3. Double Entry Bookkeeping Flashcards
What is a Ledger or ‘T’ accounts?
-T account/ledger only a basic unit of the double-entry system
-Divided into two sides: LHS - debit side, RHS - credit side
-ledgers/ T accounts groups together transactions of the same type e.g. all electricity expenditures will be on an Electricity Account
What is a debit transaction?
Occurs when there is an increase in an asset or an expense or an increase in drawings made by proprietor
What is a credit transaction?
Where there is an increase in liabilities, income or capital
What happens if there is a decrease in what is usually classed as a credit or debit transaction?
The opposite occurs; credits become debits and debits become credits
What happens in transaction: sale of goods for cash?
Debit: Bank
Credit: Sales
What happens in transaction: sale of goods for credit?
Debit: debtors, Credit: Sales
What happens in transaction: receipt of cash from debtors?
Debit: Bank, Credit: debtors
What happens in transaction: purchase of goods for cash?
Debit: Purchases
Credit: Bank
What happens in transaction: purchase of goods on credit
Debit: Purchases
Credit: Creditors
What happens in transaction: Payments of suppliers for credit purchases?
Debit: Creditors
Credit: Bank
What happens in transaction: introduce capital into the business?
Debit: Bank
Credit: Capital
What happens in transaction: introduce capital into the business?
Debit: Bank
Credit: Capital
What happens in transaction: Take out a bank loan?
Debit: Bank
Credit: Loan
What happens in transaction: Payment of an expense?
Debit: Expense
Credit: Bank
What happens in transaction: purchase of an asset for cash?
Debit: Asset
Credit: Bank
