24 Questions
What is the primary purpose of a Sales Journal?
To record company sales
Which ledger contains a company's list of all fixed assets?
Plant Ledger
What is the purpose of a Cash Payments Journal?
To record company payments
Which journal is used to record transactions mentioned in other journals?
General Journal
What is the purpose of a Purchase Journal?
To record company purchases
Which ledger contains a company's individual accounts with creditors?
Accounts Payable Ledger
Which type of record is used to analyze the effectiveness of advertising and promotions?
Sales Records
What type of record is used to determine the total payments made to employees?
Payroll Records
Which type of record is used to control inventory items?
Inventory Records
What type of record is used to determine the credit and collection policies of a firm?
Accounts Receivable
Which type of record is used to compute product costing and detect lost profits?
Production Records
What type of record is used to determine the cash flow and petty cash balances of a firm?
Cash Records
What is the primary purpose of business records?
To accurately review business dealings at a later date
What is the primary purpose of keeping track of income sources?
To separate business from non-business receipts
What is the role of good records in monitoring business progress?
To show whether the business is improving or deteriorating
Why is it essential to keep records of deductible expenses?
To prepare the annual tax return
What is the primary function of an income statement?
To show the income and expenses of the business over a given period
What is the significance of the basis in property for tax purposes?
It figures the gain or loss on the sale of property
What is the significance of business records in terms of trust and confidence?
It ensures the business's dealings are accurate and transparent
What is the purpose of a balance sheet?
To show the assets, liabilities, and equity of a business on a given date
What type of record is typically used to track business expenses?
Credit card statement
What is the primary benefit of keeping good records in terms of business success?
It increases the likelihood of business success
What is the purpose of obtaining samples from an existing similar project in designing financial forms and records?
To prove design requirements
What is a characteristic of financial forms and records?
They have minimal differences in reporting
Study Notes
Types of Accounting Records
- Insurance registers, leasehold records, and investment records are specific types of accounting records.
Journals
- Sales Journal (Sales Book) is used to record a company's sales.
- Purchase Journal (Purchase Book) is used to record a company's purchases.
- Cash Receipts Journal (Cash Receipts Book) is used to record a company's cash receipts.
- Cash Payments Journal (Cash Payments Book or Cash Disbursement Book) is used to record a company's payments in cash.
- General Journal is used to record a company's transactions mentioned in a, b, c, and d.
Ledgers
- Accounts Receivable Ledgers contain a company's individual trade with customers (accounts).
- Accounts Payable Ledgers contain a company's individual accounts with creditors.
- Plant Ledgers contain a company's list of all fixed assets.
Importance of Accounting Records
- Accounts Receivable records are valuable for decision-making on extension of credits, accurate billing, and maintaining good relations with customers.
- Inventory Records are used to control inventory items, supply information for purchasing, and maintain an economic supply of stocks and computing turnover ratios.
- Accounting Payable records show what a firm owes, facilitate obtaining available cash discounts, and inform when payments are due.
- Sales Records are used to analyze the effectiveness of advertising and promotions, market coverage, and profitability.
- Production Records provide a basis for product costing and detect lost profits/costs due to idle manpower/machineries.
- Payroll Records show the total payments made to employees and provide a basis for computing some legal payments.
- Cash Records show all receipts and disbursements made by a firm, contain cash flow and petty cash balances, and enable identifying sources of income.
Records for Accounting and Tax Purposes
- Business expenses, credit card statements, bank statements, annual tax returns, quarterly tax filings, payroll, inventory, sales, income, petty cash, vehicle use log, travel log, cash register tapes, credit card sales receipts, invoices, cancelled checks, and check stubs are all types of records for accounting and tax purposes.
Importance of Keeping Good Records
- Keeping good records is necessary to monitor the progress of a business and show whether it is improving, which items are selling, or what changes need to be made.
- Good records are necessary to prepare accurate financial statements, including income statements and balance sheets, which can help in dealing with banks or creditors and managing the business.
- Records help identify sources of income, which is the money or property received from many sources.
Learn about the definition and significance of business records, including types of documents and their retrieval process. Understand the importance of accuracy and trust in business dealings.
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