Bookkeeping Transactions Flashcards

Which document is issued by a seller to a buyer to confirm the details and price of goods or services to be provided?

Answer: Quotation

A quotation is issued by the seller to the buyer setting out the price and terms for goods or services offered. It is the first formal document in many sales transactions.

A business purchases goods on credit for £2,400 plus VAT at 20%. What is the correct double entry to record this transaction?

Answer: Debit Purchases £2,400, Debit VAT £480, Credit Trade Payables £2,880

Under UK VAT rules, the purchase is recorded net of VAT in the purchases account (£2,400), VAT is debited to the VAT control account (£480), and the full amount including VAT (£2,880) is credited to trade payables.

What is the purpose of a sales day book?

Answer: To record all credit sales from sales invoices

The sales day book (also called the sales journal) is a book of prime entry used to record credit sales invoices. Cash sales are recorded separately in the cash book.

A trade discount of 10% is offered on goods with a list price of £500. What amount appears on the invoice before VAT?

Answer: £450

A trade discount is deducted from the list price before the invoice is prepared. £500 less 10% = £500 - £50 = £450. VAT is then calculated on the discounted price.

Which of the following is classified as capital expenditure?

Answer: Purchase of a delivery van

Capital expenditure is spending on non-current assets that will be used in the business over more than one accounting period. A delivery van is a non-current asset. The other options are revenue expenditure — day-to-day running costs.

In the accounting equation, if assets are £50,000 and liabilities are £18,000, what is the capital?

Answer: £32,000

The accounting equation states: Assets = Liabilities + Capital. Therefore Capital = Assets - Liabilities = £50,000 - £18,000 = £32,000.