FIA FA1
FIA FA1 Recording Financial Transactions Flashcards
What is a business transaction, and list six common types found in most organisations.
Distinguish a cash transaction from a credit transaction.
Name the six main documents in a typical credit purchase cycle, in order.
What is the purpose and typical content of a (sales) invoice?
What is a credit note and when is one issued?
What is a debit note and how does it differ from a credit note?
Distinguish a delivery note from a goods received note (GRN).
What is the purpose of a statement of account sent to a customer?
What is a remittance advice and who sends it?
Distinguish a purchase requisition from a purchase order.
Distinguish a trade (bulk) discount from a cash (settlement) discount.
On what figure is sales tax calculated when a trade discount is given?
Give the sales tax cost structure at a 20% rate and show how to find net, tax and gross.
Distinguish output tax from input tax, and state what is paid to government.
A petty cash voucher shows a gross amount of 12 including sales tax at 20%. What are the tax and net amounts?
List the four main methods of payment a business may use and a key security concern for each.
Why are coding systems used in accounting, and what four benefits do they give?
What is a sequential (sequence) code and what are its drawbacks?
What is a hierarchical (significant digit) code? Give the advantage.
Briefly describe block codes and faceted codes.
List four advantages of a computerised accounting system over a manual one.
Draw the basic model of a computerised accounting system and explain GIGO.
Distinguish batch processing from real-time, on-line processing.
What is exception reporting and give two examples.
List the three main risks to accounting data in a large organisation.
What four things should internal control ensure about all transactions, and what is segregation of duties?
How should computer-based accounting data be safeguarded?
Why keep a document retention policy, and roughly how long are documents kept?
What are the two summary financial statements prepared at the period end, and what does each show?
In the statement of financial position, distinguish non-current from current assets, and current from long-term liabilities.
Name the three ledgers in a typical accounting system and what each records.
The receivables and payables ledgers are 'memorandum'. What must their totals agree to?
State the accounting equation in its two common forms.
What does a debit entry represent?
What does a credit entry represent?
State the fundamental rule of double-entry bookkeeping.
What is the double entry for a cash sale?
What is the double entry for a credit sale?
What is the double entry when a credit customer pays the amount owing?
What is the double entry for the purchase of goods for resale on credit?
What is the double entry for paying a supplier the amount owed?
What is the double entry for paying wages to employees (in cash)?
What is the double entry for the purchase of a car on credit from a garage?
What is the double entry when the owner introduces capital in cash?
What are drawings and what is the double entry when the owner takes cash out?
How do you find the balance on a T-account, and what does a debit balance on the cash account mean?
Define the five elements of the financial statements.
Which elements appear on the statement of financial position and which on the income statement?
How is profit treated in the statement of financial position, and are capital and drawings income or expenses?
State the relationship linking the change in net assets to profit.
Net assets rose from 15,000 to 19,000; no capital was introduced but drawings were 750. What is the profit?
What is the purpose of a trial balance?
Distinguish gross profit from net profit.
When a business makes a credit sale of goods, why are two double entries usually recorded?
What is the double entry for the purchase of office stationery for cash?
Describe the layout of a general ledger (T) account.
How do you balance off a general ledger account, and what do 'c/d' and 'b/d' mean?
What do balance brought forward and carried forward represent on a ledger account?
How do entries reach the general ledger from the books of prime entry?
How do the control accounts in the general ledger relate to the receivables and payables ledgers?
What is the journal used for?
Describe the traditional format of a journal entry.
Why must a journal entry include a narrative and an authorisation?
Give the journal to offset (contra) a customer who is also a supplier: 1,400 owed to them and 1,400 owed by them.
350 paid to repair a machine was wrongly recorded as the purchase of a new machine. Give the correcting journal.
1,789 received from XYZ in settlement of an invoice was wrongly treated as a new sale. Give the correcting journal.
Give the journal to write off an irrecoverable debt of 3,800 (ignore sales tax relief).
Is the journal itself part of the double-entry (T-account) system?
Name some other books of prime entry besides the journal.
Give three examples of adjustments typically put through the journal.
List the four main ways of making a payment from a bank account.
Distinguish a direct debit from a standing order.
On a cheque, define the drawer, drawee and payee.
How does the cheque clearing system work, and roughly how long does it take?
What does it mean when a cheque is dishonoured ('bounced' / 'refer to drawer')?
What is a paying-in slip used for?
What is the cash account (cash book) and what does it record?
What is a bank reconciliation and why is it performed?
Why does a bank statement show a credit balance when the customer has money in the account?
What are unpresented cheques and uncredited lodgements in a bank reconciliation?
Which reconciling items are used to update the cash book (rather than being timing differences)?
Outline the standard method to reconcile the cash book balance to the bank statement balance.
Cash book 5,700 Dr; add receipt 403 not recorded, deduct bank charges 70 not recorded; unpresented cheques 3,880; uncredited lodgements 1,367. What is the bank statement balance?
Why might the cash book and bank statement balances differ even with no errors?
What is the petty cash book and what feature does it usually have?
Explain the imprest system for petty cash.
How does a non-imprest petty cash system differ from an imprest system?
How do you reconcile a petty cash float, and how much is a reimbursement?
Float is 100. During the month 5 was received from staff for photocopying and vouchers of 45 were approved. How much top-up is needed?
How do banks differ from other financial services businesses?
Why is it good practice to bank cheques received promptly?
How is a bank overdraft shown, and what does a credit balance b/d on the cash book mean?
Why should spoiled cheques still be accounted for?
What is credit control and what checks are made before granting credit to a new customer?
Once credit sales are made, what three methods help ensure customers pay on time?
How is a settlement discount allowed to a customer accounted for?
An invoice for 700 offers a 5% settlement discount, taken by the customer. Show the entries.
Goods list 800, trade discount 20%, plus a 5% settlement discount which the customer takes. What is posted to Sales and to Discounts Allowed?
A settlement discount only reduces the payment if what condition is met?
What is an aged receivables analysis and what does it show?
Why are remittance advices important for an aged receivables analysis?
What is an irrecoverable (bad) debt and how is it written off?
When can sales tax relief be claimed on an irrecoverable debt, and how is the tax content found?
A debt of 34,615 (including sales tax at 15%) is written off. What sales tax is recoverable and what is the final cost?
Distinguish writing off a debt from making an allowance for irrecoverable debts.
Distinguish a specific allowance from a general allowance for irrecoverable debts.
Receivables 125,000: write off 6,000; specific allowance 12,000; general allowance 4% on the rest. What receivables value appears in the SOFP?
Four invoices (1,200; 400; 500; 1,000) offer 2.5% for payment within 30 days; only the 500 and 1,000 are paid in time. What is the payment and discount?
What is the double entry to record sales returns from a credit customer (ignore sales tax)?
List the items that are accounted for in the receivables (control) account.
What is a contra entry in the context of receivables and payables?
Whatever entry is made in an individual customer's account, what must always also happen?
What is the double entry for a cash sale including sales tax at 20% on net 100?
Which account is Discounts Allowed, and where does it appear in the financial statements?
What three accounting documents are central to purchase transactions and the payables ledger?
How is a settlement discount received from a supplier accounted for?
A supplier's invoice for 900 offers a 5% settlement discount, which is taken. Show the effect.
Goods list 2,800, trade discount 25%, plus a 3% settlement discount taken. What is posted to Purchases and to Discounts Received?
Where is Discounts Received shown in the financial statements, and how does it differ from Discounts Allowed?
Four supplier invoices (2,400; 800; 1,000; 2,000) offer 5% within 30 days; only the 1,000 and 2,000 are paid in time. What is the payment and discount received?
Before a payment to a supplier is authorised, which three documents are typically checked together?
Why should invoices be paid when due?
What should accompany every payment to a supplier, and why?
List the items accounted for in the payables (control) account.
What is the double entry to record purchase returns to a supplier (ignore sales tax)?
What is the double entry for a credit purchase of goods for resale including input sales tax at 20% on net 500?
Why should a business reconcile a supplier's statement to the supplier's account in its own payables ledger?
Give common reasons a supplier's statement may differ from your own payables ledger balance.
What is a payments due list and how is it used?
Whatever entry is made in an individual supplier's account, what must always also happen?
What is a memorandum discount column in the cash book?
What is the double entry for a cash purchase of goods (ignore sales tax)?
What is a trial balance and what does it prove (and not prove)?
Name the errors that are NOT revealed by a trial balance.
Define an error of commission and give an example.
Define an error of principle and why it is more serious than an error of commission.
Define an error of omission and a compensating error.
What is a transposition error and what quick check suggests one?
What kinds of error WILL cause a trial balance not to balance?
What is a suspense account and when is it opened?
Which errors are corrected using the suspense account, and which are corrected by journal without it?
When correcting a one-sided error, how do you decide the suspense account entry?
A debit balance of 1,123 was listed in the trial balance as a 2,123 credit. By how much does the trial balance fail to balance?
Cash of 5,641 paid was posted to the credit card account as 5,146. Give the correcting entry.
Writing off a bad debt of 500, the receivables entry was correct but the Irrecoverable Debts account was credited 500. Give the correction.
Petty cash of 56 was listed on the wrong side of the trial balance. What correction is needed?
Sales of 2,950 including sales tax at 18% were recorded as Dr Receivables 2,950, Cr Sales 2,950, Cr Sales tax 531. What correction is needed?
A debt of 4,300 with a 5% settlement discount was paid net within terms. Cash was debited 4,085 but 4,300 was credited to receivables. What suspense balance arises?
An offset of ABC (owed 500 by them, owe 600 to them) was recorded as Dr Receivables 500, Cr Payables 500. Is this right?
Why should trial balances be extracted regularly (at least monthly)?
An invoice from a supplier for 900 was completely omitted from the books. Give the correcting journal.
After all errors are corrected and the suspense account is cleared, what final step completes the process?
A sales order slips behind a desk before goods are despatched or invoiced. What error is in the accounting system?
List the main remuneration methods for paying employees.
How can employees be paid, and what are the drawbacks of cash?
List components that can make up labour costs.
Define gross pay, net pay and total labour cost to the employer.
Under a PAYE (pay as you earn) scheme, what does the employer do?
Under most tax systems, what does the employer actually pay to the employee?
Define the overtime premium and calculate the total pay: 52 hours worked, basic week 40 hours, basic rate 10, overtime at time-and-a-half.
How does piecework pay work when there is a guaranteed minimum? Rate 3/unit, minimum 250/week.
Bonus scheme: basic 9/hour for 40 hours; standard output 120 units; bonus = 50% of time saved paid at time-and-a-third. 150 units made in 40 hours. Total pay?
Employee works 46 hours at 10/hour. Deductions are 25% of weekly pay above 120; employer payroll tax is 10% of gross. Find gross, net and total paid to the tax authorities.
Gross wages 76,000; employee tax 20,000; employee pension 12,000; employer payroll tax 15,000; employer pension 16,000. Find net pay and total cost to the employer.
What is the purpose of a Wages Control account?
Outline the postings to record payroll using a Wages Control account.
Why is authorisation and security of payroll important?
Distinguish employee deductions from employer's payroll costs.
How is pay calculated when an employee is on a constant (salaried) basis?
Why is overtime premium often analysed separately from basic pay?
What documents or records support the calculation of an employee's pay?
Card 1 of 171. Question side.