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business
accounting for business

Questions and Answers of Accounting for Business

(c) Do you consider information overload an outcome of using computerised accounting systems.
(d) Does the use of a computerised accounting system reduce the required accounting knowledge of its users?
(e) Explain the importance of the chart of accounts and the coding system in a computerised accounting system.
1 In large organisations bills are o#en batched up and processed, using batch totals as a kind of control. Is this any different from keeping invoices together for a week and then processing them?
2 A real estate business will not have a huge number of transactions. Can you identify other businesses, for which the number of transactions are of a similar magnitude, that may find a system
3 Even though this business is small, there are checks and balances built in. Identify them.
1 Why do you think this small organisation has chosen to operate in the cloud?
2 Discuss the use of job numbers and why it is necessary to have a job number on every transaction entered (hint:think about the flow through to the Finance Manager’s report using the Job Profit
3 Discuss any ssues the organisation may have had when first deciding to move its accounting system to the cloud(hint: it is a medical organisation).
4 In relation to internal control, what is the significance of having an external audit performed?
5 Discuss the processing of payroll in relation to the principles of a manual system.
1 Does the number of cost centres surprise you?
2 Discuss the batching of invoices and compare this with a traditional purchases journal.
3 Discuss the way in which actual cash is handled in this organisation.
4 Compare the systems outlined above with the traditional manual system. What are the main advantages of a computerised system of this type?
5 Discuss the extent to which the system described is grounded in the same principles as those of a manual system.
LO1: Identify the main elements of internal control and explain the need for sound internal control in accounting systems
LO2: Explain why in a typical manual system the ledger needs to be split up, identify common ways of doing this, and outline the purpose and structure of a traditional manual system of subsidiary
LO3: Explain the nature and role of sales and purchases journals and show how they are used in posting figures to the accounts in a traditional manual system
LO4: Explain the nature and role of the cash book and cash journals and show how they are used in posting figures to the accounts in a traditional manual system
LO5: Explain the nature and role of the journal and show how they are used in posting figures to the accounts
L06: Explain the importance of control accounts and reconciliations, and prepare control accounts for debtors and creditors and a bank reconciliation
L07: Explain the major elements of computerised accounting systems and explain how these systems still use the same basic principles of accounting and internal control used by a manual system, but
5.1 LO1 Identify the components of internal control, as defined by the Treadway Commission. Compare these components with the definition of internal control given in businessdictionary.com.
5.2 LO1 Discuss the role of the trial balance in internal control.
5.3 LO1 List as many approaches as you can that contribute to internal control.
5.4 LO2 Why does the ledger need to be split up, and what are the main ways of doing this?
5.5 LO3 Explain the basic idea behind a purchases book or journal.
5.6 LO1 Discuss segregation of duties as an internal control device.
5.7 LO1 What do you think are the critical elements of good records maintenance?
5.8 LO1 Identify some physical safeguards commonly found in internal control systems.
5.9 LO1 How might the use of standardised documents help internal control?
5.10 LO1 Discuss the importance of a good staff profile to internal control.
5.11 LO1 Identify and discuss the main internal control issues that arise with e-commerce.
5.12 LO1 Why do internal control systems break down?
5.13 LO4 What are the main reasons for the development of analysis books?
5.14 LO4 Explain the reasons for use of an imprest system of petty cash.
5.15 LO5 Provide examples of transactions that might appear in a general journal.
5.16 LO6 Explain the rationale for control accounts.
5.17 LO1 Why is pre-numbering of receipts an important part of internal control relating to cash receipts?
5.18 LO1 What do you understand by the term ‘asset register’? What is its purpose? How often might it be checked?
5.19 LO6 Discuss the notion that, as more and more transactions are carried out by direct bank transfer, the bank reconciliation is dead.
5.20 LO1/6 Are you one of the many people who never require a receipt in relation to purchases using a credit card? If so, how are you able to keep track of your financial positon?
5.21 LO7 Discuss what might be the critical components in broad terms of a system for purchasing goods, and then paying creditors, using a computerised accounting system.
5.22 LO7 Discuss the link between the recording process and the production of documents used in the business process when using a computerised accounting system.
5.23 LO1/3 Why is it important that the responsibility for ordering goods is held by someone other than the person who is responsible for paying bills?
5.24 LO1/3 Why is it important that those people making the sale are not also responsible for despatch of the goods sold and receipt of cash?
5.25 LO1/3 In devising a purchasing system, how might you prevent payment of fictitious invoices?
5.26 LO7 What do you understand by cloud accounting? What are the implications for accounting systems?
5.27 LO1/7 What kind of physical, mechanical or electronic controls have you experienced in dealing with businesses to date?
5.1 LO2 Using the ledger division suggested in the chapter, identify the ledger in which each of the following accounts would be kept.(a) Premises(b) Accumulated depreciation—vehicles(c) Sales
5.2 LO3 Draw up a sales book and a sales returns book for the following transactions, and show where the figures contained therein would be posted.(a) January 1 Credit sales to D. Duck $500(b)
5.3 LO4 Record the following transactions in a three-column cash book.February 1 Cash in hand $500, cash at bank $25,000 February 2 Receives cash of $50 from G. Knott in settlement of a debt of $55
5.4 LO4 Write up a cash payments journal and indicate the postings you would make to the ledger accounts, for the following transactions.March 1 Payments to creditors—A. Knott $190 in satisfaction
5.5 LO5 B. Quick opens his business with the following assets and liabilities: Premises $500,000; Equipment$150,000; Fixtures $50,000; Inventory $100,000; Cash $45,000; Receivables—J. McCool
5.6 LO4 A business operates a petty cash system using the imprest system with an allocation of $1,000. The opening balance is $1,000. During October the following transactions were completed through
5.7 LO3/4 David is responsible for entries in the nominal ledger of a business. Jonathan is responsible for the sales (debtors) ledger.A sales book is kept in which the total for each sales invoice
5.8 LO1 Identify ways in which the recording process can use principles of internal control, relating to:(a) recording of transactions(b) separation of roles and responsibilities within the
5.9 LO3–5 Assume that a business uses the subsidiary records described in this chapter. It also keeps a sales(debtors) ledger control account. At the start of a period it has a debit balance on
(b) Explain the purpose of a control account of this type, and also how the process of reconciliation with the individual debtor records will be carried out.
5.10 LO6 The bookkeeper responsible for maintaining the individual records of creditors relating to purchases prepared a schedule of the balances of individual supplier’s accounts at the end of
(b) Prepare a statement starting with the original total of the schedule of individual creditors, then identify and correct errors in the schedule, concluding with an amended total.
5.11 LO6 You are a fairly careful person who likes to keep tabs on the balance in your bank account. You try to keep a diary, which acts as your equivalent of a ledger account. This shows the
5.12 LO4 Your business gives senior staff credit cards for use on specified purposes. Expenditure can be made on the card for fuel, accommodation, meals and entertaining up to a limit of $500 on any
(b) Identify the disadvantages and dangers of their use.
(c) Use the information from the statement to prepare a four-column analysis for the month that could be used for posting to the accounts. (This could be perceived as being an analysis cash payments
(d) How important is it that credit card slips and associated receipts are kept?
5.16 LO1 Identify ways in which physical controls can be used to ensure security and safety of staff and assets.
5.17 LO1 List any potential security issues that you can see with e-commerce and identify possible ways of dealing with them.
5.18 LO1/3/4 How might you devise a sales system and related cash receipts so as to minimise scope for abuse?Using Table 5.1 as a guide, indicate what kind of documents might be needed and identify
5.19 LO1/4/5 Using Table 5.1 as a guide, identify the main features of a payroll system and the kind of internal controls you think would be useful.
Find a friend or relative (or the relative of a friend)who is involved in a managerial or ownership role in a business. Try to ascertain the following relating to the business:1 What is the size and
2 How are the transactions dealt with in terms of subsidiary records?
3 How does the information collected get posted to the ledger?
4 What parts of the accounting process use computerised systems?
5 What is the nature of the computerisation (i.e.spreadsheets, accounting package, dedicated system)?
6 What terms are used for the various parts of the process? Do these mirror the terms used in a manual system?
7 What part of the process is manual?
8 What reports are provided?
9 What documents are provided as part of the accounting system?
10 What kind of databases (detailed files) are kept, and how are they used? Specifically, what detail is kept relating to such things as inventory, wages, debtors and creditors?
11 Are there many special reports prepared (e.g. to assist in planning)?
12 How useful does management find the reports produced?
(a) The sheer volume of transactions will mean that a simple double-entry system will not be able to cope, so ways of dealing with large volumes of transactions need to be found. The main way in
LO1 Explain the nature and purpose of the statement of financial position (balance sheet) and its component parts
LO2 Explain the accounting equation, and use it to build up a statement of financial position at the end of a period
LO3 Classify assets and claims
LO4 Apply the different possible formats for the statement of financial position
LO5 Identify the main factors that influence the content and values in a statement of financial position
LO6 Explain the main ways in which the statement of financial position can be useful for users of accounting information
LO7 Identify the main deficiencies or limitations in the statement of financial position.
1 How do you think the figures included in the ranking are derived?
2 The figures are interesting. What reliance would you place on them? Would you make any decisions based on them?
3 How easy might it be to do similar calculations for most corporations in the world?
4 Can you think of reasons that might explain Facebook’s rise in ranking? How might these reasons be quantified?
5 While undoubtedly of interest, just how useful is information of this type?
1 Do the figures shown tell us anything about the value of the players?
2 It is interesting to note that the cost of registering its squad of players would not have included anything for ‘home-grown’ players. In earlier years, the figures would have included the cost
3 How might the value of a player be determined? Should a current figure based on a (possibly) speculative value be included? How might such a figure be included?
1 Several of the examples given in Real World 2.3 relate to the energy industry. Substantial reductions in oil and gas prices worldwide necessitated these impairments. Why do you think that the

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