Key Terms: Chapter 6

Question 1

Purchases?

Answer 1

The Purchase of goods with the intention that they should be resold at a profit.

Question 2

Revenue expenditure?

Answer 2

The cost of purchases and running costs of the business.

Question 3

Capital expenditure?

Answer 3

The cost of asset items other than for resale

Purchased in connection with the running of the business

(eg. Buildings, shop fittings)

Question 4

Purchases Day Book

Answer 4

Book of prime entry prepared from credit notes received from suppliers.

Question 5

Analysed Day Books

Answer 5

Day Books which incorporate analysis columns, for example between:

• Goods bought for resale, often split between different types of goods
• Other items of revenue expenditure.

Question 6

General Ledger

Answer 6

Ledger section which includes

• purchases account
• purchases returns account
• purchases ledger control account
• VAT account

Question 7

Purchases Ledger

Answer 7

Subsidiary ledger section which contains the memorandum accounts of the firm’s payables (suppliers)

Question 8

Memorandum Account

Answer 8

A subsidiary ledger (eg purchases ledger) account which provides a note of individual amounts

(eg. owing by the business to suppliers)