Bank accounts, financial control systems & record-keeping

Which of the following best describes an overdraft facility?

• A bank account that allows a business to withdraw more money than it has saved in the account

• A loan attached to an asset such as a house

• A temporary account that is opened for a brief period of time

• A situation whereby a business pays an amount over and above the required loan repayment

______________ entity principle states that the owner’s finances are _____________ to that of the business

An overdraft facility is useful to the business because: (Tick the options that apply)

• the bank allows a business to withdraw more money than they have available in their account.

• it allows the owner to make urgent payments if a business falls low on cash temporarily.

• it is a fixed term loan

Which of the following is the least likely to be a consideration when establishing a business bank account?

• The bank fees charged on the bank account

• Whether a bank overdraft is available with the given bank account

• The share price of the financial institution

• The interest rate of the bank account

Which of the following is the most important factor for business owners when selecting a business bank account?

• A high rate of interest

• A low rate of interest

• An interest-free bank account

• A low rate of interest with high bank fees

Which of the following is the most important factor when choosing a business loan?

• A high rate of interest

• A low rate of interest

• Low bank fees but with a high rate of interest

• A low rate of interest but with high bank fees

A business owner should have a separate bank account for their business because: (Select all options that apply)

• This practice ensures that the financial performance and position of the business can be easily monitored.

• This practice allows for easier calculation of business expenses such as bank fees and revenue such as interest earned

• Which makes it less time consuming and costly to prepare tax returns for the business.

• The owner and the business are one and the same entity

What is the 'separate entity' principle in accounting?

• The separate entity principle in accounting is that the owner’s finances are separate to that of the business and should be recorded separately.

• The separate entity principle in accounting is that the owner’s finances are same as the business's finances and should not be recorded separately.

• None of the above