Accounting UK—IGCSE

Question 1

Define account

Answer 1

A list of all transactions relating to a person, property, income, or expenses

Question 2

What are the two formats an account can be represented as?

Answer 2

• T-format:
  _____________________________
  Debit (Dr) I Credit (Cr)
  I
  I
  I
• Running balance format:
  ________________________________________________
  I Date I Details I Debit I Credit I Balance I
  I I I I I I
  I I I I I I

Question 3

Define book-keeping

Answer 3

Recording of business data in chronological order (date wise).

Question 4

Define accounting

Answer 4

The language of business; the purpose is to provide a means of recording, classifying, summarising (trial balance), interpreting and reporting data.

Question 5

Define assets

Answer 5

Resources owned by a business (having economic value)

Question 6

What are the two types of assets?

Answer 6

• Fixed Assets/Non-current Assets
• Current Assets (used up in one year)

Question 7

What are the two types of fixed assets?

Answer 7

• Tangible: Can be touched and felt (e.g cars, furniture)
• Intangible: Can be felt only (e.g Brandnames, copyright, goodwill (reputation)

Question 8

What is meant by liabilities?

Answer 8

The amount owed to others

Question 9

There are two types of liabilities; name them.

Answer 9

• Long-term Liabilities: Payable after a period of one year
• Short-term Liabilities: Payable within one year

Question 10

Define capital (also known as owner’s equity)

Answer 10

Amount of cash, goods or assets which is initially invested by proprietor (owner) while commencing.

Question 11

What are three ways in which the accounting equation can be expressed?

Answer 11

• Assets = Liabilities + Capital/Owner’s Equity
• Capital/Owner’s Equity = Assets - Liabilities
• Liabilities = Assets - Capital/Owner’s Equity

Question 12

Define drawings

Answer 12

The amount of cash withdrawn by the owner from the business for personal use. (It decreases capital)

Question 13

Define trade

Answer 13

Purchase and sale of goods and services

Question 14

Define purchases

Answer 14

Goods bought for resale

Question 15

Define sales

Answer 15

When purchased goods are sold

Question 16

Define return outwards/purchases return

Answer 16

Goods returned to supplies

Question 17

Define return in/sales return

Answer 17

Goods returned by customers

Question 18

Define Stock/Inventory

Answer 18

Unsold goods at the end of a period

Question 19

Define Expenses

Answer 19

Money spent on goods and services

Question 20

Define discount

Answer 20

Concession or rebate allowed by a business

Question 21

What are the two types of discounts?

Answer 21

• Trade Discount: Discount on buying and selling on list/invoice price
• Cash Discount: Discount given or received when money is paid or received

Question 22

What are the three types of accounts?

Answer 22

• Personal: Related to persons and organisations. E.g. Trade receivables, banks, etc.
• Real: Related to assets of business
• Nominal: Expenses, losses, incomes and gains.

Question 23

What is a person?

Answer 23

Anything that has identity is known as a person

Question 24

What is Balance Sheet?

Answer 24

List of assets, liabilities and capital on a specific date

Question 25

What is a trial balance?

Answer 25

A list of balances on all the accounts in the business.

Question 26

What are the items that will always appear on the debit side?

Answer 26

• Assets
• Expenses
• Purchases
• Sales return (return in)
• Drawings

Question 27

What are the items that will always appear on the credit side?

Answer 27

• Owner’s Equity/Capital
• Liabilities
• Sales
• Purchases return (return out)
• Incomes

Question 28

There are two types of errors. What are they?

Answer 28

• Errors not disclosed
• Errors disclosed

Question 29

There are 6 types of errors that are not disclosed. Name them.

Answer 29

1. Error of omission
2. Error of commission
3. Error of principle
4. Compensating error
5. Error of original entry
6. Error of complete reversal

Question 30

What is error of omission?

Answer 30

Transactions that are completely excluded from the books of accounts

Question 31

What is error of commission?

Answer 31

Transactions recorded in wrong persons account

Question 32

What is error of principle?

Answer 32

Error made in the account on the same side

Question 33

What is compensating error?

Answer 33

Two errors of the same amount on two sides cancel each other out

Question 34

What is error of original entry?

Answer 34

When wrong amount is entered in both debit and credit

Question 35

What is error of complete reversal of entries?

Answer 35

When debit is recorded as credit and credit as debit