TYPES OF BUSINESS
What is one key characteristic of a public sector organisation?
Run by the government
The aim is to provide public service
Funded by the taxes
Name one advantage of using accounting software.
Faster calculations, improved accuracy, easier record-keeping.
What does the principle of objectivity mean in accounting?
Fair / unbiased.
Based on facts and evidence.
Not influenced by personal feelings or pressure.
Which business document serves as proof of payment?
Receipt – it serves as proof that payment has been made.
Give one advantage of forming a partnership instead of being a sole trader.
Shared responsibilities and workload.
More capital than sole trader
Wider range of skills and expertise.
Easier decision-making support compared to working alone.
How does cloud accounting save time for businesses?
saves time by allowing real-time access to financial data from anywhere, automating updates, and reducing manual entry.
Real-time access (no need to wait for updates).
Automation (bank feeds, data syncing, etc.).
Reduced manual work (less paperwork, fewer duplicate entries).
If an accountant hides expenses to make profit look higher, which ethical principle is violated?
The principle of integrity is violated, because the accountant is not being honest and is misrepresenting the financial statements.
What is the function of a credit note?
A credit note reduces the amount a buyer owes to the seller, usually because of returned goods or an overcharge.
A business wants to expand but keep control within family members. Which type of business structure is most suitable?
Private Limited Company (Ltd) – allows shares to be issued, but only to selected people (such as family members), so control stays within the family while still raising capital for expansion.
Give one risk of relying too much on accounting technology.
Risks = cybersecurity threats, technical issues, over-dependence, cost of software/training.
Case study: An accountant delays reporting an error because it makes the company look better. Which principle is violated, and why is this serious?
The principle of integrity is violated, because the accountant is not being honest and transparent. This is serious because it misleads stakeholders, damages trust, and can have legal or financial consequences.
Compare the invoice and the receipt: what is the difference in purpose?
An invoice is issued by the seller to request payment for goods or services, while a receipt is issued after payment as proof that the buyer has paid.
A farmer wants to expand his farm but cannot raise enough money alone. He also wants to share the workload and responsibilities. Which type of business structure would be most suitable, and why?
Partnership → allows him to bring in partners who can invest more money and share responsibilities. This reduces his financial burden and spreads risk.
A company uses AI to scan receipts and automatically input data. What benefit does this provide?
It improves accuracy and efficiency by reducing human error and saving time on manual data entry.
Accuracy (fewer mistakes).
Efficiency / saves time.
(Optional extra: frees accountants to focus on analysis and decision-making).
Case study: An accountant is offered a gift from a supplier to approve invoices faster. Which principle is violated, and what should the accountant do?
The principle of objectivity is violated, because the gift could influence the accountant’s judgment. The accountant should refuse the gift and follow professional guidelines to stay impartial.
Scenario: A buyer orders goods, receives them, finds some faulty items, and returns them. List the documents involved in order.
1. Purchase Order – sent by the buyer to request the goods.
2. Invoice – issued by the seller to show the total debt and request payment.
3. Credit Note – issued by the seller for the faulty items returned.
A business wants to expand but keep control within family members. Which type of business structure is most suitable?
Private limited company (Ltd) → Can raise capital by selling shares, but keeps control within small group (family/friends).
Explain how technology has changed the role of accountants in decision-making.
Technology has shifted accountants’ roles from mainly recording transactions to analyzing real-time financial data, giving insights that support better business decisions.
Less time on manual entry (automation handles this).
More focus on analysis and strategy.
Real-time information helps managers make quicker, informed decisions.
Explain how ethical behavior in accounting can affect the reputation and survival of a business.
thical behavior builds trust with investors, customers, and regulators, protecting the business’s reputation. If a business acts unethically, it can lose credibility, face legal penalties, and even risk closure—so ethics directly affect both reputation and long-term survival.
Arrange these documents in the correct order of use in a credit transaction: Invoice, Statement of Account, Purchase Order, Receipt, Credit Note and mention each function.
Purchase Order – Sent by the buyer to request goods from the seller.
Invoice – Issued by the seller to inform the total debt and request payment for goods supplied.
Credit Note – Issued by the seller if goods are returned, reducing the amount owed.
Statement of Account – Sent by the seller (usually monthly) to summarize all transactions and show the balance due.
Receipt – Given by the seller as proof of payment once the buyer pays.