Business and Accounting Studies – Grade 10 (Ch. 1-12)

Flashcards cover key definitions, concepts and procedures in Business & Accounting Studies chapters 1-12, following a question-and-answer format for Grade 10 revision.

What is the definition of a business?

An economic activity that manufactures or provides goods and services to satisfy human needs and wants.

What are the three basic human needs?

Food, clothing, and shelter.

How do ‘needs’ differ from ‘wants’?

Needs are essential and limited; wants are diverse, unlimited, and ways of satisfying needs.

List two common objectives of profit-oriented businesses.

1) Earning profits, 2) Increasing customer satisfaction.

Who are ‘stakeholders’ in a business?

All parties that have an interest in, or are affected by, a business’s activities (e.g., owners, employees, customers, community, government).

Give two examples of internal stakeholders.

Owners and employees.

Name the four factors of production.

Land, labour, capital, and entrepreneurship.

Differentiate commodity-manufacturing businesses from service-providing businesses.

Commodity businesses produce tangible goods; service businesses provide intangible services to consumers.

What is meant by ‘business environment’?

All internal and external factors that influence a business’s operations.

Give two elements of a business’s internal environment.

Managers and employees.

What are ‘political environment’ factors?

Government policies and actions (e.g., infrastructure policy, fiscal policy) that affect business activities.

How does technology influence business today?

It speeds up production, communication, ordering, payment and makes global trade easier.

State one positive and one negative impact of globalisation on domestic businesses.

Positive: Access to foreign markets. Negative: Increased competition from abroad.

How are businesses classified by ownership?

Private-sector businesses and public-sector businesses.

Give three private-sector forms of business organisation.

Sole proprietorship, partnership, incorporated company.

What is the maximum number of partners allowed in a partnership in Sri Lanka?

20 partners.

Define ‘limited liability’.

Shareholders are liable only up to the amount they have invested in shares, not their personal assets.

Name two advantages of a sole proprietorship.

Easy to start and all profits belong to the owner.

What is a cooperative society’s main purpose?

To fulfill the common economic and social needs of its members through collective ownership and democratic control.

State one advantage and one disadvantage of a state corporation.

Advantage: Provides essential public services. Disadvantage: Limited independence in decision making.

Why must a sole-proprietor register a business name?

If the trade name differs from the owner’s full name; registration gives legal recognition and easier access to loans.

What is the primary objective of accounting?

To provide useful financial information to stakeholders for decision making.

Define ‘asset’.

A resource controlled by a business as a result of a past transaction from which future economic benefits are expected.

Give two examples of current assets.

Inventory (stock) and trade debtors (accounts receivable).

What is the accounting equation?

Assets = Equity + Liabilities.

How does income affect equity?

Income increases equity.

Give the double-entry rule for recording an increase in an asset.

Debit the asset account.

Name the five main types of ledger accounts.

Asset, liability, equity, income, and expense accounts.

What is the purpose of prime-entry books?

To record transactions first in chronological order before posting to the ledger, making posting systematic and reducing errors.

Which source document supports credit purchases of goods?

Purchase invoice.

What two functions does the cash book perform?

Acts as both a prime-entry book and a ledger (cash) account.

When is a discount ‘allowed’?

When a business grants a reduction to debtors for prompt payment; it is an expense to the business.

Explain ‘petty cash imprest’.

A fixed amount advanced to the petty cashier to cover small, regular expenses; replenished when spent.

Give two common analysis columns in a petty-cash book.

Postage and Travelling (any reasonable two of postage, travelling, entertainment, stationery, sundry).

What document accompanies a cash deposit into a bank?

A bank deposit slip.

Define ‘cheque not presented’.

A cheque issued by a business that has not yet been cashed or cleared by the bank.

List two reasons for differences between the bank statement balance and the cash-book bank balance.

1) Cheques issued but not presented, 2) Cheques deposited but not yet realised.

What is a bank reconciliation statement?

A statement that reconciles the adjusted cash-book balance with the balance shown on the bank statement, explaining any differences.

Name the two journals used to record only credit transactions.

Purchases journal (credit purchases of goods) and Sales journal (credit sales of goods).

Which journal records non-regular transactions such as asset purchases on credit?

General journal.

What is a trial balance used for?

To test the arithmetical accuracy of ledger postings by listing all debit and credit balances.

Does an agreed trial balance guarantee error-free accounts?

No; some errors (e.g., omission, commission, principle) don’t affect equality of debits and credits.

Give two examples of errors revealed by a trial balance.

1) Entering only one side of a transaction, 2) Posting unequal amounts to debit and credit.

What is a suspense account?

A temporary account used to hold the difference in a trial balance until errors are located and corrected.

How is an error of omission corrected?

By recording the omitted double entry in the appropriate accounts.

Describe an ‘error of commission’.

Recording the correct amount but in the wrong account of the same type (e.g., crediting wrong debtor).

What principle governs correction entries?

Use the general journal to debit one affected account and credit another; include suspense account if the error affected trial-balance agreement.

What technological method allows account holders to check balances by phone?

Mobile/tele-banking services.

State one advantage of computer-aided accounting (CAA).

Automated preparation of financial reports saves time and increases accuracy.

Give one risk associated with computerised accounting systems.

Loss of data due to technical failures or unauthorised access.

What are ‘standing orders’ in banking?

Written instructions to a bank to make regular, fixed payments on behalf of the account holder.

Explain ‘bank overdraft’.

A facility allowing withdrawals that exceed the current account balance, creating a short-term liability to the bank.

Why is analysing the business environment important?

To identify strengths, weaknesses, opportunities, and threats (SWOT) for strategic decision making.

List two sub-objectives a business might set to increase customer satisfaction.

1) Improving product quality, 2) Offering competitive pricing or better service.

What is meant by ‘dual impact’ of a transaction?

Every transaction affects at least two accounts, one debit and one credit, maintaining equality in the accounting equation.

Which book would you use to record a credit note issued to a customer?

(Beyond scope) – Typically the Sales Returns Journal; if using only a General Journal, record it there.

Identify one benefit of registering a sole-proprietor’s business name.

Provides legal recognition and enhances credibility with lenders and customers.

What distinguishes a ‘not-for-profit’ business from a ‘for-profit’ one?

Its primary objective is social welfare rather than earning profit for owners.

Name two economic factors in the external environment.

Interest rates and inflation.

Who bears unlimited liability in a partnership?

All partners; their personal assets can be used to settle business debts.

Give one reason governments operate state departments rather than corporations.

To provide essential public services without a profit motive, under direct ministerial control.

What is the normal ledger entry to record a direct remittance by a debtor into the bank?

Debit Bank account; Credit Debtor’s account.

State one characteristic of cooperative membership.

Voluntary and open; any eligible person may join or leave freely.

Which side of a ledger account is ‘credit’?

Right-hand side.

What is the definition of a business?

An economic activity that manufactures or provides goods and services to satisfy human needs and wants.

What system of exchange preceded money in early societies?

The Barter System – exchanging goods directly for other goods.

List two common business objectives.

Earning profits and increasing customer satisfaction.

What is a ‘need’ in economic terms?

A requirement essential for human existence, such as food, clothing or shelter.

Give two characteristics of human needs.

They are essential and common to everyone.

What is meant by ‘wants’?

Different ways of satisfying a particular need (e.g., rice, bread, or noodles to satisfy hunger).

State two characteristics of wants.

They are diverse and unlimited.

Name the four basic factors of production.

Land, Labour, Capital and Entrepreneurship.

Who are stakeholders?

Individuals or groups that have an interest in a business’s activities (e.g., owners, employees, customers).

Give one objective of shareholders/owners in a business.

Security of investment and earning a sufficient profit.

What are the two main components of a business environment?

Internal environment and external environment.

Give two examples of internal environmental forces.

Owners and Employees (also Managers).

Name two elements of the technological environment.

Advances in production technology and improvements in communication technology (e.g., internet).

What is the purpose of studying the business environment?

To identify strengths, weaknesses, opportunities and threats so the business can adapt and succeed.

State two classifications of business organisations based on ownership.

Private sector organisations and Public sector organisations.

What is a sole proprietorship?

A business owned and managed by one individual who bears unlimited liability.

List two advantages of a sole proprietorship.

Easy to start and all profits belong to the owner.

State one disadvantage of a sole proprietorship.

Unlimited liability of the owner.

What is the minimum and maximum number of partners in a partnership (under Companies Act Sri Lanka)?

Minimum 2; maximum 20 partners.

What written document governs most partnerships?

The Partnership Deed (written partnership agreement).

Define a company with limited liability.

An incorporated business where shareholders’ liability is limited to the unpaid value of their shares.

Give one advantage of an incorporated company.

Ability to raise large capital by issuing shares.

What is a cooperative society?

A democratically controlled organisation formed voluntarily to meet members’ common needs through joint ownership.

Define a state corporation.

A business entity fully or mainly owned by the government and established by an Act of Parliament.

What is an accounting transaction?

An exchange of economic resources measurable in money terms between a business and another party.

State the basic accounting equation.

Assets = Equity + Liabilities.

What is an asset?

A resource controlled by a business from which future economic benefits are expected to flow.

Give two examples of current assets.

Inventory (stocks) and Trade Debtors (accounts receivable).

What are liabilities?

Present obligations of a business arising from past events, settlement of which will result in an outflow of resources.

How does income affect equity?

Income increases equity.

State the double-entry rule for asset accounts.

Increase – Debit; Decrease – Credit.

Which book records the first entry of cash receipts and payments?

The Cash Book.

What is ‘discount allowed’?

A cash discount the business gives to debtors for early payment; recorded as an expense.

Where is discount received recorded in the cash book?

In the discount received column on the credit (payment) side.

What is a petty cash imprest?

A fixed amount of cash given to a petty cashier to cover small day-to-day expenses.

Name two analysis columns commonly found in a petty cash book.

Postage and Travelling (any small recurring expense headings).