AC 9-11

Question 1

What is an irrecoverable debt? Where does it go in financial statement?

Answer 1

A debt believed not to be paid. It goes in the statement of profit and loss.

Question 2

What is the double entry for irrecoverable debt

Answer 2

Dr IDE (irrecoverable debt expense)
Cr trade receivables

Question 3

What is a doubtful debt and how do you deal with it? What is the double entry?

Answer 3

A doubtful debt is when you are unlikely to receive the money. You do not to remove from receivables, but instead create an allowance for receivables.

Double entry for increase:
Dr IDE
Cr allowance for receivable

Question 4

What is the formula for irrecoverable debt expense?

Answer 4

Irrecoverable debt expense= irrecoverable debt + doubtful debt

Question 5

What type of expense is irrecoverable debt expense classed as

Answer 5

Admin expense

Question 6

What is the general ledger, receivable ledger, payable ledger

Answer 6

General shows all journal entries (aka nominal)
Receivable ledger more detailed than general and shows what is owed to us
Payable ledger is what we owe and where

Question 7

What are the three source documents?

Answer 7

Sales invoice, purchase invoice, and credit note (adj amount owed (refunds?))

Question 8

What is the difference between real time and batch processing?

Answer 8

Real-time process it as it is imported
Batch processes in one go, usually at the end

Question 9

Give the formula for the imprest system (float)

Answer 9

Float= cash in petty cash box + total expense
Money left + money used = float (fixed) amount

Question 10

What is the net selling price and gross selling price in terms of VAT

Answer 10

Net selling price is the amount the business wants to keep and gross selling price is the amount they actually charge

When provided net, take 20% off to get VAT amount
When provided gross, take off 1/6th

Question 11

What can’t you claim VAT on?

Answer 11

Entertaining clients and motor vehicles

Question 12

What is the double entry for overcharging VAT?

Answer 12

Dr VAT (expense rise)
Cr receivable (asset rise)

Question 13

What is the double entry for contra and dishonoured checks

Answer 13

Contra:
Dr payable Cr receivable

Dishonoured checks :
Dr receivable Cr cash

Question 14

What are the three main reasons for bank reconciliation to be needed

Answer 14

1) unrecorded items in cash at bank Ledger- interest or dishonoured checks

2) timing difference- unpresented cheque (paid by us, but not cashed in) lodgements (paid by them, but not cashed in)

3) Error

Question 15

In a pro forma, reconciliation and bank reconciliation statement what should be the same

Answer 15

We want the revised balance b/f in the pro forma to match the balance of cash at bank (revised) in bank reconciliation

Question 16

How would you create a T table for VAT?

Answer 16

On the debit side purchases
on the credit side sales

Dr purchase
Cr sales

Question 17

When looking at a financial statement, what is carried forward and brought forward?

Answer 17

For receivables brought forward is current year

For payables forward is prior year

Question 18

When looking at the receivable or payable ledger, what is brought forward? (Double entry)

Answer 18

Receivables:
Dr Brought forward
Cr carried forward

Payables:
Dr carried forward
Cr brought forward

Question 19

What is output tax and input tax

Answer 19

Output tax is charged on sales

Input tax is charged on purchases

Question 20

How does a business account for discounts from the customer and from the supplier?

Answer 20

Discounts allowed reduce the amount receivable from the customer discount received reduce the amount payable to supplier

Question 21

In a receivables account (ledger) what goes in the credit side?

Answer 21

Balance brought forward
Cash received
Irrecoverable debts
Discount allowed
Contra
Balance carried forward

Black CID Centre back

Question 22

For a payable’s account (ledger) what goes in the credit side?

Answer 22

Balance brought forward
Credit purchases less returns
Refund of debit balances
Balance carried forward

Black CRB check

Question 23

When approaching reconciliation, what does a difference in the supply statement mean? What does the difference in the payable ledger mean?

Answer 23

Supplier statement implies problem lies with them (no need to make change)

Payable ledger implies error in our account system (make change to payable ledger)