Chapter 4: Cash Transactions

Question 1

What is the order of documents in the accounting period?

Answer 1

Source Documents- General Journal- Ledgers- Trial Balance- Reports

Question 2

What are the role of source documents?

Answer 2

To ensure verifiability by providing the evidence and details of transactions, which in turn ensures faithful representation, as the information is neutral and free from material error

Question 3

What is the role of a tax invoice?

Answer 3

To provide a source document used to verify transactions that involve GST, and provide specific information required by the ATO to substantiate GST amounts

Question 4

What is an ABN?

Answer 4

An Australian Business Number, which all business must register for, appears on all documents and is used to track GST

Question 5

What are some source documents for cash transactions?

Answer 5

Cash receipts, cheque butts, bank statements, electronic funds transfer and credit card receipts

Question 6

What are some source documents for credit transactions?

Answer 6

Sales and purchase invoices

Question 7

Who gets the original and copy of the source document during a transaction?

Answer 7

The buyer gets the original source document and the seller gets a copy of it

Question 8

What is GST?

Answer 8

Goods and services tax, which is a 10% tax levied by the federal government on the purchase of most goods and services

Question 9

What are some exceptions to GST?

Answer 9

Basic foods, medical services and education courses

Question 10

What is GST Clearing?

Answer 10

A ledger account that records all GST transactions, and at the end of a period will either be a current asset or a current liability

Question 11

What is a GST settlement?

Answer 11

A cash payment to the ATO to settle a GST liability from a previous period

Question 12

What is a GST refund?

Answer 12

A cash receipt from the ATO to settle a GST asset from a previous period

Question 13

In order to substantiate a GST transaction, what must a source document include?

Answer 13

The words ‘tax invoice’, name of seller, ABN of seller, date of transaction, description of good/service, price of transaction (inc. GST), amount of GST

Question 14

When was GST introduced to Australia?

Answer 14

1 July 2000

Question 15

Who is responsible for collecting GST?

Answer 15

Businesses are responsible for the collection of GST on behalf of the ATO

Question 16

How do you calculate the GST when a source document says ‘plus GST’?

Answer 16

Multiply the amount by 0.1 to find the GST

Question 17

How do you calculate the GST when a source document says ‘including GST?

Answer 17

Divide the amount by 11

Question 18

What is a mark-up?

Answer 18

A percentage of the cost price that is added to the cost price to determine the selling price

Question 19

What is the general journal?

Answer 19

An accounting record used to analyse and record each transaction, and to identify its source document before being posted to the general ledger

Question 20

What is a narration?

Answer 20

A brief description of the transaction recorded in the General Journal, including a reference to the relevant source document