cash voucher. The amount in the tin must at all times equal the set limit:
limit= cash + vouchers.
At the beginning of the next period the tin will be replenished up to the set limit amount.

42
Q

When does the petty cash receive payment?

A

Usually, receipts into petty cash are only to replenish the amount spent but occasionally it will receive payment from staff member whom have used company resources.

43
Q

What should a completed petty cash voucher include?

A

A description of the payment;
The date;
A sequential identifying number.

44
Q

What should normally accompany a petty cash voucher?

A

A till/Sales receipt.

It’s is important for VAT reclaiming purposes.

45
Q

What should be done to signify that a number in a cash Book is a total?

A

Draw a single line above and a double-line below the number.

46
Q

Who prepares the cheque requisition?

A

The person responsible for the petty cash.

47
Q

What is a typical layout of the petty cash Book?

A

Receipts (money input into the petty cash);

Date;

Details;

Petry cash voucher number (which must be ordered);

VAT;

Analysis columns.

48
Q

List the steps that should be taken when PPD is offered?

A

Prepare the invoice and calculate the VAT from the full net value. The invoice details are then listed on the Day Book.

Post the Day Book to the relevant accounts in the General Ledger.

Record the customer receipts.
If the customer takes advantage of the discount, the accounting records must be adjusted (produce a Credit Note).

Update the Ledger accounts to reflect the customer receipt and any any PPD allowed.

49
Q

When adjusting the accounting records due to a PPD, where should the Credit Note be posted?

A

On a Discounts Allowed Day Book.

50
Q

What is the Discounts Allowed Day Book?

A

A Day Book used to list Credit Notes to customers who have taken advantage of PPD.

51
Q

How frequently is the Day Book used?

A

Usually, invoices are posted everyday and then the totals are posted to the General and subsidiary ledgers at the end of the month.

52
Q

How will the Discounts Allowed Credit Note be posted to the account?

A

General Ledger:

Debit the Discounts Allowed account with the net goods amount;

Debit the VAT account with the VAT amount;

Credit the debtors control account with the invoice total.

Sales Ledger:

Credit the individual customer account with the invoice total.

53
Q

How will the Discounts Received debit Note be posted to the account?

A

General Ledger:

Debit creditors control account with the invoice total;

Credit VAT with the VAT amount;

Credit the Discounts received account with the net goods amount.

Purchase Ledger:

Debit the individual account with the invoice total.

54
Q

What is the Trial Balance?

A

A list of td balances taken from all the accounts in the Nominal Ledger.

55
Q

When must the General Ledger balance?

A

It must balance at every stage after entries have been made to it.

56
Q

List the steps in preparing a trial balance.

A

Balance the Ledger accounts;

Write the balance against the name of the account in the appropriate column (debit or credit).

Total the debit and credit sides to ensure they agree.

57
Q

What is a three column cash book?

A

A cash Book without the analysis column; only Discounts (Allowed on the debit side and Received on the credit side), Cash and Bank columns.
This is part of the double entry system so there will be no cash or bank accounts in the General Ledger.

58
Q

In three column cash Books, how are cash sales dealt with, in terms of the VAT?

A

In the same column, the cash amount will be posted and, on the following cell, the VAT amount will also be posted.

59
Q

With three column cash Books, when posting from the bank column, what should be the procedure?

A

First, the individual amounts should be posted to the subsidiary ledgers and then these amounts should be compared to the totals posted to the control accounts on the General Ledger.

Finance Analyst 2 (11 decks)

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