FA1

Question 1

What is the primary function of a credit sales invoice which a customer has received from a supplier?

Answer 1

It is a demand for payment within an agreed time from the supplier

Question 2

Which of the following correctly describes the function of a credit note issued by a supplier to one of its customers?

Answer 2

A document used by the supplier to cancel part or all of a previously issued invoice

Question 3

Which of the following correctly describes the term ‘debit note’

Answer 3

It is issued by a customer to a supplier to request a credit note

Question 4

What is the purpose of a remittance advice?

Answer 4

It provides details of amounts being paid

Question 5

What is the name given to a code in which the level of detail increases in a logical way as you work through the code?

Answer 5

Hierarchical or significant digit

Question 6

What is a ‘trade discount’?

Answer 6

A reduction in the invoice price by a supplier because of the terms of trade agreed with an individual customer

Question 7

Which of the following correctly explains sales tax?

Answer 7

A tax levied on the sale of goods and services which is administered by the government

Question 8

Sales tax rate = 15%. Gross sales are $690. What are the net sales and the sales tax?

Answer 8

Net = $600; Sales tax = $90

Question 9

Sales tax rate = 16%. Full net price before any bulk discount = $3,000. Bulk discount = 20%. What are the gross sales and the sales tax?

Answer 9

Gross = $2,784; Sales tax = $384

Question 10

Gross Sales

Answer 10

After tax

Question 11

Net Sales

Answer 11

Before tax

Question 12

In a period a company charges $4,600 sales tax on its sales. Its purchases from its suppliers cost $6,000 including sales tax at 20%. What payment/receipt will be made to/received from the government at the end of the period?

Answer 12

3,400 to be paid to the government

Question 13

Which of the following statements in relation to computerized data entry is/are true? 1. Automatic data entry such as scanning avoids transcription errors. 2. Computerization avoids data entry errors caused by malicious intent on the part of staff

Answer 13

Statement 1: Correct; Statement 2: Incorrect

Question 14

What is the term for a computer program that deals with one particular part of a business accounting system?

Answer 14

Module
(A computerized accounting package will typically consist of several modules)

Question 15

What type of information is regulated by Data Protection legislation?

Answer 15

Information about individuals
(In the UK, the Data Protection Act 1998 is concerned with how information about individuals is managed. Similar legislation exists in other jurisdictions)

Question 16

Which of the following are appropriate ways of dealing with sensitive or confidential business documents that are no longer needed?
(i) Microfilm or microfiche for long-term storage
(ii) Archiving documents for storage
(iii) Secure destruction
(iv) It can be thrown away

Answer 16

(i), (ii) and (iii) only
(Simply throwing such documentation away is not acceptable, because it could result in third parties gaining access to sensitive or confidential information)

Question 17

Whenever property changes hands there has been a …

Answer 17

Business transaction

Question 18

A cash transaction is one where the …

Answer 18

buyer pays cash to the seller at the time the goods or services are transferred.

Question 19

A credit transaction is …

Answer 19

a sale or purchase which occurs some time earlier than cash is received or paid

Question 20

The purpose of the accounting system is to …

Answer 20

RECORD, SUMMARIZE and PRESENT the information contained in the documentation generated by transactions.

Question 21

A discount is a reduction in the price of goods below the amount at which those goods would normally be sold to other customers of the supplier …

Answer 21

• A TRADE DISCOUNT is a reduction in the amount of money demanded from a customer.
• A CASH DISCOUNT is an optional reduction in the amount of money payable by a customer.

Question 22

Many business transactions involve sales tax …

Answer 22

• Output tax is sales tax charged on goods and services sold by a business.
• Input tax is sales tax paid on goods and services bought in by a business.

Question 23

A business must always be treated as a … from its owners when preparing accounts

Answer 23

separate entity

Question 24

… is the excess of income over expenditure.

Answer 24

Profit

Question 25

When expenditure exceeds income, the business is running at a …

Answer 25

Loss

Question 26

The accounting equation is that the assets and liabilities of a business must always be ……..
* Assets = (Capital introduced + retained profits – drawings) + liabilities

Answer 26

Equal

Question 27

Double-entry bookkeeping reflects the fact that for every debit, there is an equal …
Therefore the total value of debit entries will always be equal to the total value of credit entries.

Answer 27

Credit

Question 28

At any point in time a business will have assets, liabilities and capital.
1. …….. are for use within a business.
2. …….. are used to generate cash.
3. …….. are payables of the business.

Answer 28

1. Non-current assets
2. Current assets
3. Liabilities

Question 29

Books of … are used to keep records of source documents

Answer 29

prime entry

Question 30

Entries are posted from the day books to the … ledger

Answer 30

general (or nominal)

Question 31

Trade Receivable

Answer 31

A person owing money to the business in return for goods supplied

Question 32

Trade Payable.

Answer 32

A person to whom the business owes money in return for goods supplied

Question 33

Loan Payable

Answer 33

A person to whom the business owes money which was lent to finance the trading operations of the business

Question 34

Revenue Expenditure

Answer 34

This is an expense incurred in the ordinary course of business.

Question 35

Trial Balance

Answer 35

A list of ledger balances extracted from accounts which helps to ensure that the bookkeeping has been accurate

Question 36

Control Total

Answer 36

A total which is used to make sure the value of transactions processed agrees to a total previously calculated

Question 37

Error of commission

Answer 37

The debit and credit are on the correct sides of the ledger accounts, but the credit is in the wrong personal account.

Question 38

Trial balance failing to agree

Answer 38

The double entry does not balance

Question 39

Error of principle

Answer 39

post to the wrong account

Question 40

What type of information is regulated by Data Protection legislation?

Answer 40

Information about individuals

Question 41

A banker’s draft

Answer 41

The payment cannot be dishonoured by the bank.

Question 42

Cheque guarantee should include:

Answer 42

(i) Amount guaranteed
(ii) Customer name/signature
(iii) Account number
(iv) Bank sort code

Question 43

EFTPOS system

Answer 43

Funds are transferred automatically from a customer’s bank account to the organisation’s bank, when goods are purchased

Question 44

What is the bank clearing system?

Answer 44

It is the mechanism for obtaining payment for cheques

Question 45

What is a bank mandate form?

Answer 45

Names and specimen signatures of individuals authorised to sign cheques supplied to a bank

Question 46

Standing order?

Answer 46

• Used to make regular payments from an account
• The payment amount is fixed
• The amount of the payment can be varied

Question 47

What is a ‘PRO FORMA’ invoice?

Answer 47

A document which is provided by a supplier where payment with order is required