POA Revision Ch 1 to 4

State the difference between a trading business and a service business.

• A trading business buys goods from supplier and sell them to customer while a service business provides services to customers.

• A service business buys goods from supplier and sell them to customer while a trading business provides services to customers.

• A trading business buys goods from supplier and sell them to customer, a service business provides services to customers.

• A service business buys goods from supplier and sell them to customer, a trading business provides services to customers.

Answer explanation

When a question ask for "difference", you must compare by using comparison word such as "while" or "but".

State the role of accounting.

Answer explanation

Accounting provides accounting information for decision-making by business owners and other stakeholders.

One principle of professional ethics is _________.

State the difference between a cash transaction and a credit transaction.

• A cash transaction happens when payment is delayed during a cash sales or purchase while a credit transaction happens when payment is made immediately during a credit sales or purchase.

• A cash transaction happens immediately, while a credit transaction is delayed.

• A cash transaction happens when payment is made immediately during a cash sales or purchase while a credit transaction happens when payment is postponed or delayed during a credit sales or purchase.

• A credit transaction is delayed while a cash transaction is immediate.

Answer explanation

It is the "payment" that is immediate/postponed, hence you must be specific.

State the order of the accounting information system.

• Source document - Journal - Trial Balance - Financial Statements

• Source document - Ledger - Journal - Trial Balance - Financial Statements

• Source document - Journal - Ledger - Financial Statements

• Source document - Journal - Ledger - Trial Balance - Financial Statements

How many source documents did we learn?

• 5

• 6

• 7

• 8

Source document for:

Paid utilities by cheque

• Cheque

• Receipt

• Invoice

• Credit note

Source document for:

Purchase inventory on credit from David

• Cheque

• Receipt

• Invoice

• Credit note

Source document for:

Purchase inventory using cash

• Cheque

• Receipt

• Invoice

• Debit note

Source document for:

Sold inventory on credit to Sam

• Cheque

• Receipt

• Invoice

• Credit note