Book keeping level 2

Question 1

Purchase Account

Answer 1

Records goods purchased for resale during the financial year regardless of whether they have been paid for yet or not.

The balance of this account will go into the profit and loss account.

Question 2

Uk - Profit and loss account

Sales. Turnover. Operating profit.

USA???

Answer 2

USA

Statement of profit and loss

Revenue. Turnover. Profit from operations.

Question 3

UK

Balance

Fixed assets

Long term liabilities

Financed by (capital)

Stock

Debtors

Credits

Answer 3

USA

Non current assets

Non current liabilities

Equity

Inventory

Trade and other receivables

Trade and other payables

Question 4

The accounting equation

Answer 4

ASSETS - LIABILITIES = CAPITAL

Question 5

Cash discount = early settlement discount

Answer 5

VAT is calculated on the discounted goods to avoid over charging.

The reduced amount of VAT is added to the NET before the discount is deducted.

Question 6

SALES RETURNS ACCOUNT

Answer 6

Records goods that have been returned.
It is recorded Ina separate account so that managers can see the difference between sales achieved and the returns from them.

If they were both in the same account there would only be a running balance of sales less returns.

Question 7

SALES ACCOUNT

Answer 7

The sales account records turnover or revenue earned by the company from sales during the financial year regardless of whether it has been actually paid or not.

The figure will eventually go in the profit and loss account and will be used to calculate profit.

Question 8

BALANCE SHEET

Answer 8

Records capital transactions.

They affect long term assets, debt or capital.

E.g. Asset

Liability- the debt of the business that need to be paid

Capital - how a business is financed

Question 9

PROFIT AND LOSS ACCOUNT

Answer 9

Records revenue transactions which are from the day to day trading activities of the business

E.g.
Income/revenue generated 
Expenses 
Overheads
Costs incurred

Question 10

CAPITAL TRANSACTIONS

Answer 10

Usually affects long term debt or capital

Question 11

REVENUE TRANSACTIONS

Answer 11

Income and expenses generated from day to day trading

Question 12

CAPITAL

Answer 12

How the business is financed

Question 13

LIABILITIES

Answer 13

The debts of the business that need to be paid

Question 14

ASSET

Answer 14

Items that have a material value that belong to the business and can be turned into cash

Question 15

D
E
A
D

C
L
I
C

Answer 15

Debit
Expense
ASSET
Drawings

Credit
Liabilities
Income
Capital

Question 16

B/d

Answer 16

Opening balance

Is always dated the first day of the following month

The opening balance should always fall on the side of the account types 
D
E
A
D
C
L
I
C

Question 17

C/d

Answer 17

Closing balance

Is always dated the last day of the period (usually month)

Question 18

Cash book or bank account

Answer 18

The cash book is a book of prime entry