chapter 4

Question 1

balancing an account

Answer 1

the process of finding which side of a ledger account is the greater and by how much. it is usually balanced once a month

Question 2

why do accounts need to be balanced

Answer 2

The ledger accounts are balanced to determine how much the business owes other people, how much it is owed and how much has been received from, or spent on, the various activities. The cash book is balanced to determine how much money is in the bank account and how much cash the business has

Question 3

debit balance

Answer 3

the amount by which the debit side of an account is greater than the credit side

Question 4

credit balance

Answer 4

the amount by which the credit side of an account is greater than the debit side

Question 5

overdraft

Answer 5

a bank account that has a negative balance. payments out of the account are greater than receipts into the account

Question 6

when do business that rely heavily on cash choose to balance even

Answer 6

it chooses to balance even more frequently

Question 7

why are accounts for customers and supplier balanced monthly

Answer 7

because of the practice of sending and receiving statements of account

Question 8

what are statements

Answer 8

The statements are copies of the accounts of customers in the sellers’ books and are sent to customers so that they can check their ledger accounts with those of their suppliers. Any differences can be queried and an agreement reached between supplier and customer. The statements also remind customers that payment of outstanding balances is due.

Question 9

purpose of statements

Answer 9

The statements also remind customers that payment of outstanding balances is due.