Accounting Systems Flashcards
1
Q
Accounting System
A
- Inventory System
- Receivables Ledger
- Nominal Ledger
- Payables Ledger
2
Q
Nominal Ledger
A
5 categories of accounts (uses double entry) SOFP: -Assets -Liabilities -Capital
SOPL:
- Income
- Expense
3
Q
Asset Accounts
A
buildings fixtures and fittings inventory motor vehicles bank receivables
4
Q
Liability accounts
A
bank
loans
payables
5
Q
capital accounts
A
initial capital invested
profit retained
6
Q
Income accounts
A
sales
interest
rental income
7
Q
expense account
A
purchases wages salaries insurance telephone stationary motor expenses
8
Q
Double entry in the accounts
A
Assets + Expense
Debit +
Credit -
Liability + Capital + Income
Debit -
Credit +
A + E = C + L + I
9
Q
Rules of double entry bookkeeping
A
- identify which 2 (or more) accounts are affected by the transaction
- identify which category of account these are
- identify if the accounts balanced has increase or decreased by the transaction
- follow the rules of UBI to enter values
10
Q
Types of Error
A
- Error of omission
- omitted an entry completely; still balances but it’s not correct - Reverse entry
- if you entered a debit as a credit (and vice versa), trial balance will balance but will be incorrect - Wrong amount
- the wrong figure was entered, books would still balance but the wrong amount - Wrong account
- one of the entries has been entered in the wrong account - Compensating errors
- if errors are made which cancel out, trial balance will wrongly balance
11
Q
What is Inventory?
A
- balance brought forward from previous year
- opening inventories this year in trial balance
- closing inventories for this year will be given after the stock take
12
Q
International Accounting Standards Board definition of Income and Expenses
A
Income
- increases in economic benefit (increases owner capital)
- increases in assets or decreases in 3rd party liabilities
Expense
- decreases in economic benefit (decreases owner capital)
- decreases in assets or increases in 3rd party liabilities
13
Q
What do UK companies adhere to?
A
UK Companies Act
