Chapters 1-5: Accounts Preparation

Question 1

Accounts Preperation

Financial Statements Primarily Compromise?

Answer 1

• A Profit & Loss Account; and
• A Balance Sheet.

Question 2

Accounts Preperation

The System of Accounting Should be Able to Determine?

Answer 2

• Whether The Business is Operating at a Profit; and
• That The Business Can Meet its Liabilities as They Fall Due

Question 3

Accounts Preperation

Businesses Are Eligible to Use The Cash Basis if?

The Accruals Basis is The ‘Default’ Under Accounting Standards.

Answer 3

• They Are Unincoporated; and
• With Income No More Than £150,000.

Question 4

Accounts Preparation

For Accounting Purposes, a Business Must be Regarded as?

Answer 4

A Separate Entity in Its Own Right.

Question 5

Accounts Preperation

How Are Current Assets Listed in The Accounts?

(If There’s More Than One Asset)

Answer 5

From The Least to Most Liquid Form of Asset.

Liquidity is The Ease by Which Something Can be Converted Into Cash.

Question 6

Accounts Preperation

What Does Proprietor’s Funds Represent?

Answer 6

The Amount the Business Owes the Owner.

Question 7

Accounts Preparation

What is The Golden Rule For All Accounting Transactions?

Answer 7

Debits Must Always Equal Credits Every Time a Transaction Occurs.

Question 8

Accounts Preperation

Are The Financial Statements Part of The Double-Entry System?

Answer 8

The P&L a/c is. The B/S is Not.

Question 9

Accounts Preperation

What is Sundry Income?

Answer 9

Other Sources of Income a Business May Have, Which Doesn’t Arise From Trading.

Question 10

Accounts Preperation

Gross Profit is Expressed as Either:

Answer 10

• A % of Revenue (Gross Profit Margin); or
• A % of COS (Mark-Up)

Question 11

Accounts Preperation

Trade Discounts Are Offered to?

Answer 11

Special Customers or For Bulk-Buying.

Question 12

Accounts Preperation

Trade Discounts Are Reflected in?

Answer 12

A Reduced Selling Price at The Point Sale is Made.

A Normal Double-Entry is Recorded For The Cash or Credit Sale.

Question 13

Accounts Preparation

Settlement Discounts Are Offered to?

Answer 13

Credit Customers to Encourage Prompt Payment.

Question 14

Accounts Preperation

When Offering a Settlement Discount, The Business Doesn’t Know if?

Answer 14

The Customer Will Take Advantage of The Settlement Discount.

It Must Record The Full Value of The Sale in Their Books.