First 1-3 Flashcards
What is the most important accounting book?
The General Ledger
What is an asset?
Something owned by the business.
Where must the VAT number be quoted?
All invoices and other business documentation.
What are the two traditional types of asset?
Fixed Assets and
Current Assets.
How many sections does a balance sheet have?
Two
What are the advantages of voluntary VAT registration?
The business can still reclaim VAT on its purchases;
It aids cashflow as the business has the use of the VAT collected from customers before it has to make payments to HMRC;
In business-to-business transactions, businesses that are themselves VAT-registered often prefer to deal with other VAT registered businesses.
What is the difference between a Credit Note and an invoice?
They are the opposite of each other: the Credit Note decreases the amount owed by the customer to the supplier. It can be printed in red!
What is liability?
An amount owed by the business.
What does “cash transaction” mean?
This term mean payment by any means, so long as it is immediate.
What Ledger accounts are normally kept by a business?
Normally, there will be a different Ledger account for every type of income received; expenditure incurred; asset owned and liability owed.
Which other name is the General Ledger known by?
Nominal Ledger
What is the role of a book-keeper?
To provide accurate accounting records of a business.
In a Balance Sheet, what are Fixed assets?
Items normally of a long life, bought to be used in the business and not for the purpose of resale to a customer.
What is a Goods Returned Note?
Used by the supplier or customer to record details of any goods returned. It will then be used as the basis when preparing the Credit Note.
Information on the Goods Returned Note should include:
Customer details;
Date goods were returned;
Details & quantity of items returned;
Reason for returning the goods.
What should ALL invoices include?
An invoice number;
Supplier’s name and address;
VAT registration number;
Customer’s name and address;
Invoice date/ tax point;
Customer’s order number;
Quantity and description of goods;
Unit price of goods;
VAT amount;
Total amount to be paid.
What is the Lower or Reduced rate of VAT?
5%;
Added to very few items, e.g. domestic fuel and power, installation of energy-saving materials, children’s car seats, residential conversions…
What is the principle of double-entry?
Each transaction is recorded twice ; so each transaction has two separate effects on the business records.
What is a Day Book?
Day Books are used to list invoices sent or received.
What is the accounting equation?
Assets = Liabilities + Capital
What is output tax?
VAT-registered businesses collect this VAT from customers and pay that money to HMRC.
What is the minimum info recorded on a Day Book?
Date;
Supplier (purchase Day Book);
Customer (sales Day Book);
Invoice/Credit Note number;
Net Goods amount;
VAT amount;
Invoice total amount.
What is a Credit Note?
Issued by a supplier to a customer to correct an error on an invoice. It states the reason for the Credit Note and the amount.
By which other names is the Purchase Ledger known?
Bought Ledger or Creditors Ledger.
The Purchase Ledger is not contained in the General Ledger and it is not part of the double-entry system.
How many parts does an invoice consist of normally?
Two.
The original, sent to the customer; and a copy, kept for the supplier’s records.