Types of Business Transactions

Questions and Answers

What does the imprest system refer to in the context of petty cash management?

A system where cash is used for large purchases only

A ledger that tracks all petty cash transactions

A fixed amount of cash maintained for small purchases (correct)

A method to reimburse employees for business expenses

Which statement correctly describes sales tax?

It applies only to credit sales.

It is collected only during end-of-year transactions.

It is charged on the sale price of goods sold. (correct)

It is a direct tax on business profits.

What is the relationship between output tax and input tax?

They are the same and do not influence business taxes.

Input tax is irrelevant to business transactions.

Output tax exceeds input tax results in a tax payable. (correct)

Output tax is always lower than input tax.

Which of the following best describes a trade discount?

An unconditional reduction on the cost of goods or services Signup and view all the answers

What typically causes differences in a bank reconciliation?

Duplicate transaction postings or incorrect amounts Signup and view all the answers

What is the primary characteristic of a settlement discount?

Offered in exchange for quick payment in credit transactions Signup and view all the answers

When calculating sales tax, what is the net amount?

The sale price before applying sales tax Signup and view all the answers

Which of the following is a common source of petty cash?

Small receipts from minor purchases Signup and view all the answers

Study Notes

Types of Business Transactions

Business transactions include cash and credit sales, sales returns, cash and credit purchases, purchase returns, and petty cash transactions.

Cash and Credit Sales

Such transactions can involve immediate cash exchanges or credit sales that delay payment.

Cash and Credit Purchases

Similar to sales, purchases can be made in cash or on credit, impacting cash flow and liabilities.

Petty Cash Transactions

Petty cash is maintained for minor purchases like office supplies and is tracked in a petty cash ledger.
Two sources of petty cash:
- Small Receipts: Cash sales for small items on business premises.
- Imprest System: A fixed amount kept in the cash box; includes current petty cash balance and vouchers.

Sales Tax

An indirect tax imposed on goods sold, charged as a percentage of the sale.
Businesses charge output tax on sales and reclaim input tax on purchases.
Tax payable when output tax exceeds input tax, categorized as a current liability.
Tax reclaimable when input tax exceeds output tax, categorized as a current asset.

Sales Tax Calculation

Net Amount: Sale or purchase price before sales tax, representing 100%.
Gross Figure: Sale or purchase price including sales tax, exceeding 100%.
Account for sales tax by distinguishing between gross figures (with tax) and net figures (without tax).

Trade Discounts

Trade discounts lower the cost of goods or services and are given unconditionally, applicable to cash or credit transactions.

Settlement Discounts

These are offered to encourage prompt payment within a specified timeframe and apply only to credit transactions.

Bank Reconciliations

A process of matching the bank statement balance with the bank ledger account balance to identify discrepancies.

Reasons for Differences in Bank Reconciliations

Differences may arise from errors such as duplicate postings or incorrect amounts in transaction records.

Description

This quiz covers various types of business transactions including cash and credit sales, purchases, and petty cash management. It examines the implications of sales tax and how these transactions impact financial records. Test your understanding of these essential business concepts.