Unit 1 - Outcome 2

Question 1

Cash Receipt (cash transaction)

Answer 1

the transaction occurred when cash is received from another entity

Question 2

What is a service business?

Answer 2

A service business is a small business that operates by providing its time, labour, asset, or expertise in return for a fee or charge.

Question 3

What does cash include?

Answer 3

Cash includes notes and coins, EFT and credit card payments, and the balance of the firm’s bank account.

Question 4

How are cash transactions recorded?

Answer 4

Cash transactions are recorded in a Cash Receipts Journal or a Cash Payments Journal so they are classified and summarised.

Question 5

Where is the total amount received/paid written?

Answer 5

The total amount received/paid is written in the Bank Column.

Question 6

How are frequent transactions recorded?

Answer 6

Frequent transactions are recorded in their own classification column.

Question 7

How are infrequent transactions recorded?

Answer 7

Infrequent transactions are recorded in the Sundries column.

Question 8

What is a journal in accounting?

Answer 8

A journal is an accounting record that classifies and summarises transactions during a particular reporting period.

Question 9

What is a Cash Receipts Journal?

Answer 9

A Cash Receipts Journal is an accounting record that classifies and summarises all cash received from other entities during a particular reporting period.

Question 10

What is a Cash Payments Journal?

Answer 10

A Cash Payments Journal is an accounting record that classifies and summarises all cash paid to other entities during a particular reporting period.

Question 11

How are cash transactions reported?

Answer 11

Cash transactions are reported in the Statement of Receipts and Payments.

Question 12

What is used to complete the cash report?

Answer 12

The summarised cash journals are used to complete the report.

Question 13

What is listed in the cash report?

Answer 13

Each column total and sundry items are listed with their amounts.

Question 14

What is a statement of payments and receipts?

Answer 14

An accounting report that lists cash receipts and payments during a reporting period, the change in the bank balance, and the opening and closing bank balance.

Question 15

What is a Cash Flow Statement?

Answer 15

An accounting report that reports all cash flows during a reporting period, classified as Operating, Investing, and Financing activities.

Question 16

What is the purpose of the Cash Flow Statement?

Answer 16

It is used to aid decision-making and planning.

Question 17

What are Operating activities?

Answer 17

Cash flows related to day-to-day trading activities.

Question 18

What are Investing activities?

Answer 18

Cash flows related to the purchase and sale of non-current assets.

Question 19

What are Financing activities?

Answer 19

Cash flows related to changes in the financial structure of the firm.

Question 20

What are examples of Financing activities?

Answer 20

Loan receipts and payments, cash capital contributions, and drawings.

Question 21

What is GST payable?

Answer 21

GST received on fees creates a GST liability.

Question 22

What is GST receivable?

Answer 22

GST paid to suppliers reduces that liability.

Question 23

What is GST liability?

Answer 23

If GST received is greater than GST paid, then the business will have a GST liability (GST payable).

Question 25

What is a GST asset?

Answer 25

A GST asset (GST receivable) occurs when GST paid is greater than GST received, resulting in a GST refund due.

Question 26

How to calculate GST Balance?

Answer 26

GST Balance = Opening GST balance + GST received - GST paid.

Question 27

What is GST settlement?

Answer 27

GST settlement is a payment made to the ATO by a small business to settle GST payable.

Question 28

What is a GST refund?

Answer 28

A GST refund is a cash receipt from the ATO to clear GST receivable.

Question 29

What is Cash Flow Cover?

Answer 29

Cash Flow Cover is a liquidity indicator that assesses a business's Operating Cash Flow to meet short-term debts.

Question 30

What is the bank balance formula?

Answer 30

Bank balance at end of month = Bank balance at beginning of month + Cash receipts - Cash payments.

Question 31

What are source documents?

Answer 31

Source documents provide evidence of a transaction and must be kept by small businesses to satisfy the ATO.

Question 32

What happens after collecting and sorting relevant documents?

Answer 32

Information from these documents is put into a cash receipt journal or cash payment journal.

Question 33

What is a cash receipt journal or cash payment journal?

Answer 33

It is an accounting record that classifies and summarizes all transactions during a particular reporting period.

Question 34

How does the Statement of Receipts and Payments assist an owner?

Answer 34

It provides the change in bank balance and categorizes the inflow and outflow of cash, helping owners make decisions about business cash activities.

Question 35

What is a cash deficit?

Answer 35

A cash deficit occurs when the amount of payments is higher than the amount of receipts.

Question 36

What are the consequences of a cash deficit?

Answer 36

It will lead to a decrease in bank position and potentially even a bank overdraft.

Question 37

How does a cash flow statement assist business owners?

Answer 37

It is a vital tool for improving owners' decision-making by detailing sources and uses of cash.

Question 38

What can a cash flow statement help determine?

Answer 38

It helps see if the business meets cash targets and if it is generating enough cash from its operating activities to fund its investing and financing activities.

Question 39

What can be used to pay for investing activities?

Answer 39

External sources of finances can be used to pay for investing activities.