Chapter 11 - Initial Trial Balance

Question 1

What is the trial balance?

Answer 1

A list of the balances of every account from the general ledger, distinguishing between DEBIT and CREDIT balances

Question 2

What are the 3 key parts of the trial balance?

Answer 2

• The DEBIT and CREDIT columns are totalled and the totals should agree.
• The balance listed for each account listed in the trial balance is the amount BROUGHT DOWN after the accounts have been BALANCED
• The order of accounts should be in either ALPHABETICAL order, RANDOM order or in the ORDER of FINAL ACCOUNTS

Question 3

What is the order of final accounts?

Answer 3

Income and expenditure items from the STATEMENT of profit or loss, followed by ASSETS, LIABILITIES and CAPTIAL items from the STATEMENT of FINANCIAL POSITION.

Question 4

What are some examples of DEBIT balances?

Answer 4

• Purchases account, Sales Returns Account Non -current assets accounts, Inventory account, Expenses, Drawings Sales Ledger Control, Petty Cash and Cash accounts.

Question 5

What are some examples of credit balances?

Answer 5

• Sales accounts, purchases returns, income. capital, loans, purchases ledger control account

Question 6

What are the accounting entries for Bank Account?

Answer 6

DEBIT - when the business has money in the bank

CREDIT - when it is overdrawn

Question 7

What are the accounting entries for VAT?

Answer 7

DEBIT - VAT is due to the business

CREDIT - When the business owes VAT to HMRC

Question 8

What is Capital Expenditure?

Answer 8

Expenditure incurred on the purchase, alteration or improvement of NON-CURRENT ASSETS

Question 9

What is revenue expenditure?

Answer 9

Expenditure incurred on purchases made by the business and on running expenses.

Question 10

What is Revenue income?

Answer 10

Income received from sales made by the business and other regular amounts of income.

Question 10

What is capital income?

Answer 10

Income received from one-off transactions.