Chapter 9 - Credit Transactions

Question 1

accounts payable

Answer 1

money owed to suppliers

Question 2

explain why there is no GST to account for when cash is paid to an Account Payable

Answer 2

because the GST is recognised and reported only at the time the purchase is made

Question 3

Accounts payable balance formula

Answer 3

Accounts payable at start

+ Credit purchases including GST

• Payments to accounts payable

= Accounts payable balance at end

Question 4

Accounts Receivable

Answer 4

A customer who owes a debt to the business for goods or services sold to them on credit

Question 5

Accounts receivable balance formula

Answer 5

Accounts receivable balance at start

+ Credit sales including GST

• Receipts from Accounts receivable

= Accounts receivable balance at end

Question 6

statement of account

Answer 6

a summary of a number of transactions involving that account payable or receivable over a certain period. It is not a source document

Question 7

Explain how customer would be reported in the balance sheet of seller

Answer 7

it would be recorded as a current asset as the amount owing to seller is an economic resource controlled by the entity as a result of past events, and is expected to be consumed by the entity within 12 months

Question 8

Explain how seller would be reported in the balance sheet of customer

Answer 8

it would be recorded as a current liability as the owed to the seller is a current obligation of the customer to transfer an economic resource, and is reasonable expected to be settled within 12 months

Question 9

Referring to one qualitative characteristic, explain the importance of source documents in the accounting process.

Answer 9

Verifiability: accounting data needs to be accurate so that all users will come to the same conclusion. To be accurate, the data needs to be verified by a source document

Question 10

Explain the function of the sundries column

Answer 10

it is used to record infrequent transactions that do not have their own column