Chapter 1

Question 1

What is the aim of this unit?

Answer 1

Understand how to set up bookkeeping system
Process cust trans, supplier trans, receipts and payments, trans into ledger acc

Question 2

What do business docs include?

Answer 2

Petty cash vouchers, invoice, credit note, remittance advice, statement of account, bank statement

Question 3

How many examples of business docs are there?

Answer 3

6

Question 4

Example of books of prime entry?

Answer 4

Sales daybook, sales returns daybook, purchases daybook, purchases returns daybook, discounts allowed daybook, discounts receive day book

Question 5

What is the purpose of accounting?

Answer 5

To record and classify business transactions

Question 6

What are the different transactions a business may undertake?

Answer 6

Cash sales, cash purchases, credit sales, credit purchases, other expenses paid from the bank of by cash, paying cash into the bank, withdrawing cash from the bank and owners drawings.

Question 7

What does the name of the transaction or document depend on?

Answer 7

Whether we are looking at it from the POV of the seller or purchaser

Question 8

Example of a trans changing due to POV

Answer 8

Seller will call it a ‘sales invoice’ but buyer will call it a ‘purchase invoice’

Question 9

If the seller makes a sale and the purchases makes a purchase, is this the same trans?

Answer 9

Yes

Question 10

What type of business trans are there?

Answer 10

Credit sales, credit purchases, cash sales, cash purchases, drawings, withdrawing from bank

Question 11

Where is the trans entered after being recorded?

Answer 11

Entered into an accounting system

Question 12

What environment is a cash sale usually made in?

Answer 12

A retail environment

Question 13

What is given to customer after a trans in completed?

Answer 13

A receipt

Question 14

What completes a cash sale or purchase?

Answer 14

A receipt

Question 15

Who initiates a credit sale or purchase?

Answer 15

A seller receiving an order from customer

Question 16

How can the PO be made from the cust?

Answer 16

Via writing, phone, email or website

Question 17

What is the first decision to be made after a credit purchase request?

Answer 17

Whether to allow the customer credit for the sale

Question 18

What does offering credit to a customer invoice risk?

Answer 18

The goods are delivered with the promise of payment in the future

Question 19

What is the decision process for a credit sale dependant on?

Answer 19

Whether it’s a new or existing customer

Question 20

What checked should be made for existing credit customer?

Answer 20

Checks should be made to ensure that the new sale when added to the amount currently owing, does not take the customer over their credit limit.

Question 21

What is another check important for existing customers wanting credit?

Answer 21

There have been no problems recently with receiving payments from the customer

Question 22

What would be normal practise for a new customer wanting credit?

Answer 22

Customer needs to supply trade references; names of other businesses that they trade with on credit that can vouch for their creditworthiness.

Question 23

How else can you check a new customers creditworthiness?

Answer 23

Through an agency, or references from the customers bank.

Question 24

How can a business ensure they keep track of all sales, purchases and expenses?

Answer 24

The trans are recorded in an accounting system

Question 25

What is an overview of the accounting system?

Answer 25

Business trans
Business docs
Books of prime entry
Ledger accounts
Trail balance

Question 26

What is a business trans?

Answer 26

A credit sales, credit purchases, a cash sale, cash purchase, expenses paid from bank or with cash, drawings

Question 27

Example of a business document

Answer 27

Invoice

Question 28

What will be entered into the books or prime entry?

Answer 28

Details from the business doc (invoice)

Question 29

What happens when a trans is recorded in the book or prime entry?

Answer 29

It is transferred into the ledger accounts regularly.

Question 30

What are ledger accounts used for?

Answer 30

As part of the double entry accounting system.

Question 31

What is a trail balance?

Answer 31

A list of all the ledger accounts in the accounting system

Question 32

What is the trail balance used for?

Answer 32

As a control to check all transactions have been recorded correctly in the double entry system prior to preparation of the financial statements.