FAPS Key Concepts

Question 1

What are the other names for the sales ledger?

Answer 1

Receivables ledger
Subsidiary ledger

Question 2

What is the receivables ledger sometimes called?

Answer 2

Receivables ledger control account

Question 3

If the sales day book is wrong, is the control account and/or the list of balances impacted?

Answer 3

Only the control account

Question 4

A credit in the bank is a … in the cash book

Answer 4

Debit

Question 6

Formula for annual depreciation charge

Answer 6

Cost - estimated residual value / useful life

Question 7

To find the admin expenses to insert into the trial balance, do you take the figure(s) from the line which says:
Bank
Prepaid expense
Reversal of accrual
SPL

Answer 7

SPL

Question 8

What is the accounting equation?

Answer 8

Assets - liabilities = capital + profit - drawings

Question 9

In what accounts is the balance transferred to SPL and not brought/carried down?

Answer 9

Income or expense accounts

Question 10

What is SPL

Answer 10

Summarises transactions of the business. It shows the companies revenues, expenses and profit or loss.

Question 11

What is SFP

Answer 11

Summary of assets and liabilities

Question 12

If a business isn’t registered for VAT can it reclaim the VAT it pays on the purchase of other goods

Answer 12

No. The cost of purchases must include VAT as these amounts are said to be irrecoverable.

Question 13

How do businesses reclaim their input tax?

Answer 13

They deduct the input tax from the output tax they owe and pay over the net amount only.

Question 14

What are the total wage expenses for a business

Answer 14

Gross pay plus employers NIC

Question 15

Does the cost of an NCA include VAT?

Answer 15

No, it’s the amount net of VAT. Cars are an exception though unless it’s an excepted car which is solely for business use.

Question 16

What is the going concern?

Answer 16

It presumes that the entity will continue in operation for the foreseeable future and has neither the need or the intention to liquidate

Question 17

Accruals basis definition

Answer 17

It states transactions should be reflected in the financial statements for the period in which they occur

Question 18

What are the fundamental qualitative characteristics?

Answer 18

Relevance
Faithful representation

Question 19

What are the enhancing qualitative characteristics?

Answer 19

Comparability
Verifiability
Timeliness
Understandability

Question 20

Integrity definition

Answer 20

Straightforward and honest

Question 21

Objectivity definition

Answer 21

Must not allow bias or allow others to influence you to override business judgements

Question 22

Professional competence and due care definition

Answer 22

Member has the knowledge and acts in accordance to professional standards

Question 23

What five key principles make up the code of ethics?

Answer 23

Integrity
Objectivity
Professional competence
Confidentiality
Professional behaviour

Question 24

What is net realisable value

Answer 24

The estimated selling price less all further costs to completion and all costs to be incurred in marketing and selling.

Question 25

At the period end what is the journal entry required for closing inventory

Answer 25

Dr inventory SFP - asset increase Cr inventory SPL - reduce cost of sales

Question 26

Opening inventory balance journal entry:

Answer 26

Dr Inventory SPL - opening inventory in cost of sales Cr Inventory SFP - no longer an asset as it’s being used

Question 27

Double entry for irrecoverable debt

Answer 27

Dr irrecoverable debts expense account Cr receivables ledger control account

Question 28

What is the double entry for receiving money from a receivable whose balance was previously written off

Answer 28

Dr bank Cr irrecoverable debts expense account

Question 29

An increase in allowance for doubtful debts will result in what journal entry

Answer 29

Dr allowances for doubtful receivables adjustment account Cr allowance for doubtful receivables account

Question 30

Double entry for credit sales with VAT:

Answer 30

Dr receivables Cr VAT Cr sales account

Question 31

Double entry for purchase returns

Answer 31

Dr payables ledger control account Cr VAT Cr Purchases returns account

Question 32

Discounts received double entry

Answer 32

Dr payables ledger control account Cr VAT Cr Discounts received

Question 33

What are uncleared lodgements

Answer 33

Money coming in which is in cash book but not bank statement

Question 34

What are unpresented cheques

Answer 34

Money going out which is in cash book but not in bank statement

Question 35

What are unrecorded transactions

Answer 35

Cash book isn’t updated but bank statement is eg direct debit

Question 36

Double entry for accruals:

Answer 36

Dr expenses Cr accrued expenses account

Question 37

Double entry for reversal of accrued expenses

Answer 37

Dr accrued expenses account Cr expense account

Question 38

Double entry for accrued income:

Answer 38

Dr accrued income Cr income

Question 39

Double entry for prepaid income

Answer 39

Dr income Cr prepaid income

Question 40

Casting error

Answer 40

Added up wrong

Question 41

Transposition error

Answer 41

Swapping digits around (if the only error it’ll be divisible by 9)

Question 42

Extraction error

Answer 42

Copy the balance brought down wrong

Question 43

Omission error

Answer 43

A balance is missing

Question 44

What is an error of original entry?

Answer 44

A wrong figure is entered as both the debit and credit entry.

Question 45

Define compensating error.

Answer 45

Two separate errors are made, one on the debit side and the other on the credit side, and the two errors are of the same amount, canceling each other out.

Question 46

Explain an error of commission.

Answer 46

A debit entry and an equal credit entry have been made, but one of the entries has been to the wrong account. However it’s in the right type of account eg stationery expense in rent account (both expenses)

Question 47

What is an error of principle?

Answer 47

An entry has been made in the wrong type of account, similar to an error of commission.

Question 48

Define reversal of entries.

Answer 48

Debit and credit entries have been made in the correct accounts but to the wrong sides of the accounts.

Question 49

Difference between error of commission and error of principle

Answer 49

Error of principle is when it impacts p&l and statement of financial

Question 50

Are bank charges a debit or a credit in the cash book

Answer 50

Credit because it reduces money in the bank account

Question 51

Receivables ledger vs RLCA

Answer 51

Receivables ledger = individual customer accounts RLCA = summary of receivables in general ledger

Question 52

Do drawings go in SPL or SFP

Answer 52

SFP

Question 53

Where does opening inventory go on an extended trial balance?

Answer 53

Dr SPL

Question 54

Example of going concern

Answer 54

Non current assets - wouldn’t be non current if it wasn’t for the going concern

Question 55

Two exceptions to consistency:

Answer 55

Change in circumstances Requirements of a new accounting standard

Question 56

Example of prudence

Answer 56

Eg inventory is recorded at lower of cost of NRV

Question 57

Relevance definition

Answer 57

Capable of influencing the decisions of users

Question 58

Faithful representation definition

Answer 58

Info is complete, neutral and free from error

Question 59

Timeliness definition

Answer 59

Info should be provided within a timescale suitable for decision making purposes

Question 60

Books of prime entry definition

Answer 60

Where transactions made by a business are recorded for the first time

Question 61

Books of prime entry examples

Answer 61

Sales day book Purchases day book Cash book