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AP > Tracking (4) > Flashcards

Tracking (4) Flashcards

1
Q

Successful financial reporting depends heavily on?

A
  • the validity,
  • accuracy and completeness of the financial transactions recorded during the course of the financial period.
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2
Q

Define Entity principle?

A

An accounting principle that requires the books of the business to only reflect the transactions of the business and not the personal transactions of the owner(s).

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3
Q

Define Journal?

A

A table used to summarise similar transactions so as to facilitate fewer postings into the bookkeeping system.

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4
Q

Define Source document?

A

A source document is the original record that proves a transaction actually occurred.

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5
Q

Define Transactions?

A

Financial activities of a business that are recorded in the entity’s books in monetary terms.

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6
Q

According to the entity principle, how are a business and its owners accounted for?

A

As separate entities

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7
Q

What are the original books of entry called?

A

Journals

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8
Q

How should transactions be recorded in a business’s books?

A

In monetary terms

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9
Q

What is the original record of a transaction known as?

A

Source document

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10
Q

Why is it important to keep track of transactions?

A

To ensure that all transactions are recorded accurately

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11
Q

Define The entity principle?

A

The entity principle requires a business to record transactions relating to the business separately from those of its owner(s). Failure to apply this principle will result in the records of both the business and the owner(s) mingled together, making it impossible to accurately determine the financial performance (profitability) and the financial position (net wealth) of the business.

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12
Q

There are three main types of transactions that take place in business on a daily basis, namely?

A
  • cash transactions;
  • credit transactions; and
  • sundry transactions.
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13
Q

The owner of Blue Bakery. Betty Blue, takes cupcakes for her personal use. What must this transaction be recorded as?

A

Drawings

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14
Q

How can credit transactions be further classified?

A

Purchases and sales

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15
Q

If a business receives a loan from the owner of R1 000, which account would the business use to record the transaction?

A

Loan

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16
Q

Which of the following would be classified as a sundry transaction?

A

Writing off irrecoverable debts

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17
Q

When a business uses a cheque to pay for an expense, what type of transaction is this?

A

Cash payment

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18
Q

A source document is the original record of a transaction. It serves as proof that a transaction has occurred and usually contains details such as?

A
  • the document number (e.g. Receipt 101);
  • details of the buyer and seller (names, contact details, address etc);
  • the date of the transaction;
  • the description, quantity and unit price of the items sold or purchased;
  • the amount of the transaction (VAT amount, VAT exclusive amount and VAT inclusive amount, where VAT is applicable.
  • settlement terms (where applicable); and
  • an authorising signature.
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19
Q

Explain what the source document is: Till slip?

A

The document given at the point of sale as evidence of a cash sale. The seller retains the duplicate.

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20
Q

Type of source document: Cheque counterfoil or stub

A

The document retained in a cheque book as proof of a cheque payment.

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21
Q

Define a Credit note?

A

A document that is issued when goods are returned to the business by the customer (i.e. sales returns), or when the business returns goods to the supplier (purchases returns).

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22
Q

Define Invoice?

A

A document that is used to record credit transactions – i.e. credit sales and credit purchases. The seller retains the duplicate and the original invoice is used to record credit purchases by the buyer.

The invoice will include payment terms, such as:
- the number of days within which payment is expected – for example, 30 days or 45 days from the delivery date;
- the discount given for early payment – for example, five per cent if payment is made within 15 days; and
- penalties for late payment – for example, interest of six per cent on overdue accounts.

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23
Q

What is an EFT confirmation slip?

A

This is a proof of payment by way of an electronic funds transfer.

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24
Q

What is a Petty cash voucher?

A

An internal source document used to record payments made from the petty cash box.

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25
Q

What is a Journal voucher?

A

An internally generated source document from which transactions are recorded in the general journal.

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26
Q

Source documents are important for the following reasons?

A
  • They provide evidence of financial transactions that have occurred, and therefore protect the business from fraud.
    -Some source documents are signed by the parties to the transaction, making it hard to deny the validity of the transaction – for example, cheques are signed by authorised signatories.
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27
Q

What details will be found on a cheque counterfoil?

A

Name of payee getting the cheque

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28
Q

Which source document is used by the business to record cash sales?

A

Duplicate till slip

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29
Q

Which of the following details is often NOT found on a source document?

A

Cost of sales of the goods

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30
Q

A debtor has returned goods worth R500. What document must you issue to the debtor to acknowledge the sales return?

A

Credit note

31
Q

A journal, also known as the book of original entries is where?

A

Transactions are first recorded. A journal is created by entering information from receipts, cash register slips, invoices and other supporting documents that show financial transactions that have occurred.

32
Q

Transactions are recorded in?

A

chronological order – i.e. according to the date on which they occurred.

33
Q

chronological order?

A

– i.e. according to the date on which they occurred.

34
Q

What are the Types of journals?

A
  • Cash receipts journal
  • Cash payments journal
  • Petty cash journal
  • Debtors (sales) journal
  • Creditors (purchases) journal
  • Debtors allowances (sales returns) journal
  • Creditors allowances (purchases returns) journal
  • General journal
35
Q

Explain a Cash receipts journal (CRJ)?

A

This is a journal used to record all the cash received by the business, regardless of the source of the cash and the reasons for the receipt of the cash. The transactions recorded in this journal are usually referred to as cash receipts.

36
Q

Examples of transactions that are recorded in the cash receipts journal include?

A
  • cash refunds received from suppliers;
  • cash sales of goods and services;
  • cash received from debtors for goods and services previously sold on credit;
  • cash contributed as capital by the owner of the business;
  • cash donations received by the business;
37
Q

Explain Cash payments journal (CPJ)?

A

This is a journal used to record all cash payments made by the business. The transactions recorded in this journal are usually referred to as cash payments.

38
Q

Explain Petty cash journal (PCJ)?

A

There are bank charges associated with making payments for goods and services from our bank account.

39
Q

Examples of transactions that are recorded in a Petty cash journal (PCJ) include?

A
  • purchases of fuel, stationery, equipment and staff refreshments from the petty cash box;
  • wages paid to employees from the petty cash box;
  • cash refunds paid to customers from the petty cash box;
  • cash taken by the owner of the business from the petty cash box, for personal use;
  • payments for postage using petty cash;
40
Q

Explain a Debtors (sales) journal (DJ)?

A

This is a journal used to record credit sales of goods and services. It is important to note that the debtors journal is only used to record credit sales of trading inventory. The credit sales of all other goods (other than trading inventory) are recorded in the general journal. These include the credit sale of old vehicles, equipment, machinery etc.

41
Q

Examples of transactions that are recorded in a Debtors (sales) journal (DJ) include?

A
  • credit sales of trading inventory;
  • services rendered on credit;
  • increases made to credit invoices previously issued to customers;
42
Q

Explain Debtors allowances (sales returns) journal?

A

We may unintentionally deliver the wrong goods or damaged goods to our customers. We may even deliver more units than the customer ordered. In such cases, customers have a right to return these goods back to us. These are known as sales returns and are recorded in the debtors journal.

43
Q

Examples of transactions that are recorded in a Debtors allowances (sales returns) journal include?

A
  • returns, by customers, of goods previously sold on credit;
  • adjustments made to credit invoices previously issued to debtors. For example: an invoice issued to the customer might have been overcast or overstated;
44
Q

Define a Creditors (purchases) journal?

A

This is a journal used to record all credit purchases of goods and services. Unlike the debtors (sales) journal, the transactions recorded in the creditors (purchases) journal include purchases of all goods (including goods other than trading inventory).

45
Q

Examples of transactions that are recorded in a Creditors (purchases) journal include?

A
  • credit purchases of goods and services;
  • increases made to credit invoices previously received from suppliers;
46
Q

Explain Creditors allowances (purchases returns) journal (CAJ)?

A

This is a journal used to record all returns of goods previously bought on credit, as well as rebates or allowances on services previously offered to the business on credit.

47
Q

Examples of transactions that are recorded in a Creditors allowances (purchases returns) journal?

A
  • returns, by us, of goods previously bought on credit;
  • adjustments to credit invoices previously received from suppliers. For example: an invoice received from a supplier might have been overcast or overstated; or
48
Q

Examples of transactions that are recorded in this journal include?

A
  • the owner of a business contributes an asset (such as property, equipment, furniture or any other asset other than cash) to the business as capital;
  • the owner taking some goods from the business for personal use;
  • interest charged on overdue debtors’ and creditors’ accounts;
  • settlement discount granted to debtors to encourage them to settle their accounts with us promptly;
  • settlement discount received from creditors to encourage us to – settle our accounts with them promptly;
49
Q

The journals are also known as _______.

A

Books of original entry

50
Q

Credit sales of trading inventory are recorded in the_______.

A

Debtors (sales) journal

51
Q

Credit purchases of goods are recorded in the _______ .

A

Creditors journal

52
Q

Cheque payments for goods or services are recorded in the _______ journal.

A

Cash payments

53
Q

The _____________ journal uses the original credit note received as the source document.

A

Creditors allowances (purchases returns)

54
Q

The information on the credit note issued is used as a source document to prepare the ______ journal.

A

Debtors allowances (sales returns)

55
Q

Explain the Double-Entry principle?

A

The double entry principle is one of the fundamental accounting principles that form the basis of the recording of financial transactions. It is based on the fact that every financial transaction will result in two effects; a debit (Dr) and a credit (Cr). The double entry principle states that for every debit, there must be an equal and corresponding credit.

56
Q

Explain the Double-Entry principle?

A

The double entry principle is one of the fundamental accounting principles that form the basis of the recording of financial transactions. It is based on the fact that every financial transaction will result in two effects; a debit (Dr) and a credit (Cr). The double entry principle states that for every debit, there must be an equal and corresponding credit.

57
Q

The basic accounting equation is?

A

Assets = Owner’s equity + Liabilities.
The double entries will ensure that the accounting equation is always in balance.

58
Q

If a business pays for their electricity bill (R400), which accounts will be affected?

A

+Electricity
-Bank

59
Q

What would the ‘Trade payables’ account be classified as?

A

Liability

60
Q

Which accounts are debited in the ledger when they are increased?

A

Expenses, Assets, Drawing

61
Q

A _____________ entry is entered on the left side of the account.

A

Debit

62
Q

A debit entry on a liability account reflects a/an _____________ .

A

Decrease

63
Q

When cash is received, the company’s bank account should be ____________.

A

Credited

64
Q

A business paid wages of R 800 in cash to its workers. What will be the correct application of the double entry principle?

A

Dr Wages R 800, Cr Bank R 800

65
Q

Mr Ram started his business on 1 April 20.17 and deposited R 50 000 into the company’s bank account. Which of the following statements is/are correct?

Assets will increase by R 50 000
Capital will increase by R 50 000
Both a. and b. are correct

A

Both Assets will increase by R 50 000 and Capital will increase by R 50 000

66
Q

A business sells goods on credit to a customer. What is the entry in the trade receivables account?

A

Debit

67
Q

The business owner took R 1 000 cash for personal use. Identify the correct application of the double entry principle?

A

Dr Drawings R 1 000, Cr Bank R 1 000

68
Q

The business paid R 2 000 to Melpark Furniture to which it owed R 6 000 for office furniture bought on credit. What are the correct entries to record the payment?

A

Dr Trade payables R 2 000, Cr Bank R 2 000

69
Q

Jeanie, a sole trader, took goods worth R 500 for personal use. Which accounts will be affected?

A

Drawings and trading inventory

70
Q

A business made a loan repayment. What are the correct entries?

A

Dr Loan, Cr Bank

71
Q

How would a business show a decrease in the Income ledger account?

A

Debit Income

72
Q

If a business sells inventory on credit, which four accounts will be affected?

A

+ Cost of sales

73
Q

Explain the entity principle?

A

The entity principle requires a business to record transactions relating to the business separately from those of its owner(s). Failure to apply this principle will result in the records of both the business and the owner(s) mingled together, making it impossible to accurately determine the financial performance (profitability) and the financial position (net wealth) of the business.

AP (9 decks)

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