Accounting A Smart Approach 2nd Edition Mary Carey, Jane Towers-Clark, Cathy Knowles - Solutions

Calculate the gross profit margin of a product and business.
What assumptions have to be made in preparing a cash budget? Will they be based on judgements or facts?
The cash budget for a business should include business transactions plus all personal cash receipts and expenses.
Capital is the amount the owner has invested in the business.
Drawings are the salaries paid to staff of the business.
Asaleis made when the order for goods or services is received,
Gross profit margin is calculated by dividing gross profit by sales and multiplying by 100.
Understand the difference between cash and the profits of a business
Understand that a set of financial statements can be prepared from data included in a trial balance
Differentiate between revenue and capital expenditure and explain the significance of the distinction
Prepare a simple statement of profit or loss for a sole-trader business.
When Sam first put money into the new business, the business then:* had an asset in the form of the business bank account* had received his investment in the business, which is recorded in the capital account.
When Sam first purchased the printing machine, the business then:* had anew asset, the printing machine* had reduced the business bank account by the cost of the printing machine.
If Sam paid an electricity bill for the garage he is working from, the effect on the business will be:* areduction in the bank account* an expense of the business will have been paid.The double-entry system is the recording of the two entries for each and every transaction.
Why are drawings taken out by the owner not treated like employees’ wages, which are shown as expenses in the statement of profit or loss?
A purchase is recognized for accounting purposes when a business takes delivery of goods or receives services.
Trade payables are the amounts owed by customers of the business who have not yet paid for goods or services received.
The total of the debit entries on a trial balance should equal the total of the credit entries.
The profit or loss for a business is found by comparing the revenue income with the revenue expenses for a period.
Capital expenditure is expenditure on the business’ day-to-day expenses.
The net profit for a period is highly unlikely to be greater than the gross profit.
Explain the purpose of a statement of financial position
Recognize the assets and liabilities in a business
Understand what an accrual and a prepayment are and how to account for them
Prepare a statement of financial position for a simple business.

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