Chapter 4 Flashcards

1
Q

Requirements of an accounting system

A
  • Relevant and accurate information must be disclosed on time
  • Internal control measures are necessary to protect the assets and to ensure reliable information
  • The system must be flexible enough to adapt in order to accommodate changes.
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2
Q

Objective of the purchases and creditors system

A
  • All purchases must be authorised
  • To ensure that goods which have been ordered, were indeed received.
  • The prices on the invoice must correspond with those that have been agreed upon.
  • All obligations must be recorded accurately
  • The creditor must be paid on time
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3
Q

Recording of cash purchases

A

Cash purchases are recorded in the cash payment journal from one of the following source documents:

  • cheque,
  • counterfoil,
  • original cash invoice
  • original receipt.
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4
Q

Recording of credit purchases

A

Credit purchases are recorded in the purchase journal from one of the following source documents:

  • original purchase invoice
  • original goods received note
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5
Q

Recording of payment of creditors

A

The payment of the creditor is recorded from the cheque counterfoil in the cash payment journal together with cash discount received if applicable.

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6
Q

Recording of cash purchase returns

A

Returns that relates to cash purchases are recorded from duplicate debit notes or original credit notes in the cash receipt journal.

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7
Q

Recording of credit purchase returns

A

Returns that relate to credit purchases are recorded from duplicate debit notes or original credit notes in the purchase return journal.

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8
Q

Two groups of discount

A
  • trade discount

- cash discount (settlement discount)

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9
Q

Trade discount

A

Normally received from suppliers when the entity purchases in bulk.
The amount is directly subtracted from the purchase price and not recorded at all.

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10
Q

Recording of cash discount received

A

Cash discount received is recorded in the cash payment journal with the cash payment made to the creditor.

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11
Q

Objective of the sales and debtor system

A
  • All sales must be recorded on time
  • The correct amount must be invoiced
  • All payments must be recorded
  • Control over collection from debtors is essential
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12
Q

Recording of cash sales

A

Recorded in the cash receipt journal and general journal from one of the following source documents:

  • Cash register slips
  • Duplicate cash invoice of duplicate receipts
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13
Q

Recording of credit sales

A

Recorded in sales journal and the general journal from a duplicate sales invoice.

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14
Q

Recording of payment received from the debtor

A

Recorded from the duplicate receipt in the cash receipt journal together with cash discount allowed if applicable.

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15
Q

Recording of cash sales returns

A

Recorded from original debit notes or duplicate credit notes in the cash payment journal.

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16
Q

Recording of credit sales returns

A

Recorded from original debit notes or duplicate credit notes in the sales return journal

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17
Q

Recording of cash discount allowed

A

Recorded in the cash receipt journal together with the payment received from the debtor.

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18
Q

Accounting equation:

Purchase of an asset for cash

A
  • Assets +

- Assets -

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19
Q

Double entry:

Purchase of an asset for cash

A
  • Dt Equipment

- Cr Bank

20
Q

Accounting equation:

Payment received from debtor

A
  • Assets +

- Assets -

21
Q

Double entry:

Payment received from debtor

A
  • Dt Bank

- Cr Debtors

22
Q

Accounting equation:

Purchase of an asset on credit

A
  • Assets +

- Liabilities +

23
Q

Double entry:

Purchase of an asset on credit

A
  • Dt Vehicles/Equipment/etc.

- Kt Creditors

24
Q

Accounting equation:

Paying a creditor

A
  • Assets -

- Liabilities -

25
Q

Double entry:

Paying a creditor

A

Dt Creditors

Cr Bank

26
Q

Accounting equation:

Borrow money from financial institution

A
  • Assets +

- Liabilities +

27
Q

Double entry:

Borrow money from financial institution

A

Dt Bank

Cr Long-term loan

28
Q

Accounting equation:

Capital contribution

A
  • Assets +

- Equity + (capital contributions)

29
Q

Double entry:

Capital contribution

A

Dt Bank

Cr Capital

30
Q

Accounting equation:

Withdrawals by owner

A
  • Assets +

- Equity -

31
Q

Double entry:

Withdrawals by owner

A

Dt Withdrawals

Cr Bank

32
Q

Accounting equation:

Services rendered for cash

A
  • Assets +

- Equity +

33
Q

Double entry:

Services rendered for cash

A

Dt Bank

Cr Services rendered (income)

34
Q

Accounting equation

Services rendered on credit

A
  • Assets +

- Equity +

35
Q

Double entry:

Services rendered on credit

A

Dt Debtors

Cr Services rendered (income)

36
Q

Accounting equation:

Cash expenses

A
  • Equity -

- Assets -

37
Q

Double entry:

Cash expenses

A

Dt Salaries and wages (expenses)

Cr Bank

38
Q

Accounting equation:

Expenses on credit

A

Equity -

Liabilities +

39
Q

Double entry:

Expenses on credit

A
  • Dt Expense

- Cr Creditors

40
Q

Accounting equation:

Purchase returns

A
  • Liabilities -

- Equity +

41
Q

Double entry:

Purchase returns

A

Dt Creditors

Cr Expense

42
Q

Accounting equation:

Sales returns

A
  • Equity -

- Assets -

43
Q

Double entry:

Sales returns

A

Dt Sales returns

Cr Debtors

44
Q

Accounting equation:

Payments received from debtor and discount allowed

A

Assets +
Assets -
Equity -

45
Q

Double entry:

Payments received from debtor and discount allowed

A

Dt Bank
Cr Debtors
Dt Discount allowed

46
Q

Accounting equation:

Payment of creditor and discount received

A

Assets -
Creditors -
Equity +

47
Q

Double entry:

Payment of creditor and discount received

A

Dt Creditors
Cr Bank
Cr Discount received