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| Question | Answer |
| What is the definition of ACCOUNTS? | Financial records, where business transactions are entered. |
| What is the definition of LEDGER? | A ledger is record of all the transactions a business has completed across all accounts. |
| What are ASSETS? | Assets are items owned by the business. |
| What are LIABILITIES? | Liabilities are items owed to a business. |
| What is CAPITAL? | Capital is the amount of the owner's stake in the business. |
| Who/What are DEBTORS? | Debtors are individuals or businesses who owe money in respect of goods or services provided by the business. |
| Who/What are CREDITORS? | Creditors are individuals or businesses who are owed money by the business. |
| What are PURCHASES? | Purchases are goods bought - either by credit or cash - which are intended to be resold later. |
| What is the difference between a CREDIT and a CASH purchase? | A credit purchase is when goods are bought with payment to be made later. A cash purchase is when goods are bought and paid immediately. |
| What are SALES? | Sales are the sale of goods - by credit or cash - with which the businesses trades. |
| What is the difference between a CREDIT and a CASH sale? | A credit sale is when goods are sold with payment to be made at a later date. A cash sale is when goods are sold and payment is received immediately. (Cash, cheque, credit card.) |
| What is the definition of a TURNOVER? | A turnover is the total number of sales - both cash and credit - for a particular time period. |
| What is VAT? | VAT stands for Value Added Tax and it is a tax set by Custom and Excise. |
| What is a JOURNAL? | A journal is an accounting record for non-regular transactions. It is a primary accounting record, not a double entry account. |
| What are DRAWINGS? | Drawings are monies removed by the owner for own use. |
| What is a TRIAL BALANCE? | A trial balance is a list of all balances; debit or credit. |
| What is a TRADING ACCOUNT? | A trading account shows the gross profit of the business. |
| What is a PROFIT AND LOSS ACCOUNT? | A profit and loss account shows the net profit of the business. |
| What is a BALANCE SHEET? | A balance sheet shows the assets and liabilities of the business at the year end. |
| What is the definition of INCOME CAPITAL? | Income capital is income received from one off transactions, like the sale of a fixed asset. |
| *** What is the definition of INCOME REVENUE? | Income revenue is made from selling items or knowledge |
| *** What is CAPITAL EXPENDITURE? | Capital expenditure is incurred when you buy assets and any cost included for fitting etc. for use in the business. |
| What is REVENUE EXPENDITURE? | Revenue expenditure is what is spent maintaining fixed assets or buildings. |
| *** What is the definition of STOCK? | Stock is an asset that has value to the business. |
| What is the difference between INPUT and OUTPUT TAX? | Input tax is tax applied on a purchase. Output tax is tax applied on a sale. |
| What is the acronym used to increase amounts on nominal codes? | DEAD CLIC. D-ebit: E-xpenditures, A-ssets, D-rawings. C-redit: L-iabilities, I-ncome, C-apital. |
| What is DOUBLE ENTRY accounting? | Double entry accounting is where both sides of the transaction are recorded. |
| What are some examples of ASSETS? | Assets can be: Buildings, Equipment, Inventory, Trade Receivables, Money in the Bank, Money Held in Cash. |
| What are some examples of LIABILITIES? | Liabilities can be: Trade Payables, Loans, Bank Overdraft. |
| What is the difference between INCOME and EXPENDITURE? | Income relates to receiving money (or other value) often because goods/services have been sold. Expenditure relates to buying things or incurring costs. They are sometimes referred to as "Outgoings". |
| *** What is CAPITAL EXPENDITURE? | Capital expenditure is incurred to purchase, alter or improve an asset that will be used in the business for more than one accounting period. These are called "non-current assets". |
| What are some examples of NON-CURRENT ASSETS? | Non-current assets could be: Land, Buildings, Vehicles and Equipment. |
| *** Where is CAPITAL EXPENDITURE APPLIED? | Capital expenditure is the cost of bringing the asset into use, with any later alterations or improvements. E.G. Purchase costs, installation costs, legal costs relating to the purchase. |
| What is REVENUE EXPENDITURE? | Revenue expenditure relates to the cost of running the business. Such as purchases of consumable items and services. These are known as "current assets". |
| What are some examples of CURRENT ASSETS? | Current assets can be: Wages, Fuel for vehicles, Repairs, Stock to be sold. |
| What is CAPITAL INCOME? | Capital income is used to describe income generated from non-regular transactions. |
| What are some examples of CAPITAL INCOME? | Capital income could be: Sale of non-current assets, Loans received, Capital invested by the owner. |
| What is REVENUE INCOME? | Revenue income is used to describe income generated from regular transactions. |
| What are some examples of REVENUE INCOME? | Revenue Income could be: Sales income, Rental income, Commissions receivable, Prompt payment discounts, Receipts from taxes (tax refunds). |
| What is the acronym used for double entry? | PEARLS. P-urchase, E-xpenses, A-ssets R-evenues, L-iabilities, S-ales PEA are debits, RLS are credits. |
| What are DEBIT ENTRIES? | Debit entries are ones that account for: ↑ Assets ↑ Expense ↓ Liability ↓ Equity ↓ Income |
| What are CREDIT ENTRIES? | Credit entries are ones that account for: ↓ Assets ↓ Expense ↑ Liability ↑ Equity ↑ Income |
| How is CREDIT and DEBIT shown in accounting? | Credit is shown with Cr and debit is shown with Dr. |
| How do CREDITS and DEBITS relate in double entry accounting? | The relation between credits and debits in accounting is shown by any increase in expense (Dr) will be offset by a decrease in assets, liability of equity (Cr). Cr - Dr = Capital |
| What is the definition of HISTORICAL COST? | Historical cost is the original cost incurred to acquire an asset. It falls under the Historical Cost Convention. |
| What are some exceptions to the HISTORICAL COST CONVENTION? | The Historical Cost Convention doesn't apply to: Financial instruments (cash, trade receivables, investments in shares) Property may be valued at market value. |
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