3. Double Entry Bookkeeping Flashcards
What are ledger accounts?
Records of items on the Statements of Financial Position/Profit or Loss.
Each item has its own ledger account.
What is an alternate name for the nominal ledger?
General ledger
What is the nominal ledger?
A file/book containing all of the ledger accounts.
What does DEADCLIC stand for?
Debit, Expenses, Assets, Drawings, Credit, Liability, Income, Capital.
Is an increase in an asset a debit or credit entry?
A debit entry.
Is a decrease in liability a debit or credit entry?
A debit entry.
Is an item of expense a debit or credit entry?
A debit entry.
Is an increase in a liability a debit or credit entry?
A credit entry.
Is a decrease in an asset a debit or credit entry?
A credit entry.
Is an item of income a debit or credit entry?
A credit entry.
What is the trial balance?
A list of balances of all items on the SoFP and SoPL.
What is the trial balance useful for?
To check that the debits equal the credits.
What mistakes will the TB not discover?
- When a transaction is missed completely.
- Both entries are of the same wrong amount.
- When both entries are on the wrong side
- An entry to the wrong account.
- Two or more mistakes where the net effect is zero (compensating errors).
When closing off the account are what is done with items on the Statement of Financial Position?
The balances are left on the account.
They will still exist at the beginning of the next period.
When closing off the accounts what is done with items on the Statement of Profit or Loss?
A new account is created in the nominal ledger called Statement of Profit or Loss.
- Income T account is debited, SoPL T account is credited.
- Expense T account is credited, SoPL T account is debited.
