Theories

Question 1

Accounting entity

Answer 1

activities of business is seperate from actions of the owner.

Question 2

Accounting Period

Answer 2

Life of business is divided into regular time intervals

Question 3

Accrual Basis of Accounting

Answer 3

Business activities that have occurred must be recorded in relevant accounting period

Question 4

Consistency

Answer 4

Once an accounting method is used, it must be applied for all future accounting periods.

Question 5

Objectivity

Answer 5

Accounting information recorded must be supported by reliable and verifiable evidence so that financial statements are free from bias and opinions

Question 6

Historical cost

Answer 6

Transactions should be recorded as original cost

Question 7

Monetary

Answer 7

Only business transactions that can be measured monetarily are recorded

Question 8

Matching

Answer 8

Expenses incurred must be matched against income earned in the same period to determine profit

Question 9

Prudence

Answer 9

Accounting treatment chosen should be one that least overstated assets and profits AND least understates liabilities and losses

Question 10

Revenue Recognition

Answer 10

Revenue is earned when goods have been delivered/services have been provided

Question 11

Purpose of receipt

Answer 11

Acknowledges payment received from customers immediately after goods sold or services provided

Question 12

Purpose of Remittance Advice

Answer 12

Informs credit supplier that payment by cheque has been made for a specific invoice

Question 13

Purpose of Invoice

Answer 13

Informs credit customers of amount owed after business sold goods/provided services

Question 14

Purpose of Credit Note

Answer 14

Reduces amount owed by credit customers:
- who were overcharged
- whose goods were returned

Question 15

Purpose of Credit Note

Answer 15

Reduces amount owed by credit customers:
- who were overcharged
- whose goods were returned

Question 16

Purpose of Debit Note

Answer 16

Increases amount owed by customers who were previously undercharged

Question 17

Purpose of Payment Voucher

Answer 17

Processes payment to credit suppliers
- Must be approved by authorised personnel
- Must be supported by original supplier invoice

Question 18

Purpose of Bank Statement

Answer 18

Checks and Tallies against the business records of its CAB account

Question 19

NCAs

Answer 19

• Office equipment
• Motor Vehicles
• Fixtures and Fittings
• Machinery
• Property
• Accumulated depreciation of NCA(contra Asset)

Question 20

CAs

Answer 20

-Cash At Bank
-Cash in Hand
-Inventory
-Trade Receivables
-Income receivables
-Prepaid Expense
-Allowance for impairment of TR(contra asset)

Question 21

NCL

Answer 21

Loan

Question 22

CLs

Answer 22

• Trade Payables
• Bank overdraft
• Income received in advance
• Expense payable
• Dividends payable

Question 23

Equity

Answer 23

• Capital
• Profit/loss
• Share Capital
• Retained earnings/accumulated losses
• Drawings (contra equity)
• Dividends (contra equity)

Question 24

Expenses

Answer 24

-Cost of Sales
-_______ expense
-Depreciation on NCA
-Impairment loss on TR
-Impairment loss on Inventory

Question 25

Income/Other income

Answer 25

-Service fee revenue/Sales revenue
-Sale income(contra income)
-Discount received
-Interest on deposit
-Rent/Commission income