|What are Cheques used for, and where are they recorded?
|- Used to make payments -Recorded within the cash book, then on the bank statement
|What are Receipts, and where are they recorded?
|-Payments received from Debtors -They are banked using a pay in book -Recorded in the cash book, then on the bank statement
|What is bank interest paid?
|-Interest on overdrafts; the interest charged by banks when an account is overdrawn
|What is Bank interest received?
|-Interest paid on positive account balance, depends on type of bank account held by the business
|What is Direct Debit?
|-Payment made by the bank on behalf of the customer. The authority to withdraw money from the account is given by the payee. The amounts withdrawn from the account is generally variable.
|Is the amount withdrawn from an account by direct debit fixed or variable?
|What is a Standing order?
|-Payments made automatically by the bank on behalf of the customer. They are set amounts and may be paid weekly, monthly or annually. E.g. Rent
|Is the amount withdrawn from an account by Standing Order fixed or variable?
|How often is the amount withdrawn from an account by Standing Order withdrawn?
|Weekly, Monthly or Annually
|What is a Bank Transfer?
|Amounts paid into an account directly through the bank system instead of by issuing a cheque
|What is an Unpaid Cheque?
|-(Dishonoured cheques) are cheques that have not gone through the drawer's bank account, often due to insufficient funds in their account to pay (honour) the cheque
|What are Bank charges, and what are they for?
|Made by banks to cover the costs of maintaining the drawer's account
|What are Assets?
|-Items or money which owned by the business
|What are Current Assets, and what are they used for?
|-Assets which are used for trading purposes,to converted into cash
|What are Non-current assets, give an example?
|-Assets owned by the business which are not normally for resale such as, Motor vehicles, Equipment and Furniture etc.
|What are Trade Payables?
|-Suppliers to whom money is owed by the business. This is short term usually paid within one year
|What are Trade Receivables?
|-Customers or other firms who owe money to the business, for items they have purchased on credit. These are usually short term and business should receive these amounts within one year
|What are Liabilities?
|-They are amounts that are owed by a business
|What are current Liabilities?
|-Debts of the business which have to be paid within 12 months, such as trade creditors, bank overdrafts and short term loans
|What are Non-current Liabilities?
|-Debts of the business which can be paid after 12 months, such as mortgages and loans
|What is the General Ledger?
|-All the other accounts of the business which are not connected to the main accounts
|Does double entry take place within the General Ledger?
|What is the purpose Trial Balance?
|-Provides a check of accuracy of the double entry. Provides a summary of all the balances within the general ledger and which will be used to prepare financial statements
|What does the Trading Account do?
|-Informs the business's Gross Profit for the period under review
|What does the Profit and Loss Account do?
|-Informs the business's Net Profit for the period under review
|What does the Balance Sheet do?
|-Inform the business's Assets, Liabilities and Capital
|Why would the Owner of a business be interest in the Financial statements?
|-Whether the business is profitable -Assess the liquidity of the business -Generating sufficient cash to pay liabilities on time
|Why would the Manager of a business be interest in the Financial statements
|-Whether the business is making any profit -To see if they are meeting targets to at least break-even -To set new targets for the future -Entitled to a bonus or getting a bonus
|Why would the Suppliers of a business be interest in the Financial statements?
|-To know how much stock the business needs -To know which stock is selling more, therefore increasing their prices -Whether the business is generating profits to pay off creditors
|Why would the Customers of a business be interest in the Financial statements?
|-Shows how successful the business is -Whether the business will continue selling the goods and services that they buy
|Why would 'Providers of Finance' of a business be interest in the Financial statements?
|-Whether the business is able to repay its bank loans or repay the people who provides the finances to the business -If not then the providers will not fund the business and loan them money, as the business may not be financially stable
|Why would the Employees of a business be interest in the Financial statements?
|-Whether they have a secure salary -'Workers rights', whether they have been given the opportunities to become of a higher status in the business
|Why would the Government be interest in the Financial statements of the business?
|-Need to check the accounts to make sure the business is paying the right level of TAX depend on the profits and income generated
|Why would Competitors of a business be interest in the Financial statements?
|-To know what the business is charging for what service -Understand the strategies of the business -To help create a 'game plan' to compete with the business
|Why would the 'Local Community of a business be interest in the Financial statements?
|-Maybe involved in the Local community -May donate money to charity
|What is a prepayment?
|-Paid in advance -Relates to next accounting period
|How is a prepayment recorded?
|-Reduce expenses in Profit/Loss Account -Current Asset in Balance Sheet
|What are Accruals?
|-Liability that has been used -Not yet invoiced to the business -Expense used in financial period but not yet paid for
|How is Accruals recorded?
|-Increase expenses in Profit/Loss account -Current Liability in the Balance Sheet
|What is Depreciation?
|-The apportionment of cost of a fixed asset over its useful economic life -Decrease in value of Fixed asset due to wear and tear
|What is the Importance of Source Documents?
|-Provides evidence that a transaction has taken place -Provides detailed information about the nature of the transaction
|What is the Importance of keeping a Subsidiary Book?
|-Divides accounting functions/tasks -Reduces the number of entries within General Ledger -Good Ref. to link Source Docs and Accounting Records -Good record for VAT purposes Provides a good Ref. for keeping track of business transactions
|What is the Purpose of Control Accounts?
|-Helps break down accounting tasks -Helps identify errors, saves time and easier to check if mistakes are made -Provides independent check -Helps confirm total Debtors & Creditors -Makes preparation of final accounts much easier -Provides a summary of sales & purchase ledgers -Cash book confirms money balances
|What are the Dis-advantages of Control Accounts?
|-Time consuming Can't identify all errors Mis-posting errors
|What are the types of errors which can be identified by using a control account?
|-Casting Error - adding up incorrectly -Error of Principle - Transaction has been recorded in the wrong type of account -Reversal of Entries - Transaction is listed in the right account but on the wrong side -Transposition - Incorrectly transfers figure -Addition - Addition mistake -Posting - One side of the transaction is posted in the correct place and the other incorrectly -Partial Omission - Only one side of the entry is made -Unequal posting - Debit side posting is not the same as Credit side posting
|What are the advantages of Control accounts/Trial Balance?
|-Check accuracy & Reliability of all postings made to personal ledgers -Enables some errors in the ledger to be located quickly -If trial balance doesn't balance, the control account may indicate which personal ledgers contain the errors -Total amounts owed by Debtors & Creditors can be calculated quickly enabling the financial statements to be produced quickly -Can be used to give responsibility to staff, making them responsible for sections of the ledger -Used to check on the honesty of staff