Bookkeeping Basics Part 2. Question and answers verified to pass 2024
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Module
Bookkeeping
Institution
Bookkeeping
Bookkeeping Basics Part 2. Question and answers verified to pass 2024 Bookkeeping Basics Part 2, Accounting Topic 2 Double Entry Book Keeping, Bookkeeping with Quickbooks, AAT Level 2 - Bookkeeping
Revenue - correct answer Revenue represents the income your client earns through their business...
Bookkeeping Basics Part 2, Accounting
Topic 2 Double Entry Book Keeping,
Bookkeeping with Quickbooks, AAT
Level 2 - Bookkeeping
Revenue - correct answer ✔Revenue represents the income your client
earns through their business operations. It's their gross proceeds from sales,
whether that's products, services, rentals, or anything else that bring money
into the business.
Expenses - correct answer ✔Expenses represent the costs of doing
business, such as labor costs like salaries and employee benefits, operating
costs like utilities, rent and insurance, and other essential expenses like taxes
and advertising, or anything else that keeps their business moving.
Your client owns a business mowing lawns. They completed a mow service
for a mini mall and billed the
property manager for the service. Which balances will change? - correct
answer ✔Assets and revenue
Debits - correct answer ✔Debits represent an increase in assets or
expenses, or a decrease in liabilities, owner's equity, or revenue
Credits - correct answer ✔Credits represent a decrease in assets, or
expenses, or an increase in liabilities, owner's equity, or revenue
Debits and Credits - correct answer ✔Debits and credits are the
choreography of your client's financial performance.
,Understanding their movements helps you keep track of your client's assets,
expenses, liabilities, owner's equity, and revenue.
When recording the purchase of office supplies purchased on account, which
side of the ledger should the accounts payable be recorded on? - correct
answer ✔Credit
When recording the payment of salaries to employees, which side of the
salary expense ledger should the transaction be recorded? - correct answer
✔Debit
You're the bookkeeper for a small coffee shop. You found out your client does
not have a separate business account for the coffee shop. You inform them
it's a best practice to separate business and personal accounts. Which
accounting principle are you using? - correct answer ✔Economic entity
assumption
Economic entity assumption - correct answer ✔This assumption means that
the business is its own separate entity, distinct from its owners. It reminds us
that we must keep the business's financial activities completely separate from
any personal finances.
Business and personal expenses are like oil and water-they should never mix!
Reliability assumption - correct answer ✔This principle ensures that the
information you record in your client's financial documents is verifiable and
backed by proper documentation. If your client can't provide an invoice,
receipt, or bank statement to support a transaction, it is not a reliable
transaction and can't be recorded.
Full disclosure principle - correct answer ✔This principle states that any
information lenders or investors might need to make informed decisions
should be disclosed in the financial statements or accompanying notes.
, For example, if a worker files a worker's compensation claim, it's essential to
include that information in the notes of the financial statements.
Conservatism assumption - correct answer ✔When you are not sure if or
how to record an item, this principle guides us to err on the side of caution. It
means we choose options that show less income or asset benefit. Potential
losses can be recorded, while potential gains cannot. For instance, if your
client is facing a potential lawsuit, you can consider it a loss and note it. But, if
your client is expecting increased foot traffic to their business due to a new
business opening nearby, you can't record a potential gain until it actually
happens. Better to be cautious than overly optimistic.
Your client has bought a new coffee machine for the shop. They paid cash
and cannot locate the receipt and have no record of the purchase. You inform
them that since there's no supporting documentation for the purchase, it can't
be recorded. Which accounting principle are you using? - correct answer
✔Reliability assumption
You're the bookkeeper for a small construction business. The business has
bid on a large contract, but the results from the bid are still a month away.
This is the largest contract with potential gains. Which accounting principle
should be used? - correct answer ✔Conservatism assumption
You're a bookkeeper for a technology startup, and the CEO informs you that
the business is in advanced negotiations to secure a significant investment
from a venture capital firm. This investment will have a substantial impact on
the business's financial position and future prospects. There is lawsuit
pending that hasn't been settled. Which of the following should be used? -
correct answer ✔Full disclosure principle
Accounting Topic 2 Double Entry Book
Keeping
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