Key Terms: Chapter 8

Question 1

Cash book?

Answer 1

Records bank receipts and payments

May combine the roles of the book of prime entry for bank receipts & payments & the double-entry account for bank.

Question 2

3 column cash book

Answer 2

Cash book with columns for bank, VAT, and settlement discount.

Question 3

Capital

Answer 3

The amount of money invested in the business by the owner.

Question 4

Capital Expenditure

Answer 4

The purchase of non-current assets for use in the business.

Question 5

Revenue expenditure

Answer 5

Day-To-Day expenses of running a business.

Question 6

Drawings?

Answer 6

When the owner takes money from the business for personal use.

Question 7

Cash Sales?

Answer 7

Where a customer buys goods or services and pays in full immediately.

Question 8

Cash purchases

Answer 8

Where a business buys goods or services and pays in full immediately

Question 9

Discount allowed?

Answer 9

Amount allowed by a business to its customers

Who settle amounts due within the period for cash discount

As stated on the sales invoice.

Question 10

Discount Received?

Answer 10

Amount received by a business from its suppliers for quick settlement within the period for cash discount stated on the supplier’s invoice

Question 11

Bank Control Account?

Answer 11

Double entry account in General Ledger used when cash book is treated solely as the book of prime entry.

It shows the total receipts and payments made by the cashier during the period

Together with the opening and closing balances.