Chapter 4 - Recording transactions and balancing the ledgers

Question 1

Money that a business entity is owed is accounted for in which ledger?

Answer 1

Receivables ledger (debtor)

Question 2

Money that a business entity owes is accounted for in which ledger?

Answer 2

Payables’ ledger (creditor)

Question 3

What are the steps to balancing off a ledger account?

Answer 3

1) total both sides of the t-account and identify the larger total
2) put the larger total in the total boxes at the bottom of the debit side and the credit side
3) insert a balancing figure to the side of the t-account which does not currently add up to the amount in the total box. Reference this balancing figure ‘balance c/f’ or ‘balance c/d’.
4) Carry the balance down diagonally and reference it balance b/f or balance b/d

Question 4

What is a trial balance?

Answer 4

A list of all ledger balances brought down at a particular date or point in time

Question 5

At the year-end, the ledger accounts must be closed off in order to?

Answer 5

• Transfer income and expense ledger account balances to the statement of profit or loss
• Carry down ledger account balances relating to assets, liabilities and capital for the start of the next accounting period. These balances will also be used to prepare the statement of financial position

Question 6

Give some examples of assets?

Answer 6

Land and buildings
Machinery
Cash at bank
Inventory
Receivables
Cash in hand

Question 7

Give some examples of liabilities?

Answer 7

Payables
Vat payables
Loan
Bank overdraft

Question 8

Give some examples of revenue?

Answer 8

Rental income
Sales revenue
Interest received
Discounts received
Commission received

Question 9

Give some examples of purchases and expenses

Answer 9

Rent
Purchases
R&r