Petty Cash and Imprest System Quiz

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What is the purpose of a ledger account?

To prepare tax returns

To produce a trial balance (correct)

To record transactions using single-entry bookkeeping

To create a balance sheet

What does a ledger account identify during an accounting period?

Increases only

Both increases and decreases (correct)

Decreases only

No changes

What is the purpose of double-entry bookkeeping in recording transactions?

To reflect the duality concept that each transaction affects at least two ledger accounts (correct)

To avoid recording transactions in the ledger accounts

To ensure that every transaction affects only one ledger account

To eliminate the need for trial balances

What do the left-hand side and right-hand side represent in a T-account?

Credit and debit Signup and view all the answers

Where are an entity's financial statements generated from?

Summary totals in the ledger accounts contained in the general ledger Signup and view all the answers

What does a trial balance help in producing?

Summary of all general ledger accounts Signup and view all the answers

When does an entry in the debit side of a ledger account typically occur?

To increase an asset or income account Signup and view all the answers

What type of transaction is considered a cash transaction based on the text?

Sales and purchases made by cheque or immediate bank transfer Signup and view all the answers

Which ledger account is used to account for cash that an entity is owed by customers?

Receivables' ledger (increase in an asset) Signup and view all the answers

What is the entry in the cash at bank ledger account when cash is paid out?

Credit Signup and view all the answers

Why do transactions that pass through the bank account need to be included in the general ledger?

For consistency in recording and classification of transactions Signup and view all the answers

What type of transactions are petty cash funds typically used for?

Out-of-pocket small expenses Signup and view all the answers

How are cash receipts and payments recorded in the petty cash ledger account?

Using double-entry bookkeeping Signup and view all the answers

'Cash transactions' traditionally involve which type of processing method?

'Cash register' or 'cash till' Signup and view all the answers

'Credit sales and purchases' differ from 'cash transactions' primarily in terms of:

'The timing of payment' Signup and view all the answers

'Direct debit payments,' 'direct receipts from customers,' and 'bank interest received or charged' require adjustments to which account?

'Cash at bank general ledger' Signup and view all the answers

What happens if a customer does not pay early and is no longer entitled to the discount?

The full amount is due and any additional amount received is treated as a cash sale Signup and view all the answers

What is the primary impact of a settlement discount taken by an entity paying a supplier?

Reduced payment to the supplier and increased profit for the entity Signup and view all the answers

When must an entity typically register for sales tax?

When its sales revenue or turnover reaches a specific limit or threshold Signup and view all the answers

What does output tax refer to in the context of sales tax?

Sales tax charged on sales by an entity Signup and view all the answers

In which financial statement are trade receivables typically presented?

Statement of financial position Signup and view all the answers

What is the primary impact of being a tax-registered entity for sales tax purposes?

Acting as a tax collector for the government Signup and view all the answers

What does it mean when an entity engages in 'zero-rated' transactions?

'Zero-rated' transactions are exempt from sales tax Signup and view all the answers

What is the purpose of offsetting sales tax collected against sales tax suffered on purchases?

To ensure compliance with government regulations Signup and view all the answers

When do entities need to charge tax on their sales?

When they are registered to account for sales tax Signup and view all the answers

What is the significance of 'gross amount receivable' and 'gross amount payable' in an entity's financial position statement?

They show total assets and liabilities without deductions Signup and view all the answers

What is the purpose of a petty cash float?

To pay for various sundry cash expenses Signup and view all the answers

What does the 'imprest method' refer to in accounting?

Restoring the petty cash float to its normal level Signup and view all the answers

What is the purpose of a trade discount?

To reduce the overall invoice price for customers Signup and view all the answers

How is a settlement discount different from a trade discount?

It is offered for early payment of a debt Signup and view all the answers

What does a settlement discount of '4/14, net 30' mean?

4% discount if paid within 14 days Signup and view all the answers

How does the 'imprest method' ensure control over petty cash?

By keeping the petty cash float at a constant level Signup and view all the answers

Why do sellers offer trade discounts to customers according to the text?

To encourage customers to place more orders Signup and view all the answers

When should a customer pay the full invoice amount according to settlement discount terms?

Within 30 days Signup and view all the answers

'Variable consideration' in accounting refers to what uncertainty?

$4 or full payment depending on customer decision Signup and view all the answers