Accounting

Question 1

What is a sole trader?

Answer 1

A form of business where only one person owns the business and usually runs the business too.

Question 2

Name the 2 types of business.

Answer 2

Services business: where businesses provide a service in exchange for payment.

Trading business: Where goods are sold to customers in exchange for payment.

Question 3

Define “capital”.

Answer 3

The money used to start a business by the owner.

Question 4

Define “owner’s equity”.

Answer 4

The owner’s contribution to the business and how much the business is worth.

Question 5

What are assets?

Answer 5

Money or anything that you own that can be turned into money, including loans and other payments owed to you. Something of value that is durable, and is kept for a long time, that the business owns.

Question 6

What are fixed assets?

Answer 6

Their value doesn’t change much over a short period of time and is expected to last for a long time. Not bought/sold regularly. For example, land & buildings, vehicles, and equipment.

Question 7

What are current assets?

Answer 7

Assets kept for less than 12 months. For example, the money in the bak, cash float, trading stock, money owed to the business by debtors, etc.

Question 8

Define “income”.

Answer 8

Money earned/received by a business.

Question 9

Define “expenses”.

Answer 9

The daily running costs of the business.

Question 10

Define “profit”.

Answer 10

The amount of money left over after all the expenses have been paid.

Question 11

Define “liability”.

Answer 11

Money owed to a person/business/bank.

Question 12

Define “drawings”.

Answer 12

What the owner takes out the business for personal use.

Question 13

What is a transaction?

Answer 13

A business deal.

Question 14

Define “source document”.

Answer 14

The first document on which a transaction is recorded.

Question 15

Name the 2 types of income.

Answer 15

1. Current income.

2. Rent income.

Question 16

Name the 2 types of liabilities.

Answer 16

1. Non-current liabilities.

2. Current liabilities.

Question 17

The Double Entry System:

For each transaction, we will have a ________ and a _________ account.

Answer 17

1. Debit.

2. Credit.

Question 18

What is the accounting equation?

Answer 18

Assets = Owner’s Equity + Liabilitrs.

OR

Owner’s Equity = Assets - Liabilities.

OR

Capital + Income - Drawings - Expenses.

Question 19

List all the steps in the accounting cycle.

Answer 19

1. Transaction.
2. Source document.
3. Summarised in journals.
4. Totalled and posted to the general ledger.
5. Trial balance.
6. Financial statemnets.

Question 20

Name the 4 types of source documents.

Answer 20

1. Receipt.
2. Deposit slip.
3. Cash register Tape (CRT)
4. Cash invoice.

Question 21

Define “cheque counterfoil”.

Answer 21

A summary of the details of the cheque. An important source document used for recording transactions,

Question 22

Cash journals:

Cash _________ Journal (CRJ) in which all cash recieved are recorded.
Cash __________ Journal (CPJ) in which all cash payments are recorded.

Answer 22

1. Receipts.

2. Payments.

Question 23

In T accounts, Assets get bigger on the _________ side and smaller on the _______ side. Owners’ equity gets smaller on the _________ side and bigger on the ________ side.

Answer 23

1. Debit.
2. Credit.
3. Credit.
4. Debit.