CHAPTER 4

Question 1

Debit balance

Answer 1

Total debits exceed total credits

Question 2

Credit balance

Answer 2

Total credits exceed total debits

Question 3

Trial balance

Answer 3

A list of ledger balances shown in debit and credit column

A method to test the accuracy of double-entry bookkeeping methods

Question 4

Journal

Answer 4

• Keeps a record of unusual movement between account
• Double entries which do not arise from source documents
• Have narrative to explain transaction

Question 5

Why must narrative accompany each manual journal entry?

Answer 5

• For audit & control purposes
• Indicate the purpose & authority of every transaction

Question 6

Sundry payables

Answer 6

Supplier who have supplied non-current assets

Question 7

Trade payable

Answer 7

Supplier who have supplied raw materials or goods for resale

Question 8

Where can we record corrections to errors that have been made ?

Answer 8

Journal

Question 9

Journal voucher

Answer 9

To record the equivalent of one entry in the journal

Question 10

Errors of transposition

Answer 10

When two digits in an amount are accidentally recorded the wrong way round

• TB still balance

Question 11

Error of omission

Answer 11

Failing to record a transaction at all

• TB still balance

Question 12

Error of principle

Answer 12

Entry that breaks the rule of accounting principle/ posted to the wrong type of a/c

• TB still balance

Question 13

Error of commission

Answer 13

Putting a debit/credit entry in the wrong account but still the same type

Wrong account/Wrong amount

• TB still balance

Question 14

Error of compensating

Answer 14

Errors which coincidentally, equal and opposite to one another

• TB still balance

Question 15

Suspense account

Answer 15

Temporary account opened for a number of reasons ; accountants assistant doesn’t know the debit entry

Question 16

Statement of Profit or Loss

Answer 16

Determine financial performance of a business over a period of time

Question 17

Income

Answer 17

Revenue earned by business over accounting period mainly from sales of goods & services

Question 18

Element in SOPL

Answer 18

⦿ Income
⦿ Expense

Question 19

Expenditure

Answer 19

Cost incurred in generating income

Question 20

Statement of Financial Position @ Balance sheet

Answer 20

A snapshot of the entity’s financial situation at that moment in time

More elaborate version of the accounting equation

Question 21

Element in SOFP

Answer 21

⦿ Asset
⦿ Liability
⦿ Capital

Question 22

Capital

Answer 22

Residual interest in the assets after deducting any liabilities

Question 23

Does the total value in top half of SOFP statements equals to the total value in bottom half

Answer 23

Yes
Asset = Capital + Liabilities