Accounting chapter 4 (Double entry Book-Keeping) Flashcards
Define division of ledger
When the ledger is divided into specialized areas
Name the 4 Division of Ledgers
- Nominal Ledger
- Sales Ledger
3 .Purchase Ledger - Cashbook
Define sales ledger
The ledger used to record Trade costumers accounts
Define purchase ledger
The ledger used to record Trade suppliers accounts
Define Nominal ledger
Also referred to as general ledger, everything except cash account, bank account, Trade payable and Trade receivable is recorded here
Define cashbook
This contains the main cashbook and petty cashbook
Advantages of Division of ledger
- Convenient to use as the same type of accounts can be kept together
- Task of maintaining ledger can be separated between different people
Define contra entry
When money is withdrawn from bank to be put into cash or vice versa
Why are contra entries called that
Because they will appear on both sides of the cashbook
Other methods than check to transfer money
- Electronic means
- Credit transfer
- Standing order
- Direct debit
- Credit/Debit card
Define credit transfer
Involves instructing their bank to transfer a said amount to the account of another person
Define Standing order
Instructing the bank to transfer a fixed sum of money at a fixed interval to another person
Define Direct debit
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
Defines bank overdraft
When more has been paid out of the bank than was put into the bank account
What will happen if there is a bank overdraft
If this happens then the bank will have a credit balance instead of a debit balance
Difference between 2 column and 3 column cashbooks
3 column cashbooks have an extra cash column designated for the discount
What are the 3 types of discount
.Cash discount
.Discount allowed
.Discount received
Define cash discount
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.
Define discount allowed
Discount allowed is when a business allows its costumer when they pay their accounts within a time, it is an EXPENSE
Define discount revieved
Discount that a business receives from its supplier when the business pays back their account in a specific time. It is a REVENUE
Define dishonored check
It is a cheque received which the trade receivable’s bank refuses to pay
Reasons why a check may be dishonored
- This may be due to the fact that the trade receivable does not have enough money in his/her bank account
- It could also be due to an error in the check such as no signature , no date, etc.
What should be done after a check has been dishonored
The business must credit their the bank account and debit the trade receivable.
