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Bookkeeping L1

QuestionAnswer
What is bookkeeping? The process of accurately recording day-to-day transactions in Books of Account.
What is accounting? Making use of the info and allowing the owner to understand the financial position of their business.
What are Assets? Things a business owns.
What are Liabilities? Things a business owes.
What are fixed assets? Things which add value to the business and assist in the running of the business eg. equipment/vehicles
What are current assets? Things that the business owns but which change in value day to day eg. money in bank/stock
What are current liabilities? Short term liabilities that are normally paid off within a year eg. overdraft, suppliers
What are long term liabilities? Liabilities that will last for longer than a year eg. bank loans, mortgages
What is the formal accounting equation? Assets=Capital+Liabilities
What is the basis of double entry? Two elements - something comes into the business and something goes out.
What is revenue income? Day to day income from sales of stock or rent of houses etc.
What is capital income? Income from sales of assets.
What is capital expenditure? Money spent on fixed assets that will remain in the business for a longer time.
What is revenue expenditure? Money spent on day-to-day items eg. rent, wages, purchases
What is the bank/business relationship? The business is a customer of the bank. Money put into the bank account is still owned by the business so is in effect 'loaned' to the bank for a time.
What details should be on a paying in slip? Date, branch name, account name into which the money is being paid, signature or name of the person paying in, reference, sort code and account number, amount of money, summary on side slip, list of individual cheques paid in on reverse.
What details should be on a cheque? Date of issue, name of payee, amount in both words and figures, signature of account holder.
What is the left hand side of the T account used to record and what is it called? Left hand side records the money paid into the account and is called the Debit side.
What is the right hand side of the T account used to record and what is it called? Right hand side records all payments out of the account and is called the credit side.
What does it mean if the balance is brought down on the right hand side of the bank account? The business owes the bank money.
What does it mean if the balance is brought down on the left hand side of the bank account? There is money in the bank.
What is the analysed cash book? A cash book in which the income and expenditure is split up under different headings.
What is a person who is owed money by a business called? A creditor.
What are the golden rules of double entry? 1. Never only one entry. 2. Never both entries on the same side. 3. Always the same figure on both sides.
What is the two column cash book used for? Keeping account of both cash and bank transactions in one book.
What is a contra transaction? A transaction in which money is transferred from one account to another eg. bank to cash.
Can a cash account have a credit balance? No.
What is the difference between gross pay and net pay? Gross pay is the total pay without deductions, Net pay is what the employee is paid once the deductions have been made.
What are the main deductions to wages? PAYE and NI
What is The Journal? A book used to record non-regular transactions eg. purchase of fixed assets.
What is a person who owes the business money called? A debtor.
What is the formula for calculating VAT? Where amount = A and the rate of VAT = B, it's A x B / 100
Which way do you round the VAT? Downwards.
What information needs to be on a VAT invoice? Supplier's name and address, VAT number, Invoice identification number, date of supply, customer's name and address, a description of goods or services supplied, the charge before tax, total tax payable and total amount due.
What information needs to be on a purchase order? PO number, shipping date, billing address, shipping address, terms and conditions, list of products or services with quantities and price.
Which way do you round discounts? Up.
What is input VAT? VAT on goods/services coming into a business eg. purchases.
What is output VAT? VAT on goods/services going out of the business eg. sales.
When is VAT dealt with, at the invoice stage or the payment stage? The invoice stage.
Which side is the VAT put in on? The same side as it's 'linked' item.
Which items always appear on the debit side of their account? Purchases, sales return, expenses.
Which items always appear on the credit side of their account? Purchase returns, sales.
How do you calculate the cash discount amounts? Re-calculate the full invoice including the cash discount and then post the difference
Discounts received go in on the... Right hand side.
Discounts allowed go in on the... Left hand side.
What is petty cash? A small amount of money kept in the business in cash to pay for small incidentals.
What is the imprest system? A system in which the amount held for petty cash is fixed and is topped up again after money is spent.
How is the petty cash book normally recorded? In an analysed format.
What information should be included for each entry in the petty cash book? The date, details of expenses, voucher number, total paid, expense amount in correct column, the amount of VAT.
Created by: jenniebatchelor