chapter3- Double Entry Bookkeeping

Question 1

What is a sole trader?

Answer 1

organisations that are ran/operated by one person

Question 2

What is a partnership in business?

Answer 2

organisations owned by two or more people working together to make a profit

Question 3

What is a company?

Answer 3

organisations recognised in law as ‘persons’ in their own right

Question 4

What is a management account?

Answer 4

• prepared monthly/weekly/whenever they want
• Informal
• Internal
• (forward thinking)

Question 5

What is a financial account?

Answer 5

• prepared annually
• formal format (set by law)
• external
• Statement of Financial Position
• Statement of Prof and Loss
• (historic)

Question 6

What are the two main financial statements?

Answer 6

1- statement of profit or loss

2- statement of financial position

Question 7

What is sales revenue?

Answer 7

income made from the trading activities of the business

Question 8

What is cost of sales?

Answer 8

the cost of buying or producing the goods for resale

Question 9

What is gross profit?

Answer 9

the profit remaining after the cost of sales have been deducted from the sales revenue

Question 10

What is sundry income?

Answer 10

other types of income that arent from the trading of the business
(such as bank interest, commission)

Question 11

What are expenses?

Answer 11

day to day running costs

Question 12

What is net profit or loss?

Answer 12

the profit or loss remaining after expenses have been deducted

Question 13

What is an asset?

Answer 13

• short term
• less than a year
• something the company owns
• soon to be turned into cash or bank
• eg. inventory, receivables

Question 14

What is a non-current asset?

Answer 14

an asset used long term in the business and not resold as part of the trading system (e.g delivery van)

Question 15

What is a current asset?

Answer 15

short term
soon turned into cash
things such as inventory, recievables

Question 16

What is a receivable?

Answer 16

someone who owes the business money

Question 17

What is a non-current liability?

Answer 17

an amount owed by the business
long term
to be paid in 12+ months
(such as mortgage loan)

Question 18

What is a liability?

Answer 18

an amount owed by the business

Question 19

What is a payable?

Answer 19

someone the business owes money too

Question 20

What is a capital?

Answer 20

the amount which the owner has invested in the business

Question 21

What are drawings?

Answer 21

amounts withdrawn by the owner for their own personal use

Question 22

What is a capital expenditure?

Answer 22

the purchase of non-current assets

Question 23

What is the revenue expenditure?

Answer 23

day to day running costs of the business

Question 24

What is capital income?

Answer 24

income from the sale of capital assets of the business

Question 25

What is revenue income?

Answer 25

income generated from the sale of goods or services

Question 26

What is a current liability?

Answer 26

an amount owed
due to be paid within 12 months
(such as bank overdraft, payable)

Question 27

What is the accounting equation at its SIMPLEST form?

Answer 27

Asset=Liabilities

Question 28

What is the accounting equation at its most complex?

Answer 28

Assets- Liabilities = Captial+ Profit- Drawings

(any profit the business makes will increase what is owed back to the owner and any drawings will reduce it)
(capital is what is owed back to the owner therefore it is a type of liability
Assets= Liabilities + Captial)

Question 29

what is the dual effect?

Answer 29

every transaction has two effects