Theory questions Flashcards
Internal controls over cash
Segregation of duties, custody over cash, authorisation and bank reconciliation
4 stages of accounting cycle
Identify and record, adjust, report and close
Purpose of receipt
Acknowledges payment from payment received from customers immediately after the business has sold goods or provided services
Purpose of remittance advice
Informs credit supplier that payment by cheque has been made for specific invoice
Purpose of Invoice
Informs credit customers of the amount owed after the business sold goods or provided services on credit
Purpose of credit note
Reduces the amount owed by credit customers
Purpose of debit note
Increases the amount owed by credit customers who were previously undercharged
Purpose of Payment voucher
Processes payment to credit supplier
Purpose of bank statement
Checks and tallies against the business records of its cash at bank account
Define assets
Assets are resources a business owns or controls that are expected to provide future benefits
Define liabilities
Liabilities are obligations owed by a business to others that are expected to be settled in the future
Define equity
Equity is the claim by the owners on the net assets of a business
Purpose of preparing a trial balance
Facilitate the preparation of financial statements OR ensure arithmetic accuracy in recording
Explain the limitation of a trial balance.
Although a trial balance may be balanced, it may contain errors. For instance, a business could have forgotten to record a transaction causing the trial balance to be balanced but actually a transaction has been left out
Possible investing Stakeholders
Managers, employees, lenders, supplier, customers, government, competitors
