Chapter 3 - Business transactions and documentation Flashcards
What are the contents and purpose of a quotation?
Contents: Quantity/description/details of goods required
Purpose: To establish price from various suppliers
What are the contents and purpose of a purchase order?
Contents: details of supplier, e.g., name, address, quantity ordered, price, terms and conditions etc
Purpose: Sent to supplier as a request for supply
What are the contents and purpose of a sales order?
Contents: Quantity/ description/details of goods required and price
Purpose: Cross checked with order placed with customer. Sent to stores/warehouse to process the order
What are the contents and purpose of a dispatch note?
Contents: Details of supplier, e.g., name and address. Quantity and description of goods
Purpose: Provided by supplier. Checked with goods received and purchase order
What are the contents and purpose of a goods received note?
Contents: Quantity and description of goods
Purpose: Produced by business receiving the goods as proof of receipt. Matched with delivery note
what are the contents and purpose of a statement?
Contents: details of supplier, e.g., name and address, date and invoice number, amount owed, payments made
Purpose: Issued by the supplier, checked with other documents to ensure amount owing is correct
What are the contents and purpose of an invoice?
Contents: Name and address of supplier and customer, details of goods e.g., quantity, price, value sales, tax
Purpose: Issued by supplier of goods as a request for payments
What are the contents and purpose of a credit note?
Content: details of supplier, details of goods returned
Purpose: issued by the supplier. Checked with documents regarding goods returned
What are the contents and purpose of a debit note?
Contents: details of supplier. Contains details of goods returned
Purpose: Issued by the business receiving the goods. Cross checked to credit note
What are the contents and purpose of a remittance advice?
Contents: method of payment, invoice number, acc number
Purpose: Sent to supplier as notification of payment
What are the contents and purpose of a receipt?
Contents: Details of payment received
Purpose: Issued by the seller indicating that payment was received
What are the stages of the accounting records?
1) Transaction occur
2) Effects recorded in ledger accounts & ledgers balanced off
3) Trial balance
4) Year-ended adjustments made and ledger accounts closed off
5) Financial statements
Where are all initial transactions recorded?
Book of prime entry
What is the book of prime entry?
the place where a transaction is first recorded in the accounting records of a business. It is a list of similar transactions in date/sequential order which is then periodically totalled. The totals then posted into the general or nominal ledger as part of the double-entry accounting system
What type of transaction is recorded in the sales day book?
Credit sales
What type of transaction is recorded in the purchases day book?
Credit purchases
What type of transaction is recorded in the sales return day book?
Return of goods sold on credit
What type of transaction is recorded in the purchases returns day book?
return of goods bought on credit
What type of transaction is recorded in the cash book?
all bank transactions
What type of transaction is recorded in the petty cash book?
all small cash transactions
What type of transaction is recorded in the journal?
all transactions not recorded in any other day book
What is the general or nominal ledger?
refers to the overall system or set of individual ledger accounts maintained by a business entity to record transcations
What is the dual effect?
Debit on one side and credit on the other
What is the accounting equation?
Assets = Equity + Liabilities
or
Assets - Liabilities = Equity
What is a ledger account?
A record of the transactions relating to a particular item, for example heat and light.
What are the summary of steps to record a transaction?
1) Identify the ledger accounts that are affected
2) Consider whether they are being increased or decreased
3) Decide whether each account should be debited or credited
4) Check that both debit entries and credit entries have been made and that they are both for the same account
A debit increases which transactions?
Purchases
Expenses
Assets
A credit increases which transactions?
Revenues
Liabilities
Shareholders’ equity
