Preparing Financial Statements - Other Considerations

Question 1

Sales vs purchase return

Answer 1

Sales - return from customer

Purchase - returns to suppliers

Question 2

Double entry for credit transaction

Answer 2

Sales return - Dr sales Cr trade receivables

Purchase return - Dr trade payables Cr purchases

Question 3

Double entry for a return for a cash transaction

Answer 3

Sales return - Dr sales Cr cash

Purchase return - Dr cash Cr purchases

Question 4

2 types of discount

Answer 4

Trade (bulk buy) - given as reduction at point of sale
Early settlement (prompt payment) - discount for paying within a certain time frame, if expected to take up discount but didn’t, difference is added at settlement

Question 5

Employer payroll payments

Answer 5

Gross salary + employers NI contributions

Question 6

Gross salary composition

Answer 6

Net salary (paid to employee)
Income tax (PAYE) - paid to HMRC
Employees NI - paid to HMRC