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Accounting > June exam - 8 > Flashcards

June exam - 8 Flashcards

1
Q

What is a sole trader?

A

There’s only one owner. The owner runs their own business

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2
Q

What is capital contribution?

A

The owner contributes all the capital in the business. Money put into the business. Share or contribution

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3
Q

What is the double entry principle?

A

For every debit, there is a credit. The transaction has two accounts involed

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4
Q

Who and when was the double entry principle made?

A

In 1494. Lucas Pacioli made the principle.

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5
Q

What does debit increase?

A

Increases assets and expenses accounts

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6
Q

What does credit increase?

A

Increases liabilities, revenue or equity accounts and income

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7
Q

What is owner’s equity?

A

Share or contribution to the business. Also known as capital contribution.

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8
Q

What is capital?

A

Cash or goods used by an owner to generate income by investing in a business

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9
Q

What is accounting?

A

The art of recording, classifying and summarizing transactions in terms of money, and interpreting results

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10
Q

What is a transaction?

A

Refers to buying and selling goods or services and the receipt and payment of money

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11
Q

What will happen with a duplicate receipt in the CRJ?

A

The duplicate receipts should have a receipt number. If there is no receipt number make the numbers consecutive

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12
Q

What does the cash register roll have to do with the CRJ?

A

It’s abbreviated CRR. This will not have a document number and goes under analysis of receipts, bank and current income no sundry account.

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13
Q

What does the bank statement have to do with the CRJ?

A

The document number would be abbreviated B/S. if the account is interest on the current account the amount will not be recorded in the analysis of receipt column.

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14
Q

How do we know when we put money under the analysis of receipts column?

A

The analysis of receipts column is a breakdown of money received. It is not an account so it is not totaled.

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15
Q

What is the bank daily?

A

Bank daily is shown by underlining the last receipt of the date in the analysis of receipts column. Bank the total receipts under the bank column.

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16
Q

What is the cash payments journal?

A

Abbreviated CPJ. You will find cheque count counterfoils and bank statements

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17
Q

What is a cheque counterfoil?

A

It is easily tarceable and can be cancelled. The business retains it as proof they have paid.

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18
Q

What part of a cheque counterfoil remains in the cheque book?

A

The duplicate carbon copy remains in the cheque book. (the stub). The cheque is sent to the person the business is paying

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19
Q

What is a drawer?

A

The holder of the account and the issuer of the cheque. Name on the bottom right.

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20
Q

What is the drawee?

A

The bank issuing the money

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21
Q

What is the payee?

A

The person or business being issued the cheque. (receiving the money)

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22
Q

How often are bank statements sent?

A

Banks send bank statements to every client at the end of the month

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23
Q

What is shown on a bank statement?

A

It shows all the money that has gone into (credited) and out of (debited) the account in a specific time period. Shows a different services fees and bank charges directly debited of the account by the bank. Any deposits made by the business customers will be shown

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24
Q

What are the two subsidiary journals?

A

Cash receipts journal in cash payment journal

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25
Q

What are the CRJ keywords?

A
  • CRR
  • Received cash
  • issued receipt
  • Cash sales
  • Services rendered
  • Received capital or increase capital
  • EFT received from customer
  • Receipt
  • Current income
  • Capital
  • Rent income
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26
Q

What are the CPJ keywords?

A
  • Issued cheque
  • Paid the following by cheque
  • Personal use or drawings
  • Cheque counterfoil details
  • Cashed a cheque
  • Paid
  • Payment
  • Bought
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27
Q

What is the accounting cycle?

A

The accounting cycle ensures accuracy and conformity when processing the transactions. It helps reduce mathematical errors

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28
Q

How many steps are in the accounting cycle? Name them.

A

Five steps

  1. Source documents
  2. Journals
  3. Ledger (T-accounts)
  4. Trial balance
  5. Financial statements
29
Q

What is the source documents in relation to the accounting cycle?

A

Issued for every transaction. It is used to assit the bookkeeper in knowing which journal to record the transaction in.

30
Q

Who receives the original source documents and who keeps a duplicate?

A

The customer will receive the original document in the business will keep the duplicates

31
Q

What is journal known as?

A

Subsidiary journals

32
Q

What is the journals in relation to the accounting cycle?

A

The journal are CRJ and CPJ. Information from the source document is recorded in the journals. Entries are made on a daily basis.

33
Q

When do we post the total of journals to the general ledger?

A

At the end of the month, the journals are totalled amd totals are posted to the general ledger.

34
Q

What is cash coming into the business known as?

A

Cash coming into the business is in the CRJ

35
Q

What is cash going out of the business known as?

A

Cash going out of the business is known as the CPJ

36
Q

What is the general ledger?

A

The general ledger has a seperate column for each transaction. The folio column is a reference to the journal in which the transaction occurred. When posting one account would be debited and one would be credited. In CRJ bank would be debited and in the CPJ credited. This is divided into two sections. Balance sheet section and nominal account section

37
Q

Is the balance sheet section?

A

The balance sheet section consist of the owners to accounts (OE and drawings) and all the assets and liabilities of the business. Assets the liabilities are listed in order from most fakes to most liquid. This is used to draw up the balance sheet

38
Q

Is the nominal accounts section?

A

Consists of income expenses of the business. There is no specific order and it is used to complete the income statement

39
Q

What is The trial balance?

A

A trial balance is drawn up at the end of each month to check if the general Ledger was correct. It is a summary of the month general ledger accounts. Used at the end of the financial year in order to draw up financial statements. To check if the entries are correct they use a double entry system. Trials and balances in the general ledger are recorded in the trial balance. This consists of two sections the balance sheet and the nominal accounts

40
Q

What is the financial statements?

A

At the end of a financial year the financial statements are drawn up. It is used by the managers and owners to see how well the business has been doing. This compromises the income statement and balance sheet

41
Q

What is a bookkeeper?

A

The person responsible for drawing up the accounting records of the business. They do not need to be a qualified accountant but should have financial knowledge

42
Q

What is the income statement?

A

Drawn up before the balance sheet because the business needs to calculate their profit and loss. Profit is referred to as net profit. Loss is called Net loss. Only the nominal accounts section is used for drawing up the income statement.

43
Q

How do you calculate profit?

A

Income - expenses

44
Q

What is the balance sheet?

A

Drawn up to see the financial position of the business on a certain date. It is drawn up at the end of the financial year, half yearly or quarterly. Consist of accounts from the balance sheet of the trial balance. The balance sheet is divided into two sections and they must equal each other.

45
Q

What are the two accounts and why does businesses want the accounts to equal each other?

A
  • Assets
  • Equities and liabilities

A business way of confirming the accounting equation

46
Q

What are T-accounts?

A

Looks like a capital T. Left hand side is debit (DR) Right hand side is credit (CR). There are certain rules.

47
Q

What is the four steps of recording a transaction?

A
  1. Identifying relevant accounts
  2. Identifying types of accounts
  3. Is it an increase or decrease?
  4. Debit or credit?
48
Q

What are the rules for the T-accounts?

A

Use the acronym dead clic.

D - debtors

E - expenses

A - assets

D - drawings

C - creditors

L - liabilities

I - income

C - capital (OE)

49
Q

What is own Capital ?

A

The owner contributes all money to the business. Owners purchased shares and are known as shareholders

50
Q

What is borrowed capital?

A

This business takes out a loan with a financial institution. The loan must be repaid of a certain time. With interest charges

51
Q

What Is intellectual capital?

A

Specialized skills or abilities the owner may bring into the business. Skills will increase the value of the business through it performance. Not recorded in financial records.

52
Q

What is assets?

A

Any item of economic value owned by an individual or business that can be converted into cash. There are fixed or non-current assets and current assets.

53
Q

What are fixed assets?

A

Also known as current assets. It has a lifespan of over 12 months. There are different types of fixed assets such as land and buildings, investments, vehicles and equipment.

54
Q

What are current assets?

A

Current assets would be turned into cash within a 12 month period. There are five types of current assets which include trading stock, debtors control, bank, petty cash, and cash float.

55
Q

What are trading stock?

A

Money invested in goods that have been bought by the business for the purpose of reselling.

56
Q

What is debtors control?

A

A summary of people who all owe money to the business

57
Q

What is the bank?

A

The amount of money that the business has in its current bank account or cheque account. Used on a monthly basis

58
Q

What is petty cash?

A

Money the business keeps in a petty cash box which is used for business purchases that are too small to warrant the issuing of a cheque

59
Q

What is a cash float?

A

Money that is kept in the businesses register.

60
Q

What are current liabilities?

A

Current liabilities are paid back within a 12 month period. There are two types of current liabilities which are creditors control and SARS

61
Q

What is a liability?

A

A business’s debts or obligations that arise during the course of the business operations. Liabilities can be divided into two categories which are long-term liabilities also known as non-current liabilities and current liabilities. Money owed by the business and reduces its value

62
Q

What are long-term liabilities?

A

Long-term liabilities are taken out for longer than 12 months and paid back monthly. There is one type of non-current liability which is loans

63
Q

What are loans?

A

The business borrows money from a financial institution and re-pays it over a certain amount of time

64
Q

What is creditors control?

A

Creditor control is also known as accounts payable. When a Business buys goods or services on credit, it still owes the supplier money

65
Q

What is SARS?

A

SARS also known as South African revenue services. The receiver of revenue (tax man) is owed money by the business in the form of VAT and income tax.

66
Q

What is income?

A

Income is an amount of money received, during a period of time in exchange for labor services from a sale of goods. Any money the business receives. It increases the profit of a business and therefore also increases owners equity. Current income, sales, renting property and interests on any investments are ways that a business can earn an income.

67
Q

What are expenses?

A

Expenses are money spent or cost returned in a business effort to generate revenue, representing the cost of doing business. Money that is spent by the business in order to keep it running every day. The more expensive the less profit is going to be made. Businesses need to ensure that they have both a high income and can manage their expense as well.

68
Q

What are drawings?

A

Drawings are anything the owner takes from the business whether it’s money, stock or equipment. This cannot be treated like a normal business expense, they belong to the owner and not the business. Drawings are in an owners equity account.

69
Q

How do you workout the gross profit?

A

Gross profit = selling price - cost price

Accounting (8 decks)

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