Bookkeeping Transactions Flashcards

A credit note is issued when:

Answer: Goods are returned by the customer or an error on the invoice needs correcting

A credit note is issued by the seller to the buyer to reduce the amount owed, typically because goods have been returned, were damaged, or there was an overcharge on the original invoice.

The purchases returns day book is used to record:

Answer: Credit notes received from suppliers

The purchases returns day book records credit notes received from suppliers when goods are returned to them. It is a book of prime entry that feeds into the general ledger.

A sole trader receives a prompt payment discount of 2% on an invoice of £1,000 plus 20% VAT. If the discount is taken, how much does the trader pay?

Answer: £1,176.00

Under current UK rules, VAT is calculated on the discounted price when a prompt payment discount is offered. Net amount: £1,000 × 98% = £980. VAT: £980 × 20% = £196. Total: £980 + £196 = £1,176.

What does the term 'footing' mean in bookkeeping?

Answer: Adding up a column of figures

Footing means totalling a column of figures in an account or day book. It is a basic bookkeeping procedure to ensure columns are correctly added up before posting.

Which of the following best describes a remittance advice?

Answer: A document sent with payment to inform the supplier which invoices are being paid

A remittance advice is sent by the buyer to the seller alongside payment. It details which invoices and credit notes the payment covers, helping the supplier allocate the payment correctly.

A business buys office furniture for £3,600 plus VAT at 20% on credit. The correct entry in the purchases ledger is:

Answer: Credit supplier account with £4,320

The supplier account in the purchases ledger is credited with the full amount including VAT: £3,600 + (£3,600 × 20%) = £3,600 + £720 = £4,320. The supplier is owed the total inclusive of VAT.