Accounts Form 4

Question 1

Accruals

Answer 1

Amounts owing at the end of the financial year resulting to liabilities and so they are showed in the current liabilities section

Question 2

Accruals concept

Answer 2

We should always include the amount that should have been paid/received and not the amount actually paid/recieved

Question 3

Allowance for depreciation account

Answer 3

Where depreciation of assists is recorded and accumulated

Question 4

Allowance for doubtful debts

Answer 4

Used to record and adjust the estimate of the amounts of receivables that may be lost to bad debts

Question 5

Bank reconciliation statement

Answer 5

Prepared when the bank balance in the cashbook is different to the bank statement sent by the bank, prepared to make sure the differences are due to timing differences and not errors

Question 6

Bank statement

Answer 6

Statement sent by bank to all account holders showing all transactions affecting the bank account for a period

Question 7

Capital employed

Answer 7

Total amount of capital used to make profits

Total assets - current liabilities

Question 8

Compensating errors

Answer 8

2 unrelated errors that affect trial balance (errors that cancel out) not affecting trial balance

Question 9

Depreciation

Answer 9

Loss in value of a non current asset through use and passing of time

Question 10

Direct costs

Answer 10

(Manufacturing) costs that are directly related to produce a good ex: raw materials

Question 11

Dishonoured cheque

Answer 11

Cheque that was received by bank but cannot be caused due to : money availability, no signature, no date , words don’t match amounts

Question 12

Error of commission

Answer 12

Wrong account of same type used : t mine, t mone

Question 13

Error of omission

Answer 13

Error where a transaction was completely left out

Question 14

Error of original entry

Answer 14

Wrong amounts in both accounts

Question 15

Error of principle

Answer 15

Wrong account of wrong type

Question 16

Fixed costs

Answer 16

(Manufacturing ) don’t change with level of production : rent

Question 17

Manufacturing account

Answer 17

Prepared to calculate cost of making goods for the year

Question 18

Net current assets/working capital

Answer 18

Calculates availability of assets that can quickly change to cash to do business with, after short term debts are paid
Current assets - current liabilities

Question 19

Non current liabilities

Answer 19

Debts that must be paid back after more than one year

Question 20

Overheads

Answer 20

Manufacturing - indirect factory costs, factory expenses that are Indirectly related to making the product

Question 21

Partnership

Answer 21

Business between 2-20 people

Question 22

Partnership deed

Answer 22

Agreement between partners about how profit/losses will be shared, interest to be paid on capital, interest to be charged on drawings and partners salaries to be paid

Question 23

Prepayment

Answer 23

Amount of expense or revenue that was paid/received before it was due. In advance

Question 24

Prime cost

Answer 24

Manufacturing- cost of making product before overheads are added

Question 25

Production cost -

Answer 25

Manufacturing- total cost of producing the goods in a year

Question 26

Reducing balance method

Answer 26

Calculated as a % of NBV

Question 27

Revaluation method

Answer 27

Value at start+ new assets -disposals -value at end

Question 28

Standing order

Answer 28

Permission given to the bank to pay a bill or transfer to another account through the bank account

Question 29

Straight line method

Answer 29

Depreciation equal per year, used for assets that are used as much when they are new as when they are older. Calculated as a percentage of cost or using
Cost - estimated resale value divided by estimated years of use

Question 30

Statement of corrected net profit

Answer 30

Statement prepared to recalculate the net profit after errors have been corrected

Question 31

Suspense account

Answer 31

Account opened when trial balance doesn’t agree. Used in correcting errors that affect the trial balance agreement and should balance out when all errors have been corrected

Question 32

Unpresented cheques

Answer 32

Bank reconciliation - cheque paid and credited in the cashbook ha snot been cashed so won’t appear on bank statement

Question 33

Variable cost

Answer 33

Manufacturing - costs that change with level of production e.g.- raw materials

Question 34

Work in progress

Answer 34

Manufacturing - goods still in the process of production at the beginning or end of the year

Question 35

Working capital / net current assets

Answer 35

Calculates availability of assets that can quickly change to cash to do business with, after short term debts are paid
Current assets- current liabilities