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aat level 2 > AAT Level 2 > Flashcards

AAT Level 2 Flashcards

1
Q

Accounting Equation

A

Assets - Liabilities = Capital

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2
Q

Cash Sale

A

The sale and the payment happen at the same time.
E.g. Cash/card/cheque.
A till receipt is produced

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3
Q

Credit Sale

A

The seller provides the buyer with the good/service but payment is not made until later.
An invoice is issued.

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4
Q

The risk of credit sales

A
  • Customer may not pa at the appropriate time

- Customer may not pay at all

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5
Q

The Six Stages of the sales process in order

A
  • Quotation
  • Customer order
  • Delivery Note
  • Invoice
  • Credit note (if goods are damaged / returned)
  • Remittance advice note
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6
Q

Why is coding used

A
  • So information can be recorded accurately and in a timely manner
  • Documents can be filed and retrieved efficiently

Usually coding is alpha-numeric

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7
Q

What are the books of prime entry

A
  • Sales daybook
  • Sales returns daybook
  • Purchases daybook
  • Purchases returns daybook
  • Cashbook
  • Petty cashbook
  • Discounts allowed daybook
  • Discounts received daybook
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8
Q

What is the Sales daybook

A

Lists all the business’s invoices sent to credit customers

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9
Q

Sales returns daybook

A

Records credit notes given to customers when products are returned.
Can also be recorded as a negative amount on the sales daybook.

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10
Q

What is recorded on the cashbook debit side

A

Money that is received by the business

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11
Q

What is recorded on the cashbook Credit side

A

Money paid out by the business

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12
Q

What is the two column cash book

A

Two columns:

  • Cash: records amounts received or paid by CASH only
  • Bank: Records amounts paid/received through the bank e.g. cheque / BACS etc.
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13
Q

Cashbook - and VAT

A

When credit customers pay, No VAT is recorded in the Cashbook as this has previously been recorded.

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14
Q

Purchases daybook

A

Records purchase invoices received

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15
Q

Purchases Returns daybook

A

Records goods the business has purchased and then returned due to them being faulty etc.

A list of credit notes received

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16
Q

Sales Ledger

A

A record that contains ledger accounts for every credit customer.
Customer ledger account shows how much each credit customer owes the business

17
Q

Purchase Ledger

A

A record containing ledger accounts for every credit supplier.
Ledger account shows how much the business owes that supplier.

18
Q

Sales Ledger Debit and Credits

A

Left side (Debit) - Invoices are recorded increasing the amount owed by the customer.

New invoices are debited to the Sales Ledger account.

Right side - (Credit) - Credit notes, payments, Prompt payment discounts are recorded. All decreasing how much the customer owes. Credits the account.

19
Q

Purchase Ledger Debits and Credits

A

Left side (Debits) - Credit notes, prompt payment discounts, payments are recorded, decreasing how much the business owes the supplier.

Right side (Credit) - Record invoices increasing how much we owe the supplier.

20
Q

What is the standard rate of VAT

A

20%

21
Q

What can businesses claim VAT back on

A

Purchases

22
Q

The difference between Net and Gross total

A

Net - before VAT

Gross - after VAT

23
Q

What are the three discounts

A
  • Trade
  • Prompt Payment (recorded in discounts allowed / received daybook)
  • Bulk
24
Q

Which discount is not shown on the invoice

A

Prompt payment - is issued as a credit note as a business has to decide whether to pay quicker and take the discount.

25
Q

Assets

A

Items the business owns e.g. cash, machines, amounts owed to the business by credit customers.

26
Q

Liabilities

A

Amounts the business owes to other parties e.g. loans, overdraft, amounts owed to credit customers

27
Q

Income

A

Main source of income is sales

28
Q

Expenses

A

Main source of expenses is purchases

29
Q

What does a Debit represent

A
  • Increase in Asset
  • Increase in Expenses
  • Increase in Drawings
  • Decrease in Liabilities, Income or Capital

DEAD CLIC

30
Q

What does a credit represent

A
  • Increase in liability
  • Increase in income
  • Increase in capital
  • Decrease in expenses, assets or drawings
31
Q

Cash transactions double entry

A

Cash payment = Credit (Asset is decreasing, matching debit entry is in the new asset / expense account)
Cash receipt = Debit (Asset is increasing, matching credit entry is made in the sales account)

32
Q

Double entry for credit

A

aat level 2 (8 decks)

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