Advanced Bookkeeping

Question 1

Accounting records should be…

Answer 1

1. Accurate
2. Up-to-date
3. Secure
4. Confidential

Question 2

Books of Prime Entry

Answer 2

1. Sales day book
2. Sales returns day book
3. Purchases day book
4. Purchases returns day book
5. Cash book
6. Journal

Question 3

What is capital expenditure

Answer 3

The purchase on non-current assets for us by the business

Question 4

What is revenue expenditure

Answer 4

the expenses incurred in the day-to-day running of the business

Question 5

What is a control account

Answer 5

A control account is a summary account or master account, which records the totals of entries to a particular set of accounts

Question 6

What are the 4 main control accounts ?

Answer 6

1. Sales ledger control account
2. Purchases ledger control account
3. Value Added Tax control account
4. Payroll control account

Question 7

Definition of a Trial balance

Answer 7

A trial balance is a list of balances of every account from the general ledger (including cash book) setting out debit balances and credit balances in separate columns

Question 8

What is the purpose of a trial balance ?

Answer 8

The purpose of a trial balance is to -
A. check the accuracy of the double-entry bookkeeping (i.e that the total of debit entries equals the total of the credit entries)
B. Form the basis for the preparation of the year-end financial statements of the business

Question 9

What are the errors not revealed by the trial balance?

Answer 9

• Error of Principle
• Error of Commission
• Error of Original Entry
• Error of Omission
• Reversal of Entries

Question 10

What is the error of principle?

Answer 10

Where the transaction has been entered in the wrong type of account
I.E - Fuel for the company van was entered as a debit to the Vehicles Account isn’t it should have been entered into the Vehicle Expenses Account

Question 11

What is the Error of Commission?

Answer 11

Where the transaction has simply been entered into the wrong account
I.E - the sales of goods on credit was entered in to the wrong customer account

Question 12

What is the Error of Original Entry?

Answer 12

The correct accounts have been used with the correct debit and credits but the amount has been entered incorrectly usually caused by a ‘reversal of figures’
I.E - the transaction amount was £54 but has been entered into the accounts as £45

Question 13

What is the Error of Omission

Answer 13

The transaction has been completely omitted from the accounting records

Question 14

What is the Reversal of Entries?

Answer 14

Where the debit and credit entries have been made in the correct accounts but on the wrong side

Question 15

What is an accrual of expenses

Answer 15

An accrual is an amount due or a calculation of an amount due in an accounting period which is unpaid at the end of that period

Question 16

In the financial statements accrued expenses are shown as

Answer 16

Added to the expense account shown in the trial balance before it is listed in the SoPL (debit entry I’m adjustments in the extended trial balance)
Shown as a liability in the year end SoFP (credit entry on the accruals row and shown as a credit on the SoFP)

Question 17

What is a prepayment of expenses

Answer 17

A prepayment is a payment made on advance or the calculation of an amount paid in advance (pro rata) of the accounting period to which it relates

Question 18

In the financial statements prepaid expenses are shown as

Answer 18

Deducted from the expense account shown in the TB before listed in the SoPL (recorded as a credit entry on the expenses row)
Shown as an asset in the year end SoFP (debit entry on the prepayment row in the adjustments and then showings a debit in the SoFP)