Mr Lewis

Question 1

Income statement

Answer 1

The profit or loss made by the business
Subtract costs from sales revenue to calculate this

Question 2

Statement of financial position

Answer 2

Summaries a company’s assets (what it owns), liabilities (what it owes), and equity (assets less liabilities)

Question 3

What are Trade receivables

Answer 3

The amount of money a business is owed by its customers for goods or services that have been paid for

Question 4

Trade payables

Answer 4

Suppliers that are owned money by the business because they sold goods to the business on credit

Question 5

Non current assets (and examples)

Answer 5

Resources owned by the business for more than a year before being converted to cash and sold on

Examples are as followed: Equipment, Land, Premises, Buildings

Question 6

What does RAIL stand for

Answer 6

Running costs, Assets, Income and Liabilities
Running costs and assets are debits
Income and Liabilities are credits

Question 7

What’s the difference between debit and credit

Answer 7

Debits are incoming money
Credits is outgoing money

Question 8

Debits (DR) go on the (left or right?) side of each T account

Answer 8

Left
“In England we DRive on the left and CRash on the right”

Question 9

Credits (CR) go on the (left or right?) side of each T account

Answer 9

Right
“In England we DRive on the left and CRash on the right”

Question 10

What are running costs

Answer 10

Running costs is money being regularly spent on certain things in a business
Running costs can be stuff such as wages, utilities, commissions pay & transporting good

Question 11

What are non current assets

Answer 11

Resources that are owned by the business and are converted to cash within 12 months

Examples: Inventory, Prepayment, Trade receivables

Question 12

What is capital introduced

Answer 12

Any money or goods provided by the owner for the business

Question 13

What is typically on the debit side of a receivables ledger

Answer 13

Balance b/d
Credit Sales
Dishonoured Cheque
Discount on dishonoured cheque
Interest to charged receivables

Question 14

What is on the credit side of the receivables ledger

Answer 14

Receipts from the customer
Discounts allowed (if there was any)
Sales returns
Balance c/d

Question 15

What is a payables ledger account

Answer 15

An account that records the money that your business owners to
They may be owing money to creditors, vendors, suppliers, investors etc

Question 16

What is on the debit side of the payables account

Answer 16

Payment to suppliers
Discount received (if there was any)
Purchase returns (credit notes from the purchase returns journal)
Contra with receivables ledger
Balance c/d

Question 17

What is on the credit side of the payables ledger

Answer 17

Balance b/d
Credit purchases (invoices from purchases journal)
Dishonoured cheque (from the cash book)
Discount on dishonoured cheque (if there is)
Interest charges by payables (if there is)

Question 18

Irrecoverable debts

Answer 18

Business won’t receive amounts of money owed by customer

Customer was sold goods on credit

The customer account has been declared bankrupt

Irrecoverable debts are an expense in the income statement

Question 19

Depreciation definition

Answer 19

Spreading the cost of a non current asset over its useful life.

Decreases the value of non current assets over time

Question 20

Examples of non current assets

Answer 20

Vehicles, Machinery, Equipment, Furniture, Buildings, fixture and fittings etc (these are all non current assets

Question 21

Non current liabilities + Examples

Answer 21

Amounts owed by the business that are fully repaid after more than a year

E.g: Bank Loans, Mortgages and debenture

Question 22

Current liabilities + Examples

Answer 22

Amounts owed by the business that must be repaid within a year

Examples: Accruals, Trade payables + Bank Overdraft

Question 23

Residual value

Answer 23

The estimated value of an asset after it has been fully depreciated and reached the end of its useful life

Question 24

Carriage in definition

Answer 24

The cost of transporting goods purchased by the business and is included as past of ‘Cost of Sales’

Question 25

Carriage out definition

Answer 25

The cost of transporting goods sold by the business
Included as an expense

Question 26

Profit for the year calculation

Answer 26

Gross Profit + Other Income - Expenses

Question 27

Costs of sales

Answer 27

The cost to the business of buying or making the goods that it’s sold

Question 28

Purchases definition

Answer 28

The costs of goods that have been bought for resale (doesn’t include non current assets)

Question 29

Revenue definition

Answer 29

The value of goods and services sold, even if they havent been paid for

Question 30

Discount received

Answer 30

Cash discount received from suppliers. Added after gross profit to calculate profit for the year

Question 31

Discount allowed

Answer 31

Cash discount given to customers. One of the expenses subtracted when calculating profit for the year

Question 32

Net book value

Answer 32

Cost - Accumilated Depreciation
The predicted value of a non current asset
Shown on the statement of financial position