Summary: Introduction To Bookkeeping

Read the summary and the most important questions on Introduction to Bookkeeping

• 1 FA1 Section 1

• 1.1.1 Introduction

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• What are types of financial transactions, explain shortly? [6]

  • Sales | Exchanging good/service for money;
    
  • Purchase | Buying good or service;
  • Payments | Cash paid to purchase goods or services; 
  • Receipts | Money that the business receives;
  • Petty cash | Cash paid, or received for low value business transaction; 
  • Payroll | Wages and salaries paid to employees, and any payroll taxes.

• What do all transaction that are recorded need to have?

  A valid document associated with them.

• What is a financial statement, what is it also called?

  Set of accounts or financial accounts
  Containing formal statements which describe the current financial state of the business, as well as how it has performed during a period of time (usually a year)

• Through what process are financial documents converted into financial statements?

  Financial documents > Books of prime entry > Ledger accounts > Trial balance > financial statements

• Who are interested in financial information?

  • Tax authorities 
  • Future investor
    
  • Bank manager
  • Supplier 

• 1.1.2 Sales and purchasing

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• What is a cash purchase?What is a cash sale? 

  Immediate payment for product/service from the perspective of the buyer or the seller.

• What is credit?What is a credit purchase?What is a credit sale?

  Credit is the transaction for products/services in exchange for a future payment.
  
  From the perspective of the seller and the buyer.

• 1.1.3 Financial documents

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• What is a statement?

  Sent to a customer to remind them how much they owe the supplier, usually at the end of the month.

• What is a credit note?

  A document to show a reduction in the amount owing to a supplier due to faulty or damaged goods being supplied.

• What is a GRN | Goods received note?

  An internal document that the customer would complete as a check that everything has been received that was ordered.