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AAT Level 2 > Bookkeeping Transactions > Flashcards

Bookkeeping Transactions Flashcards

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1
Q

Income Statement

A

Summarises the effects of trading (buying and selling goods) and shows the financial performance of the business for the accounting year.

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2
Q

Sales

A

Income generated from trading activities (when goods are sold)

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3
Q

Sales Returns

A

When SOLD goods are returned by the customer

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4
Q

Purchases

A

The cost of buying goods for resale (when goods are bought)

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5
Q

Purchase Returns

A

when goods bought are returned to the supplier

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6
Q

Gross Profit

A

The profit left in the business after the cost of sales have been deducted from the sales

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7
Q

Expenses

A

The day to day running costs of the business, e.g. stationery, rents and rates, motor expenses, heat and light

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8
Q

Net Profit (or Loss)

A

The profit (or loss) left in the business after all expenses have been deducted

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9
Q

Statement of Financial Position

A

A balance sheet

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10
Q

Assets

A

Good things which your business wants more of if possible. You wish to own them

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11
Q

Non-Current Assets

A

Assets held in the business for the long term. 4 types: land and buildings (L&B), plant and machinery (P&M), motor vehicles (MV), fixtures and fittings (F&F)

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12
Q

Current Assets

A

Short term assets which you hope will quickly convert into cash. 4 types: inventories, receivables, cash (includes cash at till), bank (includes money at thee bank)

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13
Q

Inventories

A

Goods which have been bought in for resale which remain unsold at the year end

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14
Q

Receivables

A

Customers who have received credit terms who owe us money at the year end

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15
Q

Liabilities

A

Bad things - you owe someone for these (likely money). 5 types: payables, loan, mortgage VAT or HMRC Creditor, Overdraft

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16
Q

Payables

A

suppliers who have supplied us with goods and remain unpaid at the year end - we owe them money

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17
Q

Capital

A

The amount the owner puts into the business (the amount thee business owes to the owner

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18
Q

Drawings

A

The amount the owner takes out of the business for personal use

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19
Q

Dual Effect

A

Every transaction has two financial effects: gain thee asset, lose the cash

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20
Q

Separate Entity

A

The owner of the business is, for accounting purposes, a completely separate entity from the business itself - why we have a CAPITAL account

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21
Q

Accounting Equation

A

Assets - Liabilities = Capital + Profit - Drawings

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22
Q

Double Entries - Sale Cycles

A

Cash sale - DR Cash, CR Sales
Credit sale - DR Debtor A/C, CR Sales
Sales return - DR Sales Returns, CR Debtors A/C
Debtor pays - DR Cash, CR Debtors A/C

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23
Q

Double Entries - Purchase Cycle

A

Cash purchase - DR Purchases, CR Cash
Credit purchase - DR Purchases, CR Creditors A/C
Return to supplier - DR Creditors A/C, CR Purchase Returns
Pay creditor - DR Creditors A/C, CR Cash

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24
Q

Double Entries - 2 Other Must Know Ones

A

Capital invested - DR Cash, CR Capital

Money paid to owner - DR Drawings, CR Cash

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25
Q

Sole Trader

A

Organisations that are owned and operated by one person

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26
Q

Partnership

A

Organisations owned by two or more persons working in common with a view to making a profit

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27
Q

Company

A

Organisations recognised in law as ‘persons’ in their own right. May own assets and incur liabilities in its own name. The accounting of these organisations must meet certain minimum obligations imposed by legislation, eg. via company law and other regulations

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28
Q

Management Accounts

A

usually prepared on a monthly basis to present timely financial and statistical information to business managers. This aids managers to run the business more effectively by making day-to-day and short-term decisions.

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29
Q

Financial Accounts

A

Prepared annually, mainly for the benefit of people outside the management of the business, such as the owners of the business, HM Revenue and Customs, banks, customers, suppliers and the government

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30
Q

Sales Revenue

A

income generated from the trading activities of the business

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31
Q

Cost of Sales

A

the cost of buying or producing the goods for resale

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32
Q

Gross Profit

A

the profit remaining, after the cost of sales have been deducted from sales revenue

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33
Q

Sundry Income

A

other types of income that aren’t generated by the primary trading activities of the business

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34
Q

Expenses

A

the day to day running costs of the business

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35
Q

Net Profit or Loss

A

the profit or loss remaining after expenses have been deducted

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36
Q

Asset

A

something owned or controlled by a business, available for use in the business

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37
Q

Non-Current Asset

A

an asset which is to be used for the long term in the business and not resold as part of the trading activities, such as the purchase of a delivery van

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38
Q

Current Asset

A

a short-term asset of the business which is to be used in the business in the near future, such as cash or something to be converted to cash

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39
Q

Receivable

A

An example of a current asset, someone who owes the business money, such as a credit customer

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40
Q

Non-Current Liability

A

an amount owed by the business and due to be paid in the longer term (after 12 motnhs)

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41
Q

Liability

A

an amount owed by the business, i.e. an obligation to pay money at some future date

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42
Q

Payable

A

an example of a liability - someone the business owes money to, such as a credit supplier

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43
Q

Capital

A

the amount which the owner has invested in the business - owed back to the owner and is therefore a special liability of the business

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44
Q

Drawings

A

amounts withdrawn by the owner for their own personal use, they may be of cash or items of inventory

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45
Q

Capital Expenditure

A

the purchase of, or improvement of, non-current assets

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46
Q

Revenue Expenditure

A

the day to day running costs of the business

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47
Q

Capital Income

A

income from the sale of capital assets of the business

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48
Q

Revenue Income

A

income generated from the sale of goods or services

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49
Q

Statement of Profit or Loss

A

Summarises the effects of trading - income and expenses, shows the financial performance of the business for a given time period, usually the last 12 months

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50
Q

Statement of Financial Position

A

Presents a snap shot of the financial position of the business at a specific moment in time, summarising the assets and liabilities of a business

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51
Q

Things you Will Find on a Statement of Profit or Loss

A 
Sales revenue
Cost of sales
Gross profit
Sundry income
Expenses
Net profit or loss
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52
Q

Sales Revenue

A

Income generated from the trading activities of the business

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53
Q

Cost of Sales

A

the cost of buying or producing the goods for resale

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54
Q

Sundry Income

A

Other types of income that are not generated by the primary trading activities of the business

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55
Q

Things you Find on a Statement of Financial Position

A 
Asset
Non-current asset
Current asset
Receivable
Liability
Non-current liability
Current-liability
Payable
Capital
Drawings
56
Q

What’s Represented on the Debit Side of a Ledger Account

A

Increases to an asset
Decreases to a liability
Increases to an item of expense
Decreases to an item of income

57
Q

What’s Represented on the Credit Side of a Ledger Account

A

Increase to a liability
Decrease to an asset
Increase to an item of income
Decrease to an item of expense

58
Q

DEAD CLIC

A

DRs increase Expenses, Assets, Drawings, CRs increase Liabilities, Incomes, Capital

59
Q

Procedure for Balancing a Ledger Account

A

1) Total debit and credit sides, make a note of each total
2) Insert the higher total as the total on both sides, leaving a line beneath the final entry on each side
3) Side with smaller total - insert the figure needed to make this column add to the total - Bal c/d
4) On opposite side, below the total insert the same figure, refer to it as Bal b/d

60
Q

Examples of Assets (DR)

A 
Land and buildings
Machinery
Fixtures and fittings
Motor vehicles
Computer equipment
Inventory
Receivables
Cash at bank
Cash in hand
VAT receivable
61
Q

Examples of Liabilities (CR)

A

Payables
Loan
Bank overdraft
VAT payable

62
Q

Examples of Income (CR)

A 
Sales revenue
Rental income
Commission received
Discounts received
Interest received
63
Q

Expenses (DR)

A 
Purchases
Interest paid
Rent and rates
Telephone
Discounts allowed
Electricity
Travel
Stationery
Repairs and renewals
Motor expenses
Wages and salaries
64
Q

How is VAT Charged?

A

Charged on the taxable supply of goods and services in the United Kingdom by a taxable person in the course of a business carried on by them

65
Q

VAT (Sales Tax)

A

a consumption tax added to a product’s selling price. It represents a tax on the “value added” to the product at each stage of a production or supply process

66
Q

Output Tax

A

tax charged on the sale of goods and services

67
Q

Input Tax

A

tax paid on the purchase of goods and services

68
Q

Net of VAT

A

The total amount, excluding VAT

69
Q

Gross of VAT

A

The total amount, including VAT

70
Q

Trade Discount

A

a definite amount that is deducted from the list price of the goods for the supplies to some customers, with the intention of encouraging and rewarding customer loyalty

71
Q

Bulk Discount

A

deducted from the list price of goods and disclosed on the invoice, but is given by a supplier for sales orders above a certain quantity

72
Q

Prompt Payment Discount

A

also known as settlement or cash discounts, offered to customers in order to encourage the early payment of invoices

73
Q

Double Entry for a Credit Sale including VAT

A 
DR Receivables (gross)
CR VAT
CR Sales (net)
74
Q

How VAT is Calculated

A

calculated on the net amount of the transaction after the deduction of bulk and trade discounts

75
Q

Double Entry for Payment from Receivable

A

DR - bank account

CR - receivable account

76
Q

Double Entry for Discount from Customer

A

DR - discount allowed account (net amount)
DR - VAT account (VAT amount)
CR - receivable account (gross amount)

77
Q

Credit Purchases

A

Goods and/or services are provided along with an invoice that will specify when payment is due. Credit terms can differ and are usually by prior agreement, following credit checks

78
Q

Double Entry for Credit Purchase including VAT

A

DR - purchases account (net amount)
DR - VAT account (VAT amount)
CR - payables account (gross amount)

79
Q

Double Entry for Payment Owed to Credit Supplier

A

DR - payable account

CR - bank account

80
Q

Double Entry for Discount Received from Supplier

A

DR - payables (gross amount)
CR - VAT acc (VAT amount)
CR - discounts received acc (net amount)

81
Q

Sales Day Book

A

a list of the sales invoices that are to be processed for a given period (e.g. a week)

82
Q

Purchases Day Book

A

a list of the purchase invoices that are to be processed for a given period (e.g. a week)

83
Q

Cash Receipts Book

A

the receipts half of the full cash book. All money that is paid into the bank is recorded in the cash receipts book. Receipts may be in the form of cash, cheque, credit/debit card receipts, or receipts automatically paid into the bank

84
Q

Cash Payments Book

A

the payments half of the full cash book. It is where you record the payments made out of the bank, perhaps cheques, sent to your suppliers or any other cash expenditure from the bank.

85
Q

Discounts Allowed Day Book

A

used to record the discounts that have not been deducted at the point of the invoice being recorded in the sales day book but instead were offered on a conditional basis (i.e. prompt payment discounts allowed to credit customers)

86
Q

Discounts Received Day Book

A

used to record the discounts that have not been deducted at the point of the invoice being recorded in the purchases day book but instead were offered on a conditional basis (i.e. prompt payment discounts received from credit suppliers)

87
Q

Petty Cash Book

A

records the cash receipts into the petty cash tin (which just replenish the amount in the tin so that cash is always available for small items of expense). It also records the cash payments for expenses that are made from the petty cash tin.

88
Q

General Ledger

A

contains all of the ledger accounts for recording transactions occurring within an entity (main or nominal ledger)

89
Q

Sales Ledger Control Account (SLCA)

A

contains the total value of all the invoices and credit notes issued to and cash receipts from credit customers for a given period

90
Q

Purchases Ledger Control Account (PLCA)

A

contains the total value of all the invoices and credit notes received from and cash payments made to credit suppliers for a given period

91
Q

Subsidiary Ledger

A

provides details behind the entries in the general ledger. They are maintained for individual receivables and payables, does not form part of the double entry

92
Q

Subsidiary Sales Ledger

A

AKA ‘sales ledger’, a set of accounts for individual receivables; individual entries in the individual receivable accounts

93
Q

Subsidiary Purchases Ledger

A

AKA ‘purchases ledger’, a set of accounts for individual payables; individual entries in the individual payable accounts

94
Q

Double Entry in the General Ledger

A

Receivables - now SLCA

Payables - now PLCA

95
Q

Petty Cash

A

the small amount of cash that most businesses hold in order to make small cash payments

96
Q

Receivable (Customer) Statement

A

a statement that shows all the invoices and credit notes that have been sent to a particular credit customer for that month, together with any amounts outstanding from previous months; also details any payments received from credit customers

97
Q

Payable (Supplier) Statement

A

a statement that shows all the invoices and credit notes that have been received from a particular credit supplier for that month, together with any amounts outstanding from previous months. The statement also details any payments sent to the credit supplier

98
Q

Remittance Advice

A

a blank document that the customer completes when making a payment to the supplier, shows the total payment being made and which invoices (less credit notes) the payment is paying off

99
Q

Cash Book

A

a record of cash receipts and payments that conforms to the double entry system

100
Q

Analysed Cash Book

A

a cash book with additional columns for analysing principal sources and payments for cash

101
Q

Petty Cash Voucher

A

an internal document that details thee business expenditure an employee has incurred out of his own money

102
Q

Cash Book

A

a record of cash receipts and payments that conforms to the double entry system

103
Q

Analysed Cash Book

A

a cash book with additional columns for analysing principal sources and payments for cash

104
Q

Imprest System

A

business decides on a fixed level of petty cash (e.g. £100). Cash is withdrawn from the bank to replenish the amount paid out. Business decides on the fixed amount, good practice for record keeping and keeping track of unauthorised payments

105
Q

Non-Imprest System

A

where a round sum amount of cash is withdrawn from the bank to top up the petty cash. the sum taken out is regardless of the value of expenses paid since the last top up

106
Q

Cash

A

money in coins or notes

107
Q

Credit Card

A

a plastic card that is issued by a bank allowing the holder to purchase goods and services on credit

108
Q

Debit Card

A

a plastic card that is issued by a bank allowing the holder to transfer money electronically from their bank account when making a purchase of goods and services

109
Q

Cheque

A

an order to a bank written on a specially printed form that states a sum to be paid from the drawer’s (account holder’s) account

110
Q

BACS

A

BACS (Bankers’ Automated Clearing Services) is an electronic system to make payments directly from one bank account to another. They’re mainly used for direct debits and direct credits. Transfers usually take three working days

111
Q

Faster Payment

A

Faster Payments Services (FPS) is an electronic system which makes payments directly from one bank account to another. Transfers typically take a few seconds

112
Q

Standing Order

A

an instruction to a bank by an account holder to make regular fixed payments to a particular person or organisation

113
Q

Direct Debit

A

an instruction to a bank by an account holder authorising the organisation the account holder wants to pay, to collect varying amounts from the account. Advanced notice of the amounts and dates of collection must be given

114
Q

Purchase Order

A

a buyer generated document that authorises a purchase transaction

115
Q

Sales Order

A

a seller generated document that authorises a sale to a customer, issued after the receipt of a purchase order

116
Q

Delivery Note

A

a document accompanying goods dispatched to a customer explaining what the delivery contains

117
Q

How Delivery Notes are Issued

A

3 copies
1st part to customer
2nd part to supplier
3rd part to delivery organisation

118
Q

Goods Received Note

A

an internal document completed by the purchaser that records the details of goods received and contains similar information to a delivery note

119
Q

Sales Invoice

A

a document that itemises a transaction between a buyer and a seller. A sales invoice can be simply defined as the request for the buyer to make payment for goods sold or services provided by the seller

120
Q

VAT (Sales Tax)

A

a consumption tax added to a product’s selling price. It represents a tax on the ‘value added’ to the product at each stage of a production or supply process

121
Q

Output Tax

A

the tax charged on the sale of goods and services

122
Q

Input Tax

A

the tax paid on the purchase of goods and services

123
Q

Net of VAT

A

the total amount excluding VAT

124
Q

Gross of VAT

A

the total amount including VAT

125
Q

Purchase Invoice

A

the customer version of a sales invoice - a document that itemises a transaction between a buyer and a seller

126
Q

Credit Note

A

document issued by a supplier to a customer cancelling part or all of a sales invoice

127
Q

Goods Returned Note

A

document sent to the supplier by the customer detailing the goods returned and reason(s) for the return being made

128
Q

Code

A

a system of numbers, letters and symbols designed to be applied to a classified set of items, to give a brief, accurate reference, which helps entry to the accounting records, collation and analysis

129
Q

Ledger Code

A

a unique reference given to different types of income, expenses, assets and liabilities. It may also be referred to as a general ledger (GL) or nominal code

130
Q

Customer Account Code

A

a unique reference given to each individual customer of an organisation

131
Q

Supplier Account Code

A

a unique reference given to each individual supplier of an organisation

132
Q

Product Code

A

a unique reference given to each type of product of an organisation

133
Q

Alphabetical Codes

A

consist of letters. If ordering alphabetically the order is a system whereby characters are placed in order of their position in the conventional ordering of an alphabet

134
Q

Numerical Codes

A

consist of numbers. If ordering numerically it can be ascending or descending

135
Q

Alphanumerical Codes

A

a combination of alphabetic and numeric characters

136
Q

Remittance Advice

A

a slip returned by the customer when paying an invoice so as to identify what the payment is for

AAT Level 2 (3 decks)

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