Basic Book-Keeping Level 1.doc

Basic Book-Keeping Level 1PC Training CoursewareModel AnswersBasic Book-Keeping Level 1Code 7191 answers 28/06/2006 Copyright 2020. When used in conjunction with course 7191 Basic Book-Keeping Level 1; you are permitted to download, print, copy and distribute only the model answers as provided in this publication - 7191 answers.Model Answersfor Basic Book-Keeping Level 1Information in this publication, including URL and other Internet web site references is subject to change without notice. Unless otherwise stated, companies, organisations, products, people and events depicted in this publication are fictitious and no association with any real company, organisation, product, person or event is intended or should be inferred. 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All rights reserved.Quick ReferenceChapter 1 Introduction Model Answers5Chapter 2 An Introduction to VAT Model Answers7Chapter 3 Books of Original Entry Model Answers10Chapter 4 Ledger Accounts Model Answers15Chapter 5 Bank Reconciliation Model Answers20Chapter 6 Trial Balance Model Answers26Chapter 7 Business Documents Model Answers30Chapter 8 Security of Data Model Answers31Chapter 9 End of Course Exercise Model Answers32Table of ContentsChapter 1 Introduction Model Answers5Answers to the test your knowledge questions in chapter 15Exercise 1a6Chapter 2 An Introduction to VAT Model Answers7Answers to the test your knowledge questions in chapter 27Exercise 2a8Chapter 3 Books of Original Entry Model Answers10Answers to the test your knowledge questions in chapter 310Exercise 3a11Exercise 3b11Exercise 3c12Exercise 3d12Exercise 3e13Exercise 3f13Exercise 3g14Exercise 3h14Chapter 4 Ledger Accounts Model Answers15Answers to the test your knowledge questions in chapter 415Exercise 4a15Exercise 4b18Exercise 4c19Chapter 5 Bank Reconciliation Model Answers20Answers to the test your knowledge questions in chapter 520Exercise 5a20Exercise 5b23Chapter 6 Trial Balance Model Answers26Answers to the test your knowledge questions in chapter 626Exercise 6a26Exercise 6b27Exercise 6c28Exercise 6d29Chapter 7 Business Documents Model Answers30Answers to the Test your knowledge questions in chapter 730Chapter 8 Security of Data Model Answers31Answers to the test your knowledge questions in chapter 831Chapter 9 End of Course Exercise Model Answers32Step 1 Post opening balances32Step 2 Post details to the cash book33Step 3 Post sales and purchase invoices to the sales and purchases day books34Step 4 Post petty cash expenses to the petty cash book35Step 5 Balance the day books and post balances to the ledgers35Step 6 Prepare the VAT account39Step 7 Balance off the ledger accounts and extract a trial balance40Chapter 1 Introduction Model AnswersAnswers to the test your knowledge questions in chapter 11. Why do you send your accounts to HMRC?So that HMRC can collate the amount of tax liability due to be paid by the business owner2. How much can you be fined if you fail to keep adequate records of your business?Up to 3,000 for each year that proper records are not kept3. When setting up in business, for who would the category Sole Trader be used?An individual trading in his or her own name, or under a recognised trading name4. What are the common abbreviations for Debit and Credit in book-keeping?Dr. (Debit) Cr. (Credit)5. Which Government Department collects VAT (Value Added Tax)?HMRC - HM Revenue & Customs6. Name two business categories other than Sole Trader that a business can decide to trade under?Any two of the following: Partnership, Limited Liability Partnership, Private limited Company, Public Limited Company, Social Enterprise, Community Interest Company7. Name the two accounts and whether they are debited or credited when the business sells goods for cash?Dr. Cash, Cr. Sales8. Name the two accounts and whether they are debited or credited when you pay the rent by cheque?Dr. Rent, Cr. BankExercise 1aChapter 2 An Introduction to VAT Model AnswersAnswers to the test your knowledge questions in chapter 21. What does the abbreviation VAT stand for?Value Added Tax2. What is the current turnover threshold on taxable services and supplies, above which a company must register for VAT?60,000 (in tax year 2005/06)3. What is meant by Input tax?VAT deductible4. What is meant by Output tax?VAT payable5. Name three items that should appear on a VAT invoice?Any three of the following: Date, Name/Address of customer, VAT registration number, unique Invoice number, description of goods supplied, net price of invoice (before VAT is calculated), amount of VAT being charged and the rate, final invoice amount charged6. What is the standard VAT rate that most businesses charge on their sales and reclaim on their purchases?Standard rate 17.5.% Exercise 2aChapter 3 Books of Original Entry Model AnswersAnswers to the test your knowledge questions in chapter 31. Name a source document needed when writing up the sales day book?Sales invoice2. Name three books of original entry?Any three of the following: Sales, Purchase, Returns Inwards, Returns Outwards, Cash Book, General Journal3. What is the general journal used for?Uncommon or exceptional transactions4. What are folio columns used for?Cross referencing5. Explain the purpose of books of original entry?To summarise the daily business transactions6. Name the source document used when writing up the purchases day book?Purchase invoice7. Name the source documents used to write up the returns inwards and returns outwards day books?Returns inwards - credit note Returns outwards - debit Note8. Which system do most businesses use for petty cash?The Imprest system9. Name the items that need to be recorded on a petty cash voucher?Date, Voucher or Folio No, Detail of Expenditure, Amount, Signature of person authorising the expenditure, and any VAT if applicable10. What transactions are usually entered into the general journal?Any of these - writing off bad debts, the correction of errors, sale and purchase of fixed assets (this is not an exhaustive list)11. When are payment terms usually set up with customers?At the onset of taking on new customer12. What is the term used for customers who owe money to the business for goods or services supplied on credit? Debtor13. What is the term used for suppliers to whom the business owes money for goods or services that have been received on credit?CreditorExercise 3aExercise 3bExercise 3cExercise 3dExercise 3eExercise 3fExercise 3gExercise 3hChapter 4 Ledger Accounts Model AnswersAnswers to the test your knowledge questions in chapter 41. From what are the ledger accounts written up?The books of original entry or day books2. What is the difference between a ledger and a ledger account?A ledger is used to record the accounts of all customers/suppliers and a ledger account is used to record individual customer/suppliers accounts3. What is capital expenditure?Money spent on the purchase of fixed assets or adding to their value4. What is revenue expenditure?Money spent on running the business on a day to day basis5. When is a credit balance recorded in a ledger account?When the total of credit entries exceeds the total of debit entries6. When is a debit balance recorded in a ledger account?When the total debit entries exceeds the total of credit entries7. When writing off a bad debt, which accounts are debited and credited?Debit the Bad Debts account to transfer the amount of unpaid debt to the bad debts accountCredit the Debtors account to reduce or eliminate the amount owingExercise 4aExercise 4bExercise 4cChapter 5 Bank Reconciliation Model AnswersAnswers to the test your knowledge questions in chapter 51. In general, how often is it usual to perform a bank reconciliation?Each month when the bank statement arrives2. What does a tick represent when comparing the cash book with the bank statement?A tick represents items that have been entered in the cash book and appear on the bank statement3. Why is it important to perform a bank reconciliation?To check the mathematical accuracy between the cash book and the bank statementsExercise 5aExercise 5bChapter 6 Trial Balance Model AnswersAnswers to the test your knowledge questions in chapter 61. How many columns is the trial balance sorted into?Two columns - debit and credit2. From what is the trial balance extracted?The balance of ledger accounts3. The trial balance is performed to check the accuracy of what?Mathematical accuracy of the book-keeping4. Name three errors that the trial balance does not disclose?Any three of the following: errors of omission, commission, principle, compensating errors, reversal of entries, errors of original entry5. Name three actions that you can take to correct any errors in the trial balance?Any three of the following: recheck the addition of the trial balance, check addition of ledger accounts, check debit and credit entries are correct, check for transposition of figures, recheck calculation of ledger accounts and balancesExercise 6aExercise 6bExercise 6cExercise 6dChapter 7 Business Documents Model AnswersAnswers to the Test your knowledge questions in chapter 71. Why do companies choose a house style for their documents?To create a good corporate i