Incomplete Records

Question 1

Positive impacts of double entry system

Answer 1

Fewer errors
More accurate
More information
Easier to prepare final accounts
Reduce fraud and theft
Evidence for loans

Question 2

Negative impacts of double entry system

Answer 2

Don’t know how to do it
Cost
Time

Question 3

What’s the accounting equation

Answer 3

A = C + L

Question 4

What is a statement of affairs

Answer 4

A balance sheet that lists the assets and liabilities
E.g ASSETS
Vehicles
Buildings
LIABILITIES
Trade receivables

Question 5

4 techniques used to find missing figures

Answer 5

Cash book
Control accounts
Ratios
Adjustments e.g accruals + prepayments

Question 6

4 items in control accounts used for financial statements

Answer 6

Purchases
Sales
Trade receivables
Trade payables

Question 7

Gross profit mark up equation

Answer 7

Gross profit / cost of sales x 100

Question 8

Gross profit margin equation

Answer 8

Gross profit / revenue x 100

Question 9

Where do accruals and prepayments go in the SoFP

Answer 9

Accrued exp CL
Accrued inc CA
Prepaid exp CA
Prepaid inc CL

Question 10

What is meant by incomplete records?

Answer 10

Don’t have a set of double entry books

Question 11

Why might incomplete records exist?

Answer 11

Don’t have the knowledge or time
Don’t see the need - cash business or too small

Question 12

Benefits of double entry?

Answer 12

Detects fraud
Easier to compose financial statements
Improves decision making
Reduces errors

Question 13

What technique do you use for incomplete records?

Answer 13

Statement of affairs
Cash book
Ratios
Control accounts
Financial statements

Question 14

How can SoA be used to calculate profit?

Answer 14

Calculate opening and closing capital
Adjust for drawings and capital introduced
Difference is profit or loss

Question 15

What is a statement of Affairs?

Answer 15

List of assets and liabilities
Can be used to calculate capital using A = C + L

Question 16

How can stolen cash be calculated using CB?

Answer 16

Draw up cash book
Make sure values produce correct balance

Question 17

Other than calculating stolen cash why is a CB useful for incomplete records?

Answer 17

Provides values to help calculate expense
Provides bank and cash balances

Question 18

how are control accounts used to calculate sales and purchases?

Answer 18

Work back to find credit sales or purchases and then add cash sales or purchases.

Question 19

What is likely to go into a RLCA?

Answer 19

Balances
Credit sales
Receipts from customers
Bad debts
Discounts allowed
Sales returns

Question 20

What is likely to go into a PLCA?

Answer 20

Balances
Credit purchases
Payments to suppliers
Discounts received
Purchase returns

Question 21

If GP margin is 30% what % do we say Revenue and cost of sales are?

Answer 21

Revenue 100%
Cost of sales 70%

Question 22

If GP mark-up is 20% what % do we say Revenue and cost of sales are?

Answer 22

Revenue 120%
Cost of sales 100%

Question 23

If stocktake is done late and we adjust for sales, why do we not use the sales value?

Answer 23

Prudence concept
Goods in stock are valued at the lower of cost or NRV
Sales price would be the higher value?

Question 24

What are the formulae for rate of inventory turnover?

Answer 24

Cost of sales/average inventory or average inventory/cost of sales x 365

Question 25

RoIT is 5 times Opening Inv is £25,000 CoS is £150,000, what is closing inventory?

Answer 25

£35,000