The Accounting System

Question 1

What does an invoice state?

Answer 1

Amount owing
When it should be paid
Details of good/service provided

Question 2

What is the difference between cash and credit sales/purchases?

Answer 2

Cash - payment made immediately either through cash or bank payment

Credit - payments to be made at a later date

Question 3

What does a credit note do?

Answer 3

States the money amount and the goods/services to which it relates

Question 4

What are the books of prime entry?

Answer 4

Sales day book
Purchases day book
Sales returns day book
Purchases returns day book
Cash book
Journal

Question 5

What is double entry bookkeeping?

Answer 5

Making two entries in the accounts for each transaction

Question 6

What are the 4 main ledgers

Answer 6

Sales ledger
Purchases ledger
Cash book
General ledger

Question 7

What does a trial balance do?

Answer 7

It sets out the balances of all the double entry accounts from the general ledger

Question 8

How to calculate capital

Answer 8

Assets - liabilities = capital

Question 9

What are Non current assets

Answer 9

Items with a lifespan of more than a year

Question 10

What are current assets

Answer 10

Both intangible and tangible items needed for everyday running of a business

Question 11

What are non current liabilities?

Answer 11

Repayable long term liabilities that can be payed in more than over twelve months. E.g bank loans, mortgages

Question 12

What are current liabilities? And examples

Answer 12

Short term liabilities repayable within twelve months. E.g. trade payables, overdrafts

Question 13

What are expenses

Answer 13

The costs of running the business