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Bookkeeping Transactions Level 2 > Chapter 4- Accounting for Sales, Returns and Discounts > Flashcards

Chapter 4- Accounting for Sales, Returns and Discounts Flashcards

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1
Q

What are the 4 stages of the accounting system?

A
  • financial documents
  • books of prime entry {day books}
  • double entry bookkeeping
  • trial balance
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2
Q

what does the term sale mean?

A

the sales of goods in which the business trades

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3
Q

what is revenue income?

A
  • income from goods in which the business trades
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4
Q

what is capital income?

A
  • income from items other than the goods in which the business trades
  • eg a shop selling an old cash till
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5
Q

what is revenue?

A
  • the total amount of income from the sale of goods or services related to the company’s primary operations
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6
Q

what is capital?

A
  • owner’s investment
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7
Q

what are sales returns?

A
  • goods previously sold on credit which have been returned by customers
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8
Q

what is a ‘discount allowed’?

A
  • ppd offered by a supplier to its customers to encourage quick or short period of time from invoice date payment
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9
Q

What type of financial documents are there?

A
  • sales invoices

- credit notes for sales returns and discounts allowed

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10
Q

What books of prime entry are there?

A
  • sales day book
  • sales returns day book
  • discounts allowed day book
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11
Q

What are the double entry accounts in the general ledger?

A
  • sales account
  • sales returns account
  • discounts allowed account
  • sales ledger control account
  • value added tax account
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12
Q

what subsidiary accounts are there in the sales ledger?

A
  • accounts of trade receivables {customers}
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13
Q

what are books of prime entry?

A
  • the first place in the accounting system where financial documents are recorded
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14
Q

what are the day books included in the books of prime entry?

A
  • sales day book
  • sales returns day books
  • discounts allowed day book
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15
Q

what do the day books include?

A
  • they list amounts of money and other financial information taken from financial documents
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16
Q

what are the day books used for?

A
  • day books are used for credit sales, sales returns and discounts allowed
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17
Q

why aren’t the books of prime entry used for double- entry bookkeeping process?

A
  • they aren’t a part of double- entry bookkeeping, but they are used to give totals which are then entered into the double- entry accounts
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18
Q

what are the reasons for using books of prime entry?

A
  • totals can be checked before entering the ledger accounts
  • they are used for a large number of regular transactions {like sales}, which makes fewer transactions enter the double-entry accounts
  • divides up work at the accounts department
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19
Q

Notes for when writing up day books from invoices and credit notes:

A
  • the total amounts from the invoices/credit notes should be written in the total column
  • enter the VAT in the VAT column
  • enter the net amount of the invoice/credit note, before VAT is added on, in the net column
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20
Q

what is a credit note?

A
  • a financial doc which is created from sales being returned, sent by the seller to the buyer
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21
Q

what is an invoice?

A
  • a financial doc which is created from a sale being made, sent from the seller to the buyer
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22
Q

what is the sales day book?

A
  • a book of prime entry prepared from sales invoices
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23
Q

what does the sales day book list?

A
  • lists credit sales made
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24
Q

how is the sales day book prepared?

A
  • prepared from sales invoices
25
Q

what details are taken from the invoice and entered into the sales day book?

A
  • invoice date
  • customer name
  • sales invoice number
  • customer account number
  • total amount of invoice
  • VAT amount shown
  • Net amount shown
26
Q

what are the ledger accounts?

A
  • double entry accounts for financial transactions involving individuals, assets, liabilities, purchases, expenses, income and capital
27
Q

what is the general ledger?

A
  • ledger section which includes: sales account, sales returns account, discounts allowed account, sales ledger control account, VAT account
28
Q

what is a sales ledger?

A
  • a sales ledger is where accounts for individual customers are recorded
  • it also records money received from products or services being sold
29
Q

where are entries made after being written up in the sales day book?

A
  • they are entered into the ledger accounts, contained in the general ledger and the sales ledger
30
Q

what ledgers are used in sales transactions?

A
  • general ledger

- sales ledger

31
Q

what does the general ledger contain?

A
  • sales account
  • sales returns account
  • sales ledger control account
  • VAT account
  • discounts allowed account
32
Q

what does the sales ledger contain?

A
  • individual customer accounts (trade receivables)
33
Q

what does a sales account record?

A
  • records sales invoices issued
34
Q

what does a sales returns account record?

A
  • records credit notes issued for sales returns
35
Q

what does discounts allowed account record?

A
  • records credit notes issued for prompt payment discount allowed
36
Q

what does the sales ledger control account record?

A
  • records the total amount of the trade receivables
37
Q

what does the VAT account record?

A
  • records the VAT amounts of credit sales and sales returns
38
Q

what other accounts does the general ledger record?

A
  • purchases, expenses, capital, liabilities, assets, income, receipts and payments
39
Q

accounting system for credit sales is in the order of:

A
  • goods sold on credit (invoice issued)
  • sales day book (books of prime entry)
  • general ledger (debit to SLCA, credit to SA & VAT account)
  • sales ledger (debit to trade receivables)
40
Q

is the sales ledger control account db or cr in the general ledger? (credit sales)

A
  • debit to the sales ledger control account
41
Q

is the sales account db or cr in the general ledger? (credit sales)

A
  • credit to the sales account
42
Q

is the VAT account db or cr in the general ledger? (credit sales)

A
  • credit to the VAT account
43
Q

is the trade receivables account db or cr in the sales ledger? (credit sales)

A
  • debit to the trade receivables
44
Q

accounting system for sales returns is in the order of:

A
  • goods sold on credit returned (credit note issued)
  • sales returns day book (books of prime entry)
  • general ledger (debit to SRA, VAT account, credit to SLCA)
  • sales ledger (credit to trade receivables)
45
Q

is the sales returns account db or cr in the general ledger? (returns)

A
  • debit to the sales returns account
46
Q

is the VAT account db or cr in the general ledger? (returns)

A
  • debit to the VAT account
47
Q

is the sales ledger control account db or cr in the general ledger? (returns)

A
  • credit to the sales ledger control account
48
Q

are the customer accounts db or cr in the sales ledger? (returns)

A
  • credit to the trade receivables
49
Q

accounting system for discounts allowed is in the order of:

A
  • discounts (ppd) taken by customer (CN to customer)
  • discounts allowed day book (books of prime entry)
  • cash book & GL (debit to cash book: bank or cash, discounts allowed account, VAT account, credit to SLCA)
  • sales ledger (credit to customer account)
50
Q

is the cash book debit or credit in the CB/ GL? (discounts allowed)

A
  • debit to the cash book
51
Q

is the discounts allowed account db or cr in the general ledger? (discounts allowed)

A
  • debit to the discounts allowed account
52
Q

is the VAT account db or cr in the general ledger? (discounts allowed)

A
  • debit to the discounts allowed account
53
Q

is the SLCA cr or db in the general ledger? (discounts allowed)

A
  • credit to the sales ledger control account
54
Q

are the customer accounts cr or db in the sales ledger? (discounts allowed)

A
  • credit to the customer account
55
Q

what are financial documents?

A
  • source documents for the accounting records
56
Q

what is coding?

A
  • cross referencing methods used to trace transactions through the accounting system
57
Q

what is a ledger?

A
  • section of an accounting system, a book, eg general ledger, sales ledger, purchases ledger
58
Q

what are analysed sales day books?

A
  • day books which incorporate analysis columns between different departments or different types of goods/services sold/supplied

Bookkeeping Transactions Level 2 (11 decks)

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