Chapter 10 Flashcards

1
Q

sales cycle

A

sales order from customer detailing goods required

goods sent to customer together with goods delivery notes (GDN)

sales invoice sent to customer as request for payment

credit note issued if customer overcharged or goods returned

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2
Q

purchase cycle

A

purchase order sent to the supplier fro request of goods

goods received - GRN completed

purchase invoice received from supplier and matched to GRN

debit note may be issues in order to request credit note from supplier

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3
Q

What entries are made in the sales and purchase cycle?

A

only invoices and credit notes actually result in entries to the trade receivables and payable ledger accounts

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4
Q

What is a nominal ledger?

A

used to produce a trail balance and from this, a financial statement for the business

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5
Q

What does a nominal ledger contain?

A

separate ledger account for each type of income, expense, asset, liability or capital balance

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6
Q

What is a receivables ledger?

A

it contains a separate ledger account for each credit customer

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7
Q

What does a receivables ledger allow?

A

allowing the business to manage outstanding receivable balances and chase late payments

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8
Q

What should the total of all receivables accounts equal the balance to?

A

it should equal to the balance in the nominal ledger for trade receivables

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9
Q

What does the payable ledger contain?

A

a separate ledger account for each credit supplier allowing business to ensure that they make payments to suppliers within agreed credit terms

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10
Q

What should the total of all payable accounts equal the balance to?

A

it should equal the balance in the nominal ledger for trade payables

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11
Q

two examples of other modules that we might find in the accounting system

A

recording and processing payroll

maintaining a record of a non-current asset in the non-current asset register

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12
Q

inputs

A

source documents

standing data

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13
Q

source documents

A

documents that will trigger an accounting entry such as the generation of invoice to a customer

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14
Q

standing data

A

reference data that does not regularly change, such as name and registered address of the business, credit limited, VAT registration number and relevant VAT rates, employee PAYE tax coding etc.

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15
Q

accounting system processes

A

calculations

ledgers

journal entries

record keeping

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16
Q

outputs

A

trail balances

reports

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17
Q

the processing of transactions in the computerised accounting system

A

inputs

accounting system processes

outputs

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18
Q

processes

A

transactions that are undertaken by business needs to be entered into the system

calculations

ledgers

record keeping

journal enteries

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19
Q

Process - transaction processing types

A

real time
batch

20
Q

real time processing

A

means that the transaction are processed by the system as they are input

21
Q

batch processing

A

means that transactions are input into the system and processed later in one go

22
Q

Processes - Calculations

A

standing data can be used
for example
to calculate VAT payables on an invoice

23
Q

Processes - Ledgers

A

this term was originally used to describe a physical book where accounting data was stored

it now refers to a record but it might help to imagine that these are separate physical records held within the electronic system

24
Q

Processes - Record Keeping

A

records maintained within t-accounts

in electronic accounting system a ledger will be created and updated for each of these t accounts

25
Q

Processes - journal entries

A

a journal entry is simply a double entry entered into the system

26
Q

Outputs - trail balances

A

from earlier studies, we were all failure with extracting a trail balance from a nominal ledger

this will now occur automatically on request and can be extracted at any point

27
Q

Outputs - reports

A

an electronic system is able to generate a variety of reports.

some of these are standard, such as an ages receivable report showing how old a debt is

however some systems allow bespoke reports to be created on anything of interest to the managers, such as a list of all transactions above a certain amount

28
Q

Process of Electronic Banking

A

transaction report data is uploaded to computerised accounting system

accounting system attempts to math transactions and process these approriately

29
Q

What happens when a known transaction is put though the electronic banking system?

A

automatically recorded

30
Q

What happens when an unknown transaction is put though the electronic banking system?

A

recorded in a temporary account known as a suspense account and will be reported on exception report
- will be investigated by the accountant

once identified, the suspense account will be removed and the transaction will be recorded in correct account within the accounting system

31
Q

What is petty cash?

A

some cash in notes and coins usually kept on the business premise to make occasional payments for odd items of expense.

this cash is accounted for in the petty cash book

32
Q

Float =?

A

cash in petty box + sum of total of expense vouchers since last reimbursement

33
Q

What is the petty cash book?

A

details the amount paid into petty cash from the bank as well as analysing the nature of each item of expenditure

34
Q

How are adjustment to initial trail balance often shown?

A

in a columnar format with the columns for

initial trail balance

journals

final trail balances
- used to create financial statements

35
Q

What are the steps required to adjust a trail balance?

A

extract trail balance from ledger accounts

enter the journals in adjustment column

add across the debts and credits for each item and enter into the final trail balance

36
Q

VAT meaning

A

value added tax

37
Q

What is VAT?

A

form of indirect taxation

38
Q

How is VAT charged?

A

output is charged on sales

input tax is paid on purchases and maybe reclaimed

39
Q

VAT - What happens if output tax exceeds input tax?

A

the business periodically pays the excess to HMRC

40
Q

VAT - What happens if input tax exceeds output tax?

A

business periodically reclaims from HMRC

41
Q

What’s the standard rate for vat?

A

20%

42
Q

What is the net selling price?

A

amount that the business wishes to achieve - without vat price essentially

43
Q

What is the gross selling price?

A

price charged to customers - its the net selling price + VAT

44
Q

What does VAT registered business need?

A

a VAT ledger account

this may be a receivable or a payable account depending on the circumstances

45
Q

Double entries for VAT on sales

A

Dr
Receivables account
VAT inclusive price

Cr
Sales
VAT exclusive amount

Cr
VAT account

46
Q

Double entries for VAT on purchase/expenses

A

Dr
Purchase/expenses
VAT exclusive amount

Dr
VAT account

Cr
Payable account
VAT inclusive amount