Chapter 2 - Bookkeeping Transactions

Question 1

What are Assets?

Answer 1

Items that the business owns e.g., cash at bank, machinery, amounts owed from credit customers

Question 2

What are the key elements of financial statements?

Answer 2

• Assets
• Liabilities
• Capital
• Income
• Expenses

Question 3

What are Liabilities?

Answer 3

Amounts owed by the business to other parties e.g., loans, overdrafts, amounts owing to credit suppliers.

Question 4

What is Capital?

Answer 4

Amount of cash injected by the owner + profit - drawings.

Question 5

What is Income?

Answer 5

Amounts earned by the business e.g., from sales of goods or services, interest received, rent received, or commission received.

Question 6

What are Expenses?

Answer 6

Costs incurred by the business e.g., purchases of goods for resale, wages, rent, utilities, stationery etc.

Question 7

What is a Non-Current Asset?

Answer 7

Assets held in the business for > 1 year e.g., machinery, company vehicles, licensing, branding etc.

Question 8

What is a Current Asset?

Answer 8

Assets used by the business on a day-to-day basis e.g., inventories, trade receivables, cash.

Question 9

What is a Non-Current Liability?

Answer 9

Long term debts of the business e.g., bank loan, mortgage etc.

Question 10

What is a Current Liability?

Answer 10

Amounts owed by the business due to day-to-day activity e.g, trade payables, accruals, bank overdrafts, VAT liability etc.