ACCN1

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How do control accounts verify the accuracy of the ledger?
Each individual balance should add to total the balance of the control account. If no, it indicates and error.
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Why is it important to prepare Bank Reconciliation statement?
1. Keep cashbook up to date 2. Reduces risk of fraud 3. To identify unpresented cheques
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What errors aren't shown in the trial balance?
Omission, Commision, Principle, Original Entry, Compensating and Reversal of entries
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Why is a trial balance important?
1. Indicates errors if it doesn't balance 2. Preparation for final accounts
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What is an asset?
An item that is owned by or owed to the business. A Current asset is an item within the business for 12months or less, e.g. Inventory. A Non-current asset is an item or amount that is within the business for longer than 12 months, e.g. Equipment.
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What is a liability?
An item that is owed by the business. A Current liability is an item owed by the business for 12months or less, e.g. Trade Payables. A Non-current liability is an item that is owed by the business for longer than 12 months, e.g. Loans
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What is Capital?
The amount of money invested within the business by shareholders.
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How do you work out Net Current assets?
Current Assets - Current Liabilities
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Why would you use a Journal?
1. Non-routine transactions 2. Reduce errors 3. Reduce Fraud 4. To ensure entries can be traced back to their source documents
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Why and which subsiduary books should you keep?
1. Cashbook - records cash flowing in and out the business 2. Totals discounts
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What is the Accuruals concept?
When an expense or income must be paid in the financial year in which they occurred.
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What is the Prudence concept?
When preparing financial accounts, if ever in doubt report a conservative figure.
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What interest will external stakeholders have in the accounts?
1. Bank - Repayment of loan + interest 2. Government - correct amount of taxes being paid 3. Suppliers- to check if they can sell on credit
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What is a Credit Transfer?
A payment made from one bank account to another, under the instruction of the payer. Often using BACS (Banks Automated Clearing Services)
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What are bank charges?
Charges made by the bank, due to use of their services
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Why should you keep accounting records?
1. Record past events and so enable final accounts 2. Enable forecasts for future outcomes 3. Reduce risk of fraud
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What is an unpresented cheque?
Appears in the cashbook, but not yet shown in the bank statement
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What is an outstanding lodgement?
Appears in bank statement, but not shown in cashbook
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What is a Direct Debit?
Money directly transferred, irregular.
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What is a standing order?
A regular amount of money transferred on the same day of each month
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What interest will internal stakeholders have in the accounts?
1. Owner- to assess the profitability and solubility 2. Manager- anaylse the financial performance(maybe pay related) 3. Employees- Job security and pay rises
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Other cards in this set

Card 2

Front

Why is it important to prepare Bank Reconciliation statement?

Back

1. Keep cashbook up to date 2. Reduces risk of fraud 3. To identify unpresented cheques

Card 3

Front

What errors aren't shown in the trial balance?

Back

Preview of the front of card 3

Card 4

Front

Why is a trial balance important?

Back

Preview of the front of card 4

Card 5

Front

What is an asset?

Back

Preview of the front of card 5
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