Double entry bookkeeping - Chapter 4

A business can make a profit and yet have a reduction in its bank balance. Which of the following might cause this to happen?

• The sale of non-current assets at a loss

• The charging of depreciation on the statement of profit or loss

• The lengthening of the period of credit given to customers

• The lengthening of the period of credit taken from suppliers

Which of the following documents should accompany a return of goods to supplier?

• Debit note

• Remittance advice

• Purchase invoice

• Credit note

Answer explanation

The debit note is sent to a supplier with a return of goods. A debit note is in effect a request for a credit note

Information from which of the following documents can be found in the receivable ledgers?

• Quotation

• Sales invoices

• Credit notes received

• Trade discounts

Answer explanation

Details of sale invoices can be found in the receivables ledger.

A quotation provides information on the proposed amount to be charged for goods or services but is not evidence of a sale or purchase

Credit notes received are recorded in the payables ledger

Trade discounts are given at the point of sale and are not recorded in the accounting records

Which one of the following provides evidence that an item of expenditure on petty cash has been approved or authorised?

• Petty cash voucher

• Record of the petty cash transaction

• Receipt for the expense

• Transfer of cash from the bank account into petty cash

A document sent by a business to a credit customer requesting payment for goods or services provided?