Inteo

Question 1

Trial balance (4 categories)

Answer 1

Assets- buildings,receivables,closing inventory,cash at bank(debit)

Liabilities- money owed e.g. payables,long term loans (credit)

Income- sales revenue, rent received (credit)

Expenses- administrative, distribution, finance costs (debit)

Question 2

Cash and cash equivalents

Answer 2

Can be debit or credit

Debit- current asset, we have cash in our account

Credit- a current liability, we owe the bank money and have an overdraft

Question 3

Accounting formula

Answer 3

Assets=liabilities+ equity

Question 4

Income - expenses

Answer 4

Profit or loss for the year

Question 5

Cost of sales

Answer 5

Opening inventory +purchases - closing inventory

Question 6

Closing inventory and tax in accounts

Answer 6

Closing inventory - current asset in SOFP

And

COS in PL

Tax- current liability in SOFP

And

Expense in PL

Question 7

Assets and liabilities order

Answer 7

Non current then current

Least liquid to most liquid

Question 8

Accruals

Answer 8

Has been incurred but not fully paid

Add to expense in SOP/F

Show current liability in SOFP

Question 9

Prepayments

Answer 9

Paid but not incurred

Subtract from SOP/F

Show as a current asset in SOFP

Question 10

Bad debts

Answer 10

Debt that won’t be paid

Subtract from receivables in SOFP

add to administration expenses in SOF/P

Question 11

Doubtful debts

Answer 11

May not be paid

Subtract bad debt from receivables

Calculate required provision for doubtful debts

Look at provision brought forward in TB see what change is needed

Subtract provision from receivables in SOFP

add the increase in provision to admin expenses in SOF/P, if there’s a decrease in the provision this is income and subtracted from admin expenses