Recording Transactions

Question 1

What is the correlation between income and expenses if a profit/loss is made

Answer 1

If income > expenses, the business has made a profit

If expenses > income, the business has made a loss

Question 2

What does a Performance statement do?

Answer 2

Measures how much profit the business has generated during the trading period

Compares the INCOME generated to the EXPENSES incurred

Question 3

What is the Profit or loss equation

Answer 3

Income - Expenses = Profit or Loss

Question 4

What is the Accounting Equation

Answer 4

Assets - Liabilities = Capital + (Income - Expenses)

(With the values of Assets, Liabilities and Capital coming from the Balance sheet whilst Income and Expenses come from the profit and loss

Question 5

What is Double entry bookkeeping?

Answer 5

The concept of duality, that every transaction has two effects.

That a business both receives and gives value when a transaction is made.

That after each accounting transaction the equation should always balance

Question 6

What is DEAD CLIC

Answer 6

Debit Credit
Expenses Liabilities
Assets Income
Drawings Capital

Question 7

What are the advantages of Computerised Accounting?

Answer 7

Speed

Accuracy of calculation

Provision of detailed reports for management

Provision of financial information for regulatory purposes