Answer to Question #145307 in Accounting for spu

Question

Question Three
a) Giving explain the distinction between capital and revenue expenditure. (4mks)
b) Explain how the imprest system functions and state its advantages. (6mks)
c) State and explain FIVE errors associated with trial balance. How are they corrected? (10mks)

Answer 1

a) Capital expenditures are one-time large expenditures used by a company to acquire, upgrade and maintain physical assets such as equipment, mainly funds that will be

be used to generate income for a longer period

Revenue expenditures are current, short-term, operating expenses that are used to carry out daily business operations.

b) A special fund for small purchases and office expenses is being created in company. An imprest, the petty cash of a company is kept at a constant rate. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds.

Advantages: Create small purchases and office expenses, no need to write checks for small purchases, fund balances are checked every day.

c)When compiling a trial balance, there are the following errors: Error of omission, Error of commission, Error of principle, Error of compensation, Error of complete reversal of entries, Error of original entry.

They are corrected: rechecking the debit and credit results of the trial balance, comparison with the balance of previous years to add or remove accounts