Petty Cash and Imprest System Quiz
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Questions and Answers

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?

<p>Credit and debit (B)</p> Signup and view all the answers

Where are an entity's financial statements generated from?

<p>Summary totals in the ledger accounts contained in the general ledger (B)</p> Signup and view all the answers

What does a trial balance help in producing?

<p>Summary of all general ledger accounts (A)</p> Signup and view all the answers

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

<p>To increase an asset or income account (A)</p> Signup and view all the answers

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

<p>Sales and purchases made by cheque or immediate bank transfer (C)</p> Signup and view all the answers

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

<p>Receivables' ledger (increase in an asset) (A)</p> Signup and view all the answers

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

<p>Credit (B)</p> Signup and view all the answers

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

<p>For consistency in recording and classification of transactions (D)</p> Signup and view all the answers

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

<p>Out-of-pocket small expenses (B)</p> Signup and view all the answers

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

<p>Using double-entry bookkeeping (D)</p> Signup and view all the answers

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

<p>'Cash register' or 'cash till' (D)</p> Signup and view all the answers

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

<p>'The timing of payment' (A)</p> Signup and view all the answers

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

<p>'Cash at bank general ledger' (A)</p> Signup and view all the answers

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

<p>The full amount is due and any additional amount received is treated as a cash sale (D)</p> Signup and view all the answers

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

<p>Reduced payment to the supplier and increased profit for the entity (C)</p> Signup and view all the answers

When must an entity typically register for sales tax?

<p>When its sales revenue or turnover reaches a specific limit or threshold (A)</p> Signup and view all the answers

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

<p>Sales tax charged on sales by an entity (D)</p> Signup and view all the answers

In which financial statement are trade receivables typically presented?

<p>Statement of financial position (C)</p> Signup and view all the answers

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

<p>Acting as a tax collector for the government (B)</p> Signup and view all the answers

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

<p>'Zero-rated' transactions are exempt from sales tax (D)</p> Signup and view all the answers

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

<p>To ensure compliance with government regulations (D)</p> Signup and view all the answers

When do entities need to charge tax on their sales?

<p>When they are registered to account for sales tax (B)</p> 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?

<p>They show total assets and liabilities without deductions (C)</p> Signup and view all the answers

What is the purpose of a petty cash float?

<p>To pay for various sundry cash expenses (A)</p> Signup and view all the answers

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

<p>Restoring the petty cash float to its normal level (D)</p> Signup and view all the answers

What is the purpose of a trade discount?

<p>To reduce the overall invoice price for customers (D)</p> Signup and view all the answers

How is a settlement discount different from a trade discount?

<p>It is offered for early payment of a debt (D)</p> Signup and view all the answers

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

<p>4% discount if paid within 14 days (D)</p> Signup and view all the answers

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

<p>By keeping the petty cash float at a constant level (B)</p> Signup and view all the answers

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

<p>To encourage customers to place more orders (D)</p> Signup and view all the answers

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

<p>Within 30 days (C)</p> Signup and view all the answers

'Variable consideration' in accounting refers to what uncertainty?

<p>$4 or full payment depending on customer decision (A)</p> Signup and view all the answers

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