Basic Accounting 1 Assignment 1

If you earn more than you spend, it means that your income exceeds your expenses. This indicates that you have made a profit, as you have generated more money than you have used. Profit is the financial gain that occurs when the revenue or income earned is greater than the expenses or costs incurred.

An asset refers to something that you own. It can be a physical object, such as a car or a house, or an intangible item, such as intellectual property or investments. Assets are generally considered valuable and can be used to generate income or provide future benefits. They are recorded on a company's balance sheet and are an important component in determining its financial health and value.

If you spend more than you earn, it means that your expenses exceed your income. This results in a negative financial situation where you are operating at a loss. In other words, you are experiencing a deficit or negative profit. This is commonly referred to as a loss in financial terms.

A credit sale refers to a transaction in which the payment for the sale is not made immediately but is instead deferred to a later date. This means that the buyer receives the goods or services upfront and agrees to pay for them at a later time. Therefore, the statement "A credit sale is a sale where payment is made at a later date" is true.

Something that you owe is called a liability. It refers to a financial obligation or debt that an individual or entity owes to another party. Liabilities can include loans, mortgages, credit card debt, or any other form of outstanding payment. Unlike assets, which represent what one owns, liabilities represent what one owes and must be paid off in the future.

The statement is true. A book of prime entry is a subsidiary book or journal where financial transactions are initially recorded. It is also known as a book of original entry. These books serve as a chronological record of transactions before they are transferred to the general ledger. Examples of books of prime entry include the sales day book, purchase day book, and cash book. By recording transactions in these books, it helps maintain an organized and systematic approach to financial record-keeping.

The book of prime entry which lists payments in and out of the bank account is not known as the Petty Cash Book. The correct answer is False.

The total accounts contained in the general ledger are known as control accounts because control accounts are used to summarize the balances of related subsidiary accounts. These control accounts provide a way to easily monitor and verify the accuracy of the subsidiary accounts. By comparing the balances of the control accounts with the total of the subsidiary accounts, discrepancies can be identified and corrected. Therefore, the statement "Total accounts contained in the general ledger are known as Control Accounts" is true.

A trial balance is a list of the balances of the ledger accounts drawn up in two columns, debit and credit. It is used to ensure that the total of all debit balances equals the total of all credit balances, which helps in detecting any errors in the recording of transactions. By comparing the debit and credit balances, the trial balance provides a preliminary check on the accuracy of the accounting records before preparing financial statements.

The statement is true because settlement discount and cash discount are indeed interchangeable terms. Both refer to a reduction in the amount owed by a customer if they pay their invoice within a specified period of time. This discount is offered as an incentive for prompt payment and helps businesses improve cash flow. Therefore, settlement discount and cash discount can be used interchangeably to describe the same concept.

A cash sale is a sale where payment is made in notes and coins. This statement is false because a cash sale refers to a transaction where payment is made in cash, which includes both notes and coins, as well as any other form of physical currency. Therefore, the given statement is incorrect.

HMRC administers VAT

The correct answer is £133.10. This is because the gross value of the goods purchased is £798.56, and VAT is calculated as 20% of the gross value. Therefore, 20% of £798.56 is £159.71. To calculate the total amount including VAT, we add the VAT amount to the gross value: £798.56 + £159.71 = £958.27. However, the question asks for the VAT amount only, so the correct answer is £133.10, which is 20% of the gross value.

E & OE is an abbreviation for "Errors and omissions excepted". This phrase is commonly used in legal and business contexts to indicate that the information provided may contain mistakes or omissions, but the party providing the information should not be held liable for them. It serves as a disclaimer to protect the party from any legal responsibility for errors or omissions in the information they provide.