Double Entry Bookkeeping

Question 1

What is a source document?

Answer 1

A source document is a primary record of a business transaction.

It provides evidence of the transaction and is used to record the transaction in the accounting records.

Question 2

List some common source documents.

Answer 2

• Purchase invoice
• Sales invoice
• Credit note
• Cheque counterfoil
• Till roll
• Cash receipt
• Paying-in slip counterfoil
• Bank statement

Question 3

What information is typically found on a purchase invoice?

Answer 3

• Supplier’s name and address
• Invoice date and number
• Customer’s name and address
• Description of goods or services
• Quantity and unit price
• Total amount due
• Payment terms

Question 4

What is the fundamental principle of double-entry bookkeeping?

Answer 4

Every transaction affects at least two accounts.

Question 5

What is a purchase invoice?

Answer 5

A purchase invoice is a document issued by a supplier to a buyer, detailing the goods or services provided, quantities, prices, and payment terms.

Question 6

What is a sales invoice?

Answer 6

A sales invoice is a document issued by a seller to a buyer, detailing the goods or services provided, quantities, prices, and payment terms.

Question 7

What is a credit note?

Answer 7

A credit note is a document issued by a seller to a buyer.

## Footnote

It acknowledges a refund or credit for returned goods or services, or for an error in a previous invoice.

Question 8

What information is typically included on a purchase invoice?

Answer 8

• Supplier’s name and address
• Buyer’s name and address
• Invoice number and date
• Description of goods or services
• Quantity of goods or services
• Unit price
• Total amount
• Payment terms

Question 9

Why are purchase invoices important for accounting?

Answer 9

Purchase invoices are essential for:
* Recording purchases in the purchase journal
* Calculating input VAT
* Tracking inventory levels
* Reconciling supplier accounts

Question 10

How can purchase invoices be used to verify the accuracy of accounting records?

Answer 10

Purchase invoices can be used to:
* Verify the quantities and prices of goods or services purchased
* Check the accuracy of calculations
* Ensure that payments to suppliers are correct

Question 11

What is a sales invoice?

Answer 11

A sales invoice is a document issued by a supplier to a customer.

## Footnote

It details the goods or services provided and the associated costs.

Question 12

Who issues a sales invoice?

Answer 12

A supplier or seller issues a sales invoice to a customer or buyer.

Question 13

What information is typically included on a sales invoice?

Answer 13

A sales invoice usually includes:
* Supplier’s and customer’s information
* Invoice date
* Invoice number
* Description of goods or services
* Quantity
* Unit price
* Total amount due
* Payment terms

Question 14

How does a sales invoice compare to a purchase invoice?

Answer 14

Sales and purchase invoices are similar in layout and purpose. However, a sales invoice is issued by a supplier, while a purchase invoice is issued to a supplier.

Question 15

What is a credit note?

Answer 15

A credit note is a document issued by a supplier to a customer to:
* Refund money for returned or faulty goods
* Correct a billing error
* Provide a discount

Question 16

How can a credit note be used?

Answer 16

A credit note can be used to reduce the amount owed on an invoice.

Question 17

What is a cheque counterfoil?

Answer 17

A cheque counterfoil is the part of a cheque that is retained by the issuer.

## Footnote

It records details of the cheque, such as the date, payee, and amount.

Question 18

What is a till roll?

Answer 18

A till roll is a paper roll that records all transactions processed through a cash register.

## Footnote

It provides a detailed record of sales, refunds, and other transactions

Question 19

What is a cash receipt?

Answer 19

A cash receipt is a document that confirms a cash payment for goods or services.

## Footnote

It typically includes the date, amount paid, and a brief description of the purchase.

Question 20

What is a paying-in slip counterfoil?

Answer 20

A paying-in slip counterfoil is the part of a paying-in slip that is retained by the depositor.

## Footnote

It records details of the deposit, such as the date, amount of cash, and cheques deposited.

Question 21

What is a bank statement?

Answer 21

A bank statement is a document issued by a bank to its customer.

## Footnote
It details all the financial transactions that have occurred in the account over a specific period.

Question 22

What information does a bank statement typically include?

Answer 22

• Bank name and customer’s name
• Account number
• Statement period
• Opening balance
• Closing balance
• List of transactions (date, description, amount)

Question 23

What are common types of transactions listed on a bank statement?

Answer 23

• Cheques paid in
• Cheques paid out
• Direct debits
• Standing orders
• Credit transfers
• Debit card payments
• Cash deposits
• Cash withdrawals

Question 24

What is a credit balance on a bank statement?

Answer 24

A credit balance means the account has a positive balance, indicating that the customer has money available in the account.

Question 25

What is a debit balance on a bank statement?

Answer 25

A debit balance means the account has a negative balance, indicating that the customer owes money to the bank.

Question 26

What is a direct debit?

Answer 26

A direct debit is an automated payment system that allows organizations to withdraw funds directly from a bank account on a specific date.

Question 27

What is a standing order?

Answer 27

A standing order is an instruction given to a bank to pay a fixed amount of money to a specific person or organization on a regular basis.

Question 28

What is a credit transfer?

Answer 28

A credit transfer is a payment method where money is transferred electronically from one bank account to another.

Question 29

How can a bank statement help a business?

Answer 29

• Track income and expenses
• Identify errors or discrepancies
• Reconcile bank accounts
• Monitor cash flow
• Prepare financial reports

Question 30

What is bank reconciliation?

Answer 30

Bank reconciliation is the process of comparing the bank statement balance with the business’s records to ensure they match and identify any differences.