C1 - section 2. The account system

Question 1

Overview of account systems (5 points)

Answer 1

1. Business transaction occurs.
2. Business document produced.
3. Entered into ‘books of prime entry’.
4. Entered into ‘Ledger accounts’.
5. Produce trial balance.

Question 2

1. Business transaction.

Answer 2

Initial business transaction, such as:

• Credit/Cash sale
• Credit/Cash purchase
• Expense
• withdrawal from bank or owners drawings.

Question 3

2. Business documents.

Answer 3

Business documents will be produced. E.g invoice.

Question 4

3. Books of prime entry.

Answer 4

Information from the ‘business document’ will be entered into the books of prime entry.

A book of prime entry is where a transaction is first recorded. There are several books of prime entry which may also be referred to as ‘Day books’.

Question 5

4. Ledger accounts.

Answer 5

Transactions recorded into the books of prime entry are then transferred into the ‘Ledger accounts’ on a regular basis.

Ledger accounts are used as part of the ‘double entry bookkeeping’ system.

Question 6

5. Trial balance.

Answer 6

A trial balance of all the ledger accounts in the accounting system is used as a control check to check transactions have been recorded properly prior to preparation of the ‘financial statement’.