Chapter 2 - Double-Entry Book Keeping Flashcards
What is the principle for double entry book keeping ?
if one account is Debited the other will be Credited
Note - Both debit and credit should be the same amount
Are Debit entries on the left or right hand side of the T account ?
Left hand side
Are Credit entries on the left or right hand side of the T account ?
Right hand side
What is the rule for Debit entries ?
The account debited gains value, or records an asset. or an expense
What is the rule for Credit entries ?
The account credited gives value, or records a liability or an income item
When a business buys a Non-Current asset, the expenditure is referred to as ?
capital expenditure
What is Revenue expenditure ?
Revenue expenditure is where a business buys something that will be used quite quickly.
eg: a business buying a car to be used by the business would be capital expenditure but repairs to the car would be classed as revenue expenditure
When Capital is introduced the two accounts involved would be the bank account and the capital account.
Which account will be credited and which will be debited ?
Bank - Debit
Capital - Credit
When a Non-Current asset is bought the two accounts involved would be the bank account and the Non-Current asset account.
Which account will be credited and which will be debited ?
Non-Current asset - Debit
Bank - Credit
When a Expense is paid the two accounts involved would be the bank account and the expense account.
Which account will be credited and which will be debited ?
Expense account - Debit
Bank - Credit
When Income is received the two accounts involved would be the bank account and the income account.
Which account will be credited and which will be debited ?
Bank - Debit
Income account - Credit
When a business owner takes out Drawings from the business the two accounts involved would be the bank account and the drawings account.
Which account will be credited and which account will be debited ?
Drawings account - Debit
bank (or cash account) - Credit
Purchases and sales within a business
What side is normal for an entry to be made when a business makes a Purchase ?
(Credit or Debit)
It would usually go on the debit side
Purchases and sales within a business
What side is normal for an entry to be made when a business has a Sale ?
(Credit or Debit)
It would usually go on the credit side
If a business buys a computer for use within the business why would it not be debited into the purchase account ?
Because it is a Non-Current Asset so would have its own account to be entered into
