Unit 3 LA C Quiz

Identify one main purpose of accounting?

• Managing human resources

• Designing marketing campaigns

• Recording transactions

• Selling products

What is the advantage of receiving a loan as capital income?

• Can be repossessed if failure to pay

• Interest rates can rise

• Interest is charged on top

• Large, lump sum of money received quickly

What is the disadvantage of receiving a mortgage as capital income?

• Paid back in instalments over time

• The property or land can be repossessed if failure to pay

• Interest rates can rise

• Large, lump sum of money received quickly

What is the advantage of receiving shares as capital income?

• Raises money required without the need to pay interest payments for a business

• Interest is charged on top

• Loans may need to be secured against an asset

• Can be repossessed if failure to pay

What are the disadvantages of receiving owners' capital as capital income?

• Can be risky if business fails (all lost)

• Free of interest charges

• May be insufficient

• No need to pay back (savings)

What are the advantages of receiving debentures as capital income?

• Raises substantial money

• Interest charged

• Can be more flexible in repayment than bank loans

• Not necessarily secured

What is the advantage of cash sales as revenue income?

• Money received from the renting out of property or land by the owner

• Business may have to wait a while to receive the cash

• Guarantees income into the business

• Cash receive immediately

What is the disadvantage of credit sales as revenue income?

• Money received from the renting out of property or land by the owner

• Cash receive immediately

• Business may have to wait a while to receive the cash

• Guarantees income into the business

What is the advantage of receiving rent as revenue income?

• Property may go for long periods being unused and therefore not generating income

• Can often involved sub-letting of property

• Allows a business to make money from any unused property and land

• Guarantees income into the business

Select the examples of revenue income

• Interest received

• Discounts received

• Cash sales

• Mortgages