Other

Question 1

What is a credit note used for?

Answer 1

Returns or refunds.

Question 2

What is an invoice used for?

Answer 2

A transaction on credit.

Question 3

What does a bank transaction report show?

Answer 3

Details of bank transactions.

Question 4

What is payroll used for?

Answer 4

Recording employee costs.

Question 5

What are delivery notes?

Answer 5

Documents showing goods delivered.

Question 6

What are goods received notes?

Answer 6

Documents showing goods received.

Question 7

What is a debit note used for?

Answer 7

Requesting a credit note.

Question 8

In a contra entry, which amount should be used?

Answer 8

The lower of both amounts.

Question 9

What are the accounts involved in a contra entry?

Answer 9

Dr Trade Payables, Cr Trade Receivables.

Question 10

What is retained earnings?

Answer 10

The accumulated profits kept in the business.

Question 11

How do you calculate retained earnings?

Answer 11

Opening retained earnings + profit - dividends.

Question 12

What is a principle error?

Answer 12

Using the wrong type of account (e.g. asset instead of expense).

Question 13

What is a transposition error?

Answer 13

Recording a number incorrectly.

Question 14

What is a commission error?

Answer 14

Right type but wrong account.

Question 15

What is an omission error?

Answer 15

Not recording a transaction at all.

Question 16

What is a compensating error?

Answer 16

Two errors that cancel each other out.

Question 17

What are the entries for a rights issue?

Answer 17

Dr Cash, Cr Share Capital (nominal), Cr Share Premium (sell price - nominal).

Question 18

What are the entries for a bonus issue?

Answer 18

Dr Reserves, Cr Share Capital.

Question 19

What is the formula for a rights issue ratio?

Answer 19

Ratio × number of shares = number of new shares.

Question 20

What is an example of a rights issue ratio?

Answer 20

$1 for 5 = 1/5.

Question 21

What is the usual order for debiting in a bonus issue?

Answer 21

Use share premium first, then retained earnings.

Question 22

What is a redeemable preference share?

Answer 22

A share that must be repaid (liability).

Question 23

What is an irredeemable preference share?

Answer 23

A share that does not have to be repaid (equity).

Question 24

What is a provision?

Answer 24

An estimated liability or expense.

Question 25

What is the entry to increase a provision?

Answer 25

Dr Admin Expense, Cr Provision.

Question 26

What is an understatement of provision?

Answer 26

When the actual expense is higher than estimated.

Question 27

What is an overstatement of provision?

Answer 27

When the actual expense is lower than estimated.

Question 28

What is an over-provision?

Answer 28

A provision that was too high last year – reduce next year’s expense (Cr).

Question 29

What is an under-provision?

Answer 29

A provision that was too low last year – increase next year’s expense (Dr).

Question 30

What does an over-provision of tax mean?

Answer 30

Reduce next year’s tax expense (credit).

Question 31

What does an under-provision of tax mean?

Answer 31

Increase next year’s tax expense (debit).

Question 32

What is the accounting equation?

Answer 32

Asset - liabilities- opening capital + drawings = profit

Question 33

What is a Transposition Error

Answer 33

When putting two or more digits the wrong way around

Question 34

What is an Error of Ommision

Answer 34

When a transaction is not recorded

Question 35

What is an error of principle

Answer 35

When the accountant has broken the principles | For example when revenue expenditure is treated as capital expenditure

Question 36

What is an error of commision

Answer 36

When an error is made in the ledger account | For example debit instead of credit

Question 37

What is a compensating error

Answer 37

When two errors are equal and opposite of eachother