Module 2 Recording Financial Information Flashcards
Tim Booth introduced capital of £10,000 to start a t-shirt merchandising business. He also obtained a bank loan of £4,000 to purchase a printing machine.
Calculate the amount of the opening net assets: A) £4,000 B) £6,000 C) £10,000 D) £14,000
C=A-L
10,000 = (10,000 + 4,000) - 4,000
The correct answer is C
Tim Booth introduced capital of £10,000 to start a t-shirt merchandising business. He also obtained a bank loan of £4,000 to purchase a printing machine.
Identify the opening capital balance in Tim Booth’s business: A) £4,000 B) £6,000 C) £10,000 D) £14,000
The correct answer is C. Opening capital is £10,000.
Identify what a debit entry in the accounting records will result in:
A) Increase assets and expenses or decrease liabilities and income
B) Decrease assets and expenses or increase liabilities and income
C) Increase liabilities and income only
D) Increase assets and expenses only
The correct answer is A.
Identify what net current assets in the balance sheet represents: A) Total assets - current liabilities B) Current assets - total liabilities C) Current assets - current liabilities D) Total assets - total liabilities
The correct answer is C.
Identify what net assets in the balance sheet represents: A) Current assets - total liabilities B) Total assets - total liabilities C) Fixed assets - long term liabilities D) Total assets - current liabilities
The correct answer is B.
Identify the possible equivalent of an increase in assets: A) Increase in liabilities B) Increase in other assets C) Decrease in liabilities D) Decrease in capital
The dual aspect will have a debit and equal credit entry.
Increasing assets will be the debit entry.
The dual aspect (and the answer to this question) will have a credit entry.
Only answer A is a credit entry.
The correct answer is A.
Identify the possible equivalent of an increase in liabilities: A) Decrease in assets B) Increase in capital C) Decrease in other liabilities D) Increase in other liabilities
Increasing liabilities will be a credit entry. The dual aspect (and this answer) will give a debit entry. Only answer C is a debit.
The correct answer is C.
Identify the possible equivalent of an increase in capital: A) Decrease in assets B) Increase in assets C) Increase in liabilities D) Increase in other capital
Increasing capital is a credit entry.
Only answer B gives the necessary corresponding debit entry.
The correct answer is B.
Identify the effect on assets and liabilities if a fixed asset is bought on credit: A) Decrease assets, decrease liabilities B) Increase assets, increase liabilities C) Increase assets, decrease liabilities D) Decrease assets, increase liabilities
Purchase of assets on credit will increase assets and increase creditors (liabilities).
The correct answer is B.
Identify which of the following will NOT alter the total net assets of a business: A) Drawings by the proprietor B) Receipts of interest from investments C) Payments to trade creditors D) Charging depreciation on fixed assets
Net assets = total assets - total liabilities.
Only answer C will affect both total assets and total liabilities by the same amount and therefore not alter the net assets.
The correct answer is C.
Jolly runs a sweet shop and regularly takes his friends and suppliers out to lunch. He usually pays by cheque, but last week he took £30 from the till from which he paid a lunch account for himself and supplier of £27, keeping the balance for his own use. The cash in the till at the end of the day is taken as the daily sales figure recorded in his cashbook.
Identify the journal entry to record the withdrawal of the £30 from the till:
A) Dr Drawings 30
Cr P&L – sale 30
B) Dr P&L – entertaining 27
Dr Drawings 3
Cr P&L – sales 30
C) Dr P&L – sales 30
Cr Drawings 30
D) P&L – sales 30
P&L – entertaining 27
Drawings 3
The thirty pounds should be recorded firstly as a sale (credit sales) and secondly the use made of the cash must be recorded.
£27 was an entertaining expense whilst £3 was taken as proprietor’s drawings.
Recording the use of the cash will debit expenses (entertaining) £27 and debit drawings £3.
The correct answer is B.
Purchases of £1,733 have been wrongly posted to rent expenses. Identify the adjustment to remove the incorrect posting above the above:
A) Dr P&L – purchases 1,733
Cr P&L – rent 1,733
B) Dr P&L – rent 1,733
CrP&L – purchases 1,733
C) Dr P&L – purchases 1,733
CrTrade creditors 1,733
D) Dr Stock 1,733
CrP&L – rent 1,733
Increase in purchases is a debit entry.
The original debit was to rent which must be reversed with a credit entry.
A replacement debit entry must be posted to the purchases account.
The correct answer is A.
Identify what a debit entry can illustrate: A) An increase in income B) An increase in liabilities C) An increase in expenses D) An increase in capital
The correct answer is C.
Identify what a credit entry can illustrate: A) A decrease in capital B) A decrease in liabilities C) A decrease in profit D) A decrease in assets
The correct answer is D.
Identify what a double entry can illustrate:
A) Increase capital and increase liabilities
B) Increase income and increase liabilities
C) Increase assets and increase liabilities
D) Decrease assets and increase liabilities
The double entry must have a debit and an equal credit entry.
The only answer with a debit and credit is answer C.
