Accounting chapter 4 (Double entry Book-Keeping)

Question 1

Define division of ledger

Answer 1

When the ledger is divided into specialized areas

Question 2

Name the 4 Division of Ledgers

Answer 2

1. Nominal Ledger
2. Sales Ledger
   3 .Purchase Ledger
3. Cashbook

Question 3

Define sales ledger

Answer 3

The ledger used to record Trade costumers accounts

Question 4

Define purchase ledger

Answer 4

The ledger used to record Trade suppliers accounts

Question 5

Define Nominal ledger

Answer 5

Also referred to as general ledger, everything except cash account, bank account, Trade payable and Trade receivable is recorded here

Question 6

Define cashbook

Answer 6

This contains the main cashbook and petty cashbook

Question 7

Advantages of Division of ledger

Answer 7

1. Convenient to use as the same type of accounts can be kept together
2. Task of maintaining ledger can be separated between different people

Question 8

Define contra entry

Answer 8

When money is withdrawn from bank to be put into cash or vice versa

Question 9

Why are contra entries called that

Answer 9

Because they will appear on both sides of the cashbook

Question 10

Other methods than check to transfer money

Answer 10

1. Electronic means
2. Credit transfer
3. Standing order
4. Direct debit
5. Credit/Debit card

Question 11

Define credit transfer

Answer 11

Involves instructing their bank to transfer a said amount to the account of another person

Question 12

Define Standing order

Answer 12

Instructing the bank to transfer a fixed sum of money at a fixed interval to another person

Question 13

Define Direct debit

Answer 13

When a person notifies their bank that permission has been given for a named person to collect an amount of money straight from their bank account

Question 14

Defines bank overdraft

Answer 14

When more has been paid out of the bank than was put into the bank account

Question 15

What will happen if there is a bank overdraft

Answer 15

If this happens then the bank will have a credit balance instead of a debit balance

Question 16

Difference between 2 column and 3 column cashbooks

Answer 16

3 column cashbooks have an extra cash column designated for the discount

Question 17

What are the 3 types of discount

Answer 17

.Cash discount
.Discount allowed
.Discount received

Question 18

Define cash discount

Answer 18

Cash discount motivates the costumer to pay faster by giving a time frame where the costumer will get a discount if paid within that time.

Question 19

Define discount allowed

Answer 19

Discount allowed is when a business allows its costumer when they pay their accounts within a time, it is an EXPENSE

Question 20

Define discount revieved

Answer 20

Discount that a business receives from its supplier when the business pays back their account in a specific time. It is a REVENUE

Question 21

Define dishonored check

Answer 21

It is a cheque received which the trade receivable’s bank refuses to pay

Question 22

Reasons why a check may be dishonored

Answer 22

1. This may be due to the fact that the trade receivable does not have enough money in his/her bank account
2. It could also be due to an error in the check such as no signature , no date, etc.

Question 23

What should be done after a check has been dishonored

Answer 23

The business must credit their the bank account and debit the trade receivable.