MN-1003

Question 1

On an account, which side is credit and which side is debit?

Answer 1

LHS: Debit
RHS: Credit

Question 2

What is the formula for assets?

Answer 2

Assets = Liabilities + Owner’s Equity

Question 3

What 2 categories can Assets be broken down into?

Answer 3

Fixed & Current

Question 4

What are the definitions of:

a) Fixed Assets
b) Current Assets

Answer 4

a) Fixed = items retained for over 1 year

b) Current = items that will be used within 1 year

Question 5

What is the term for when assets are transferred between different forms? (e.g. stock is bought with cash)

Answer 5

A shift in the composition of assets

Question 6

What happens to assets when there is a shift in the composition of assets?

Answer 6

Nothing, they still hold the same value

Question 7

Define ‘Trade Payable’

Answer 7

The amount of money owed to creditors from a purchase

Question 8

What part of the accounting equation does ‘Trade Payable’ fall into?

a) Asset
b) Liability
c) Equity

Answer 8

b) Liability

Question 9

Define ‘Trade Receivable’

Answer 9

The amount of money the company is owed by customers

Question 10

What part of the accounting equation does ‘Trade Receivable’ fall into?

a) Asset
b) Liability
c) Equity

Answer 10

a) Asset

Question 11

Define ‘Capital’

Answer 11

The owner’s investment into the company

Question 12

Define ‘Withdrawls’

Answer 12

A record of assets taken out of the firm by the owner for personal use

Question 13

What is ‘Double-Entry Bookkeeping’?

Answer 13

The standard account we use with debit & credit where, when assets increase, owner’s equity also increases

Question 14

Define ‘Revenue’

Answer 14

The earnings from sales

Question 15

Define ‘Expenses’

Answer 15

The cost of running a business

Question 16

Define ‘Sales Return’

Answer 16

Where sales are made but then the goods are returned

Question 17

Define ‘Purchase Return’

Answer 17

Where purchases are made but some goods are returned to where the firm bought them from

Question 18

In the 𝘊𝘢𝘴𝘩/𝘉𝘢𝘯𝘬 𝘈𝘤𝘤𝘰𝘶𝘯𝘵𝘴 𝘰𝘯𝘭𝘺, which side of the account does ‘money in’ go?

Answer 18

Debit

Question 19

In the 𝘊𝘢𝘴𝘩/𝘉𝘢𝘯𝘬 𝘈𝘤𝘤𝘰𝘶𝘯𝘵𝘴 𝘰𝘯𝘭𝘺, which side of the account does ‘money out’ go?

Answer 19

Credit

Question 20

After submitting a transaction into the cash/bank account, which side of the other ‘T account’ does it go into?

Answer 20

The opposite

Question 21

What term is submitted into the account to make credit and debit equal after the accounts are filled in?

Answer 21

‘Balance c/f’

Question 22

What term is submitted after the total to show how much credit/debit was needed to make credit and debit equal?

Answer 22

‘Balance b/f’

Question 23

What does the ‘Trial Balance’ do?

Answer 23

Takes the balance of all the ‘T-accounts’ and lists them as debits or credits

Question 24

What is unique about the total of the ‘Trial Balance’?

Answer 24

The credit side should be equal to the debit side

Question 25

What is auditing?

Answer 25

An external check that the sales and cash balance are correct

Question 26

What are the 4 steps of accounting?

Answer 26

- Record Data - Classify Data - Summarise Data - Communicate

Question 27

Explain what is meant by an asset shift

Answer 27

When the composition of assets changes but total assets remain the same

Question 28

Define Creditor

Answer 28

Someone the firm owes money to

Question 29

Define Debitor

Answer 29

Someone who owes the firm money

Question 30

What happens to the owner's equity as revenue increases?

Answer 30

Owner's equity also increases

Question 31

What happens to owner's equity as expenses increase?

Answer 31

Owner's equity decreases

Question 32

Define 'Sales Return'

Answer 32

Where sales are made but the goods are returned

Question 33

Define 'Purchases Returns'

Answer 33

Where the firm has to return purchases it has made to wherever they bought them from

Question 34

What is a 'trial balance'?

Answer 34

The account filled out after completing the many T-accounts

Question 35

What's the formula for Net Income?

Answer 35

Net Income = Revenue - Expenses

Question 36

What does a Profit/Loss Account show?

Answer 36

Shows the businesses performance over a period of time

Question 37

What is the order of the 3 profits?

Answer 37

Gross Profit Operating Profit Net Profit

Question 38

What's the formula for Gross Profit?

Answer 38

Gross Profit = Sales - Cost of Sales

Question 39

What's the formula for Operating Profit?

Answer 39

Operating Profit = Gross Profit - Expenses

Question 40

What's the formula for Net Profit?

Answer 40

Net Profit = Operating Profit + Other Incomes - Interest - Tax

Question 41

Give an example of an 'Other Income' from the Net Profit formula?

Answer 41

- Interest Received | - Discount Received

Question 42

What is a statement of Financial Position?

Answer 42

A snapshot of a business at a given time

Question 43

What are the two types of Depreciation?

Answer 43

- Straight Line Method (SLM) | - Reducing Balance Method (RBM)

Question 44

What is the difference between Private and Public limited companies?

Answer 44

Private don't issue shares to the public whereas PLCs do

Question 45

What is the Nominal Value of a share?

Answer 45

It's original value

Question 46

What is the Market Value of a share?

Answer 46

The price people are prepared to pay for a share

Question 47

What's the formula for Share Premium?

Answer 47

Share Premium = Market Value - Nominal Value

Question 48

What's the formula foe Share Capital?

Answer 48

Share Capital = Nominal Value x Shares Issued

Question 49

What are 'Dividends'?

Answer 49

Obligations to shareholders to pay a rate per share

Question 50

Under what heading are 'dividends' classed?

Answer 50

A current liability

Question 51

What's the formula for 'Retained Profit'?

Answer 51

Retained Profit = Profit after Tax + Balance b/f - Dividends Paid

Question 52

What change was recently made to taxation of firms?

Answer 52

It was previously classed as income tax but is now classified as corporation tax as the company is separate from its owner

Question 53

What's the formula for 'Net Working Capital'?

Answer 53

Net Working Capital = Current Assets - Current Liabilities

Question 54

Define 'Management Accounting'?

Answer 54

The branch of accounting concerned with the collection of detailed financial data for use in planning and controlling

Question 55

Define 'Financial Management'?

Answer 55

The branch of accounting concerned with acquiring and deploying the finance required by an entity

Question 56

Define 'Financial Accounting'

Answer 56

The branch of accounting that reports on the performance of the firm to external users

Question 57

Name the 3 types of accounts studied weeks 1-5

Answer 57

- Statement of financial position - Statement of profit/loss - Statement of changes in equity

Question 58

Which account is also known as a 'Balance Sheet'?

Answer 58

Statement of financial position

Question 59

Which account is also known as a 'Income Statement'?

Answer 59

Statement of Profit/Loss

Question 60

What is the name of the final account done at the end of the T-accounts where all the 'Balance b/f's are shown?

Answer 60

Trial Balance

Question 61

What does the 'Statement of Financial Position' show?

Answer 61

Assets, Liabilities and Equity

Question 62

What 4 things does the 'Statement of Profit/Loss' show?

Answer 62

Sales Gross Profit Operating Profit Net Profit

Question 63

What 4 things does the 'Statement of Changes in Equity' show?

Answer 63

Balance b/f Issue of Share Capital Dividends Profit for the Year

Question 64

Is an increase in an asset recorded as a debit or a credit?

Answer 64

Debit

Question 65

Is an increase in a liability recorded as a debit or a credit?

Answer 65

Credit

Question 66

Is a decrease in an asset recorded as a debit or a credit?

Answer 66

Credit

Question 67

Is a decrease in a liability recorded as a debit or a credit?

Answer 67

Debit