ACCT1006 EXAM STUDY GUIDE
What are the limitations of internal control - Answer -cost vs benefit
-human imperfection
-business size
what are the advantages of subsidiary ledgers - Answer 1. provide for effective internal
control
2. free general ledger of excessive detail
3. provide for segregation of duties
4. show transactions in a single account providing up to date info
what are the advantages of special journals - Answer 1. increase recording efficiency
2. lower processing and ledger posting time and costs
3. increases data accuracy and control
4. increases flexibility and task separation/specialization
what are the advantages of computerized accounting info systems - Answer -ability to
process large numbers of transactions quickly
-automatic posting of transactions
-error reduction and fast response time
-flexible and fast report production
what are the disadvantages of computerized accounting info systems - Answer -use of
inappropriate/incompatible software and hardware
-need for reliable back up procedures
-fraud and embezzlement
-lack of computer system skill
-computer viruses and hackers
what are the different types of receivables - Answer accounts rec, notes receivable and
other receivables
what are notes receivables - Answer amounts owing to the firm outside normal trade for
which formal instruments of credit are issued to evidence the debt, and on which
interest is generally payable
,what are other receivables - Answer include non-trade receivables e.g. interest
receivable, loans, advances, GST
what is the journal entry for the direct write off method - Answer Dr Bad Debts Expense
Cr Accounts Receivable
what is the journal entries for the allowance method - Answer Dr Bad debts expense
Cr Allowance for doubtful debts (estimate amount)
Dr Allowance for doubtful debts
Cr Accounts Receivable (actual amount)
what are the two ways to calculate the estimate in the allowance method - Answer
ageing of accounts receivable and percentage of net sales
what are the journal entries to reverse the debt write off - Answer Dr Accounts
receivable
Cr Allowance for doubtful debts
Dr Cash
Cr Accounts receivable
What are methods used to account for receivables - Answer 1. extending credit to the
right customers
2. establishing a payment period consistent with competitors
3. monitor collections using the credit risk ratio = allowance for dd/acc rec
4. Evaluate the receivables balance using the receivables turnover and the average
collection period
5. accelerating cash receipts by offering incentives for prompt payment or sell accounts
rec to a factor or promote credit card sales
what is the journal entry for issuing a notes receivable to someone needing more time to
pay their account - Answer Dr Notes Receiable
Cr Accounts Receivable - name
what is the journal entry for the maturity of a notes receivable - Answer Dr Cash
Cr Interest Revenue
Cr Notes Receivable
what are PPE assets - Answer tangible items that are held for use in the production of
, goods and services, for rental or other administrative purposes and are expected to be
used during more than one period
How does the cost principle apply to PPE assets - Answer AABS reqires PPE assets to
be INITIALLY recorded at cost, and then AASB requires the decline in economic
benefits derived from the use of an asset to be recognized on a systematic basis over
the assets useful life
decline recognized as:
- depreciation expense in income statement
-accumulated depreciation in balance sheet
what does the cost of an asset consist of - Answer consists of the fair value of all
expenditure required to:
a.) acquire the asset, e.g. fright costs, and
b.) make it ready for its intended use e.g. installation
what are the cost involved in PPE assets - Answer Plant and Equipment
- purchase price
- frieght charges
- insurance during transit
- installation costs
Property
- purchase price
- settlement costs e.g solicor fees
- stamp duty
-accrued property taxes paid by purchaser
what is depreciation - Answer the process of allocating to expense the cost of a PPE
asset over its useful/service life in a rational and systematic manner
what is the carrying amount - Answer carrying amount = cost less accumulated
depreciation
what are the factors that contribute to a decline in economic benefit of a depreciable
asset - Answer 1. use of asset
2. physical wear and tear
What are the limitations of internal control - Answer -cost vs benefit
-human imperfection
-business size
what are the advantages of subsidiary ledgers - Answer 1. provide for effective internal
control
2. free general ledger of excessive detail
3. provide for segregation of duties
4. show transactions in a single account providing up to date info
what are the advantages of special journals - Answer 1. increase recording efficiency
2. lower processing and ledger posting time and costs
3. increases data accuracy and control
4. increases flexibility and task separation/specialization
what are the advantages of computerized accounting info systems - Answer -ability to
process large numbers of transactions quickly
-automatic posting of transactions
-error reduction and fast response time
-flexible and fast report production
what are the disadvantages of computerized accounting info systems - Answer -use of
inappropriate/incompatible software and hardware
-need for reliable back up procedures
-fraud and embezzlement
-lack of computer system skill
-computer viruses and hackers
what are the different types of receivables - Answer accounts rec, notes receivable and
other receivables
what are notes receivables - Answer amounts owing to the firm outside normal trade for
which formal instruments of credit are issued to evidence the debt, and on which
interest is generally payable
,what are other receivables - Answer include non-trade receivables e.g. interest
receivable, loans, advances, GST
what is the journal entry for the direct write off method - Answer Dr Bad Debts Expense
Cr Accounts Receivable
what is the journal entries for the allowance method - Answer Dr Bad debts expense
Cr Allowance for doubtful debts (estimate amount)
Dr Allowance for doubtful debts
Cr Accounts Receivable (actual amount)
what are the two ways to calculate the estimate in the allowance method - Answer
ageing of accounts receivable and percentage of net sales
what are the journal entries to reverse the debt write off - Answer Dr Accounts
receivable
Cr Allowance for doubtful debts
Dr Cash
Cr Accounts receivable
What are methods used to account for receivables - Answer 1. extending credit to the
right customers
2. establishing a payment period consistent with competitors
3. monitor collections using the credit risk ratio = allowance for dd/acc rec
4. Evaluate the receivables balance using the receivables turnover and the average
collection period
5. accelerating cash receipts by offering incentives for prompt payment or sell accounts
rec to a factor or promote credit card sales
what is the journal entry for issuing a notes receivable to someone needing more time to
pay their account - Answer Dr Notes Receiable
Cr Accounts Receivable - name
what is the journal entry for the maturity of a notes receivable - Answer Dr Cash
Cr Interest Revenue
Cr Notes Receivable
what are PPE assets - Answer tangible items that are held for use in the production of
, goods and services, for rental or other administrative purposes and are expected to be
used during more than one period
How does the cost principle apply to PPE assets - Answer AABS reqires PPE assets to
be INITIALLY recorded at cost, and then AASB requires the decline in economic
benefits derived from the use of an asset to be recognized on a systematic basis over
the assets useful life
decline recognized as:
- depreciation expense in income statement
-accumulated depreciation in balance sheet
what does the cost of an asset consist of - Answer consists of the fair value of all
expenditure required to:
a.) acquire the asset, e.g. fright costs, and
b.) make it ready for its intended use e.g. installation
what are the cost involved in PPE assets - Answer Plant and Equipment
- purchase price
- frieght charges
- insurance during transit
- installation costs
Property
- purchase price
- settlement costs e.g solicor fees
- stamp duty
-accrued property taxes paid by purchaser
what is depreciation - Answer the process of allocating to expense the cost of a PPE
asset over its useful/service life in a rational and systematic manner
what is the carrying amount - Answer carrying amount = cost less accumulated
depreciation
what are the factors that contribute to a decline in economic benefit of a depreciable
asset - Answer 1. use of asset
2. physical wear and tear
