Prepayments and Accruals test

Question 1

Capital Invested

Answer 1

the actual amount of money,or money’s worth brought into the business by its owners from his/her outside interests.

Question 2

Capital employed

Answer 2

The amount of money that is being used in the business.

All assets - All liabilities= Net assets (capital employed)

Capital account-long term loan=capital employed

Question 3

Working capital (net current assets)

Answer 3

current assets-current liabilities

-The money that is available to pay the running expenses.

Question 4

A SERVICE business only need to draw up what?

Answer 4

Profit & Loss account (income statement) and statement of financial position

Question 5

what is the first item on the income statement for a SERVICE business?

Answer 5

the revenues

Revenues- add
expenses- deduct

Question 6

for DA and DR we do what to the trading profit and loss account?

Answer 6

We deduct DA

We Add DR

Question 7

What r 3 different names for amounts owing?

Answer 7

expense owing, expense creditors, accrued expenses

are current liabilities

Question 8

What r 3 different names for amounts prepaid?

Answer 8

Prepayments, Prepaid expenses, payments in advances

Shown on accounts receivable

Question 9

Goods for own use meaning

Answer 9

traders will often take items out of the business for their own use, without paying for them.

Question 10

Goods for own use double entry

Answer 10

Cr: purchases account
Dr: drawing account

Question 11

Private insurance incorrectly charged and therefore needs a correction double entry

Answer 11

Cr: insurance account
Dr: drawings account