Chapter 4 - Business Transactions

Question 0

What are personal transactions?

Answer 0

Transactions of the owners, partners or shareholders that are unrelated to the operation of the business

Question 1

What is a business transaction?

Answer 1

Occurrences that affect the assets, liabilities and equity items in an entity

Question 2

What are business events?

Answer 2

Occurrences that will probably affect the entity in some way, but are not recorded as business transactions until an exchange of goods occur between the entity and an outside entity

• does not give rise to a business transaction

Question 3

Define the concept of duality

Answer 3

Every business transaction has at least two effects on the accounting equation

• must be recorded at least twice

Question 4

What is the role of the accounting worksheet?

Answer 4

It summarises the duality associated with each business transaction

Question 5

Define ‘journal account’

Answer 5

An accounting record in which transactions are initially recorded in chronological order

• affects two accounts, and
• whether each account is Dr or Cr

Question 6

What are the five types of journals?

Answer 6

1. Cash receipts
2. Cash payments
3. Sales
4. Purchases
5. General journal (any transactions not related to the above)

Question 7

Define a ‘ledger account’

Answer 7

An account that accumulates all the information about changes in specific amount balances

Question 8

What is a ‘chart of accounts’?

Answer 8

A listing of the ledger account titles and their related numbers and/or alpha numbers

Should have flexibility to cater for expansion of accounts as the business grows

Question 9

What is a trial balance?

Answer 9

A list of ledger account a lances that is prepared at the end of the period.

• assists in the prep of financial stmts
• check the accuracy of ledger or journal entries