Keywords

Question 1

Accrued Overhead

Answer 1

Overhead which won’t be paid until next financial period.

Add to TB figure

Question 2

Prepaid Overhead

Answer 2

Amount paid in a previous financial period.

Add to TB figure.

Question 3

Trade Discount

Answer 3

Given to Cash or Trade Credit Customers.

Given to reward loyalty.

Question 4

Cash Discount

Answer 4

Given to Trade Credit customers to encourage them to pay quicker.
Good for cash flow and liquidity.

Question 5

Profit

Answer 5

Revenue - Cost of Sales

Question 6

Cash

Answer 6

Notes, coins and instant access bank accounts

Question 7

Reserves

Answer 7

Undistributed profits represented by assets in the Balance Sheet.
Not cash.

Question 8

Capital Reserves

Answer 8

Share Premium

Revaluation Reserve

Question 9

Revenue reserves

Answer 9

Retained Earnings

General Reserve

Question 10

Capital Transactions

Answer 10

Affect Balance Sheet

Question 11

Revenue Transactions

Answer 11

Affect the Income Statement

Question 12

Direct Debit

Answer 12

Instruction to Bank to pay a variable amount on a regular date when the supplier requests it, until told to stop.

Question 13

Standing order

Answer 13

Instruction to Bank to pay a fixed amount on a regular date automatically to another person/business until told to stop.

Question 14

Credit Transfer

Answer 14

Electronic payment or receipt of money through banking system without cash or cheques.

Question 15

Unpresented cheques

Answer 15

Cheque recorded in the cash book but haven’t taken to the Bank.

Question 16

Outstanding Lodgement

Answer 16

Amount paid into the Bank and recorded in Cash Book but isn’t showing on Bank statement.

Question 17

Dishonoured cheque

Answer 17

Cheque returned by the Bank as their is insufficient money in their account.

Question 18

Debenture

Answer 18

Long term loan from private investor.
Percentage of interest paid yearly.
Original investment will be paid back at the end.
Temporary Capital

Question 19

Bonus shares

Answer 19

Given to existing shareholders in the ratio of their current share, to restructure equity section.
Use up capital reserves first.

Question 20

Rights issue

Answer 20

Shares sold at a discount to current shareholders in the ratio of current shares.
Fully subscribed if all existing holders want them.
Done to raise capital.
Amount raised added to cash.

Question 21

Limited liability

Answer 21

Most investors can lose is the amount they invested.
Less risky.
Easier to raise capital.
Personal assets are safe.

Question 22

NRV

Answer 22

Amount inventory can be sold for.
Deduct repair costs from NRV.
Then compare to cost and use lowest value.

Question 23

Ordinary Shares

Answer 23

Ownership
Voting Rights
Permanent Capital
Variable Dividends

Question 24

Preference Shares

Answer 24

Ownership
Permanent Capital
Fixed dividends