Chapter 5

Question 1

A book where transactions are first listed in date order: these entries are later posted to ledger accounts using the double-entry system of book-keeping

Answer 1

Book of prime entry

Question 2

Contains the bank and cash accounts of a business. May be a two-column one or a three-column one if it records discounts.

Answer 2

Cash book

Question 3

Cash discounts allowed by a supplier to a business when payment is made within the qualifying period. An income.

Answer 3

Discounts received

Question 4

Cash discounts given to a customer by a business for prompt payment. An expense incurred by the business for having its debts settled promptly

Answer 4

Discounts allowed

Question 5

Arrangement by the business with its bank for a creditor (account payable) to transfer money from the business’ account on pre-arranged dates

Answer 5

Direct debit

Question 6

A cheque that has been rejected for payment when deposited in the bank

Answer 6

Dishonoured cheque

Question 7

Used to record low-value cash transactions such as petrol charges, cleaning expenses and postage stamps

Answer 7

Petty cash book

Question 8

A fixed amount of money with which the petty cashier starts an accounting period

Answer 8

Float or imprest

Question 9

A document showing the purpose for which the petty cash is required and the date. Signed by the person making a claim for cash for an expense

Answer 9

Petty cash voucher

Question 10

A book of prime entry where credit sales are recorded

Answer 10

Sales journal

Question 11

A book of prime entry where credit purchases are recorded

Answer 11

Purchases journal

Question 12

A book of prime entry meant for the records of all transactions that cannot be recorded in other books of prime entry

Answer 12

General journal

Question 13

A brief description of the transaction recorded in the general journal. Sometimes contains a reference to the source document that proves the transaction has taken place

Answer 13

A narrative

Question 14

Book of prime entry

Answer 14

A book where transactions are first listed in date order: these entries are later posted to ledger accounts using the double-entry system of book-keeping

Question 15

Cash book

Answer 15

Contains the bank and cash accounts of a business. May be a two-column one or a three-column one if it records discounts.

Question 16

Discounts received

Answer 16

Cash discounts allowed by a supplier to a business when payment is made within the qualifying period. An income.

Question 17

Discounts allowed

Answer 17

Cash discounts given to a customer by a business for prompt payment. An expense incurred by the business for having its debts settled promptly

Question 18

Direct debit

Answer 18

Arrangement by the business with its bank for a creditor (account payable) to transfer money from the business’ account on pre-arranged dates

Question 19

Dishonoured cheque

Answer 19

A cheque that has been rejected for payment when deposited in the bank

Question 20

Petty cash book

Answer 20

Used to record low-value cash transactions such as petrol charges, cleaning expenses and postage stamps

Question 21

Float or imprest

Answer 21

A fixed amount of money with which the petty cashier starts an accounting period

Question 22

Petty cash voucher

Answer 22

A document showing the purpose for which the petty cash is required and the date. Signed by the person making a claim for cash for an expense

Question 23

Sales journal

Answer 23

A book of prime entry where credit sales are recorded

Question 24

Purchases journal

Answer 24

A book of prime entry where credit purchases are recorded

Question 25

General journal

Answer 25

A book of prime entry meant for the records of all transactions that cannot be recorded in other books of prime entry

Question 26

A narrative

Answer 26

A brief description of the transaction recorded in the general journal. Sometimes contains a reference to the source document that proves the transaction has taken place

Question 27

What is the advantage of using books of prime entry?

Answer 27

Used to list and group together similar transactions so that totals can be posted to the ledger
Allows the work to be divided between different of staff
Quicker way to record transactions
Fewer errors

Question 28

What do the petty cash book and cash book have in common?

Answer 28

Both are books of prime entry and ledger accounts at the same time

Question 29

What is the advantage of a petty cash book?

Answer 29

Reduces the number of entries in the cash book
Good task for a more junior member of staff to carry out (errors are not serious)

Question 30

What is the document that acts as proof of the transaction for the petty cash book?

Answer 30

Petty cash voucher

Question 31

Contra entry

Answer 31

Entry which appears on both sides of the cash book

Question 32

What are credit customers?

Answer 32

Sales/trade receivables

Question 33

What are credit suppliers?

Answer 33

Purchases/trade payables