Accounting part 1

Question 1

What is a sole trader?

Answer 1

A form of business where only 1 person owns the business and usually runs the business too.
A sole trader is fully responsible for the debts of the business and also take all the profits of the business.

Question 2

What is a service business?

Answer 2

Where businesses provide a service in exchange for payment.

Question 3

What is a trading business?

Answer 3

Where goods (Trading stock) are sold to customers in exchange for payment. (Supermarkets)

Question 4

What is capital?

Answer 4

The money used to start a business by the owner.

Question 5

What is owner’s equity?

Answer 5

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

Question 6

What are assets?

Answer 6

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

Question 7

What are fixed (non-current) assets?

Answer 7

Land and buildings, vehicles, equipment bought to operate a business efficiently. Their value usually does not change much over a short period of time and are expected to last for a long period of time. They are not bought or sold regularly. (Assets kept longer than 12 months)

Question 8

What are current assets?

Answer 8

Money in the bank, a cash float/petty cash, as well as trading stock the business has for sale and money owed to the business by debtors. (Assets kept for les than 12 months)

Question 9

What is income?

Answer 9

Money earned/received by a business.

Question 10

What are expenses?

Answer 10

The daily running costs of a business.

Question 11

What is profit?

Answer 11

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

Question 12

What is a liability?

Answer 12

Money owed to a person/business/bank.

Question 13

What are drawings?

Answer 13

What the owner takes out of the business for personal use.

Question 14

What is a transaction?

Answer 14

A business deal.

Question 15

What is a source document?

Answer 15

The first document on which a transaction is recorded.

Question 16

What types of transactions are recorded?

Answer 16

Capital received.
Current Income
Rent Income

Question 17

What is stationery expense?

Answer 17

Pens and paper.

Question 18

What is rent expense?

Answer 18

What is paid for premises.

Question 19

What is wages expense?

Answer 19

The weekly payment to staff.

Question 20

What is salaries expense?

Answer 20

The monthly payment to staff.

Question 21

What is advertising expense?

Answer 21

Payment to advertisers for advertising.

Question 22

What is telephone account expense?

Answer 22

Payment to calls made.

Question 23

What is water and electricty expense?

Answer 23

Payment to the municipality.

Question 24

What is fuel expense?

Answer 24

Petrol, Diesel, etc.

Question 25

What is materials/consumable goods expense?

Answer 25

The things used when rendering (providing) a service.

Question 26

What are non-current liability?

Answer 26

Liabilities that exist for a period of time longer than 12 months.

Question 27

What is mortgage bond (Liability)?

Answer 27

A loan to buy a business premises, building usually over 10 years.

Question 28

What is car finance (Liability)?

Answer 28

A loan to buy a car, usually over 5 years.

Question 29

What are loans?

Answer 29

When you need to pay back a loan over a longer period than a year.

Question 30

What are current liabilities?

Answer 30

Short term liabilities that will be repaid within 12 months.

Question 31

What are creditors (Liability)?

Answer 31

A supplier the business buys goods from on credit.

Question 32

What is bank overdraft (Liability)?

Answer 32

When the bank allows the business to spend more money than there is in their bank account.

Question 33

What is tax?

Answer 33

Money owed to the government on personal income or profits earned in the business.