Chapter 01.3 - Preparing the books of account

Question 1

Why are balancing accounts important?

Answer 1

• It breaks up each record into more manageable segments based on time period.
• It brings accounts to a neat conclusion with a clear statement on the net value shown in the account ( the balance )
• It provides summary information, for the preparation of the trial balance and other financial statements.

Question 2

What are the 03 fundamental concepts associated with double entry book keeping ?

Answer 2

Business entity
Duality
Money Measurement

Question 3

What does a trial balance do?

Answer 3

A trial balance provides a quick check on the accuracy of the double entry records. It is based on the idea that for every debit entry there will be a credit entry.

Question 4

what is a personal account?

Answer 4

These are for debtors and creditors. ( customers and suppliers )

Question 5

what are impersonal accounts?

Answer 5

These are divided between “real” and “nominal” accounts.

Question 6

What’s a real account?

Answer 6

accounts in which assets are recorded.

Question 7

What is a nominal accounts?

Answer 7

accounts in which expenses, income and capital are recorded.