Better T1 Doyle Ch 1 7 to 8 Flashcards
Why must a business invest in non-current assets (NCA)?
To provide satisfactory service to customers.
Why should all cash receipts be banked daily?
Minimizes the risk of theft from business premises.
What happens if a business invests too much in NCA?
Assets may not be used efficiently, leading to wasted resources.
Why should handling cash be separate from recording transactions?
Prevents theft and fraudulent record-keeping.
Why should handling inventory be separate from recording inventory transactions?
Prevents theft and fraudulent record-keeping.
Why should businesses prepare cash budgets regularly?
Ensures enough cash on hand to pay debts when due.
Why should large payments require approval from two employees?
Reduces fraud and unauthorized payments.
Why should inventory records be kept in a secure location?
Reduces theft risk.
Why should businesses use the perpetual inventory system?
Provides info on fast- and slow-moving stock and prevents stock shortages.
Why should businesses conduct credit checks on new customers?
Ensures only reliable customers get credit.
Why should businesses send monthly statements to debtors?
Keeps debtors informed about their transactions.
What should a business do when a debtor misses a payment?
Follow up immediately with reminders to settle the debt.
Why should handling cash be separate from recording debtor transactions?
Prevents employee theft and false accounting entries.
How does a business obtain assets?
Through capital (owner’s money) or debt (loans).
Why must loans be repaid on time?
To avoid excessive debt and interest costs.
What must businesses ensure when taking on debt?
That their debt level is not excessive.
