chapter 4 - double entry - part b

Question 1

definition of:

sales ledger

Answer 1

all personal accounts of credit customers are maintained here

Question 2

definition of:

purchases ledger

Answer 2

all personal accounts of credit suppliers are maintained here

Question 3

definition of:

nominal ledger

Answer 3

the ledger where all the other accounts are maintained

Question 4

advantages of division of ledger into specialist areas

Answer 4

• reduce possibility of fraud
• same type of accounts are kept together
• task of maintaining ledger can be divided between several people
• enables checking procedures to be introduced

Question 5

definition of:

contra entry

Answer 5

one which appears on both sides of cash book

Question 6

definition of:

bank overdraft

Answer 6

when more has been laid out of bank than was put into the bank account

Question 7

difference between two and three column cash book?

Answer 7

two column cash book is where two separate accounts (cash acc and bank acc) are maintained to record the movements of money; three column cash book has an extra money column on each side to record cash discount

Question 8

definition of:

cash discount

Answer 8

an allowance given to a customer when an account is settled within a time limit set by supplier

Question 9

discount allowed - dr or cr side?

discount received - dr or cr side?

Answer 9

discount allowed (expense) - debit side
discount received (income) - credit side

Question 10

definition of:

dishonoured cheque

Answer 10

a cheque received which the debtor’s bank refuses to pay