Business Transactions
Are cash and credit transactions both used in accrual accounting?
Yes, both cash and credit transactions are used in accrual accounting. Accrual accounting is a method of accounting that records revenue and expenses when they are earned or incurred, regardless of when the cash actually changes hands.
What is the extended form of the accounting equation?
assets = liabilities + owner’s equity + income - expenses
Did Woolworths group cash increase after the purchase of inventories?
No, cash decreased after purchase of inventories
At the Woolworths check out, you make a partial payment using Zip. This payment is recorded as a ______ transaction.
credit transaction
What is the purpose of double entry accounting and why is it important?
The purpose of double entry accounting is to double check the transactions accounted for are correct. If there is an imbalance, there must be something wrong in the data.
What accounting element was affected after dividends were paid?
Equity!
What was a cash transaction we mentioned in relation to Woolworths?
Purchase of property
Purchase of plant and equipment
Interest paid
Using the double entry accounting system, describe how the extended accounting equation would look like if income was earned on credit.
There will be an increase in income and an equal increase in assets (debtors).
Excluding the purchase of new inventories, why was there a slight increase in woolworths group inventories? (Hint: PFD)
Woolworths acquired additional inventory from the purchase of PFD