Chapter 10: Balancing Accounts, accounting equation, capital & revenue.

Question 1

How often must the traditional ‘T’ account need to be balanced?

Answer 1

At regular intervals, often the month-end.

Question 2

What is the balance b/d?

Answer 2

The account balance at the start of the next period.

Question 3

What does the balance of an account tell us?

Answer 3

The balance of an account tells us info. such as:

The amounts of

1. sales
2. purchases
3. expenses

Together with amounts of Assets & Liabilities.

Question 4

What does the accounting equation always do?

Answer 4

It always balances.

Question 5

What is expenditure classified between?

Answer 5

Expenditure is classified between capital & revenue expenditure.

Question 6

What is income classified between?

Answer 6

Income is classified between capital income and revenue income.

Question 7

What is the accounting equation another way of understanding?

Answer 7

The accounting equation is another way of understanding double-entry book keeping.

It shows how the dual aspect of book-keeping relates to the accounts.

Question 8

Book-keeping system: Why is it important to classify capital & revenue expenditure correctly?

Answer 8

In the book-keeping system, it is important to classify capital & revenue expenditure & income correctly

so as not to show a false position.