Bookkeeping Transactions

Question 1

What are the 5 elements that make up the accounting system?

Answer 1

1. Business Transaction
2. Business Document
3. Books of prime entry
4. Ledger Accounts
5. Trial Balance

Question 2

What are the ‘Books of Prime Entry’?

Answer 2

A book of prime entry is where a transaction is first recorded. There can be several books of prime entry.

Question 3

What are ‘Books of Prime Entry’ also known as?

Answer 3

Day books

Question 4

What is a trial balance?

Answer 4

A trial balance is a list of all of the ledger accounts in the accounting system and is used as a control to check that transactions have been recorded correctly in the double entry system prior to the preparation of financial statements.

Question 5

What are the business documents for a credit transaction and do they come from Customer or Seller?

Answer 5

“1. Price Quotation (Seller)

2. Purchase Order (Customer)
3. Sales Order (Seller)
4. Delivery Note + Goods (Seller)
5. Sales Invoice (Seller)
6. Credit Note (Seller)
7. Payment (Customer)”

Question 6

Why is a Price Quotation document important?

Answer 6

The price quotation is an important document as this is the price that your organisation is now contracted to sell the goods at. Appropriate authorisation is important.

Question 7

What is the definition of a purchase order?

Answer 7

a buyer generated document that authorises a purchase transaction

Question 8

What is the definition of a sales order?

Answer 8

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

Question 9

A sales order confirms the terms on which goods will be sold including: (list the 4 items)

Answer 9

“1. Quantity/Type of goods or service

2. Date of supply
3. Delivery Address
4. Price and payment terms including any discounts given or offered.”

Question 10

What is the definition of a delivery note?

Answer 10

A document accompanying goods despatched to a customer explaining what the delivery contains.

Question 11

What are the three parts to a delivery note?

Answer 11

“1. This is kept by the customer in order to compare to the purchase order and then to the sales invoice.

2. This is signed and returned to the supplier of the goods as evidence that the goods have been received by the customer in good condition.
3. This is signed and kept by the delivery organisation such as a courier, as evidence that they have delivered the goods and that the customer has received them.”

Question 12

What 4 things should be included on a goods received note?

Answer 12

“1. Supplier Name

2. Quantity/type of goods or services
3. The associated purchase order reference and delivery note number
4. the name and reference of the carrier for delivery (if different from the supplier)”

Question 13

What is the definition of a sales invoice?

Answer 13

An invoice is 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.

Question 14

If the business is VAT registered, what must be shown on the sales invoice?

Answer 14

VAT Registration Number

Question 15

Are prices on the sales invoices inclusive or exclusive of VAT?

Answer 15

Exclusive of VAT, as that is the true selling price to the business.

Question 16

What is input tax?

Answer 16

Input tax is the tax paid on the purchase of goods and services

Question 17

What is the definition of VAT (sales tax)?

Answer 17

VAT (Sales Tax) is a consumption tax added to a products selling price. It represents a tax on the ‘value added’ to the product at each stage of a production or supply process.