Chapter 3: The General Ledger

Question 1

What concept is the general ledger based on?

Answer 1

Double-entry accounting

Question 2

What is the cross-reference and what is its purpose?

Answer 2

The name of the other account affected by transaction, so that both accounts affected can be identified which aids understandability

Question 3

What is a ledger account?

Answer 3

An accounting record showing all the transactions that affect a particular item

Question 4

Which side of a ledger account does the debit side represent?

Answer 4

Left-hand side

Question 5

Which side of a ledger account does a credit side represent?

Answer 5

Right-hand side

Question 6

What are the 3 necessary components of every ledger entry?

Answer 6

Date, cross-reference, amount

Question 7

What are the double-entry rules for ledger accounts?

Answer 7

Every transaction must be recorded in at least two ledger accounts, and every transaction must be recorded on the debt side and credit side of at least one account

Question 8

Which side of the ledger account do increases and decreases in ASSETS go?

Answer 8

Increases = Debit Side
Decreases = Credit Side

Question 9

Which side of the ledger account do increases and decreases in LIABILITIES go?

Answer 9

Increases = Credit Side
Decreases = Debit Side

Question 10

Which side of the ledger account do increases and decreases in OWNERS EQUITY go?

Answer 10

Increases= Credit Side
Decreases = Debit Side

Question 11

Which side of the ledger account do increases and decreases in REVENUES go?

Answer 11

Increases = Credit Side
Decreases = Debit Side

Question 12

Which side of the ledger account do increases and decreases in EXPENSES go?

Answer 12

Increases = Debit Side
Decreases = Credit Side

Question 13

What is a trial balance and what is its purpose?

Answer 13

A list of all of the accounts in the general ledger and their balances, in order to determine if total debits is equal to total credits

Question 14

What is footing?

Answer 14

An informal process used to determine the balance of a ledger account

Question 15

What is balancing?

Answer 15

The ruling off of an asset, liability or owners equity to determine its balance at the end of the current period, and transferring that balance to the next period

Question 16

What are some examples of errors which are detected by the trial balance?

Answer 16

Two entries being recorded on the same side of the ledger or only one entry being recorded

Question 17

What are some examples of errors which are not detected by the trial balance?

Answer 17

An omission of a transaction or the transaction being recorded in the opposite ledger accounts

Question 18

What is a pre-adjustment trial balance and its purpose?

Answer 18

It is a trial balance prepared before balance day adjustments have been made in order to correct any errors

Question 19

What are the differences between balancing and footing?

Answer 19

Balancing is only done at the end of the period and balancing is a more formal process involving a double-entry

Question 20

What happens when drawings occur?

Answer 20

Owners equity is debited

Assets are credited