Part A & B

Question 1

Asset

Answer 1

An item of value that the business owns. The item to be an asset would be expected to last for more than 1 year.

Question 2

Example of Asset

Answer 2

Bank, Furniture, Equipment, A/cs Rec

Question 3

Liabilities

Answer 3

Is someone that the business owes money to

Question 4

Example of Liability

Answer 4

Bank loan, A/cs Payable

Question 5

Owners Equity

Answer 5

Owners investment into the business.

Question 6

Example of OE

Answer 6

Capital, Drawings

Question 7

Expenses

Answer 7

Items that the business must pay for to run the business. These items would be expected to be used up within a year.

Question 8

Example of Expense

Answer 8

Wages, Advertising, Stationary

Question 9

Revenues

Answer 9

Items that make money or income for the business

Question 10

Example of Rev

Answer 10

Sales

Question 11

What is the Accounting Equation?

Answer 11

It is a mathematical equation representing Assets, Liabilities and Owners Equity at a point in time.

Question 12

What is the purpose of the Accounting Equation

Answer 12

To show that where we obtain our finances either through loans (liabilities) or funds from the owner (owners equity) will always balance with the value of the businesses assets.

Question 13

3 types of accounting equation

Answer 13

A = L + OE
L = A - OE
OE = A - L

Question 14

Where do R and E fall into the accounting equation

Answer 14

Revenues are income to a business and this will increase owners equity, as owners receive all profits. Expenses reduce the profits for a business and therefore will reduce owners equity.

Question 15

Other name for A/cs Payable

Answer 15

Creditors

Question 16

Other name for A/cs Recievable

Answer 16

Debtors

Question 17

Accounts Recievable

Answer 17

Customers who the business has allowed credit to by taking stock and owing the business money for that stock. Asset to the business

Question 18

Accounts Payable

Answer 18

Suppliers who give the business stock on credit, the business will owe the supplier. Classified as liabilities to the business.

Question 19

Bank overdraft

Answer 19

When the business has spent more money then they have in their bank account. Owe the bank more money, liability

Question 20

Mortgage on Premises

Answer 20

A loan from the bank where premises is used as a collateral. The bank can sell the premises to meet the debt of the business

Question 21

Double Entry

Answer 21

For every debit entry there must be a corresponding credit entry when transactions are records.

Question 22

How are debit and credit rules formed

Answer 22

They originate from the accounting equation. A = L + OE, sources of finance (Liabilities, Owners Equal) must equal how we use that money (Assets). Therefore both sides must balance. Assets are debit and L+OE are credit.

Question 23

What is a trial balance

Answer 23

It is a list of all ledger accounts for a business and their balances at a point in time. The credit and debit sides must equal.

Question 24

What is the purpose of a trial balance

Answer 24

To determine that double entry has been done when recording.

Question 25

What are the accounts for this: Sold goods/stock/inventories for cash

Answer 25

Bank, Sales

Question 26

What is a statement of financial position

Answer 26

a financial statement that summarises a business’s assets (what it owns), liabilities (what it owes), and equity (assets less liabilities) on a particular date – usually at the end of a financial month or financial year.

Question 27

What are the two types of SFP

Answer 27

T account ledger, Assets on left, L and OE on right
Narrative - Assets, less liabilities, net assets, owners equity

Question 28

What is a profit and loss statement

Answer 28

a financial statement that summarizes the business’s revenues, costs, and expenses during a specified period.
Revenues - Less Expenses = Net profit

Question 29

What is net profit

Answer 29

A business’s total earnings after subtracting all expenses.

Question 30

What do you write when there are a lot of accounts under Owners Equity?

Answer 30

Sundry

Question 31

What is the nature for Drawings

Answer 31

Debit as it is -OE