Double Entry Flashcards
Buying a car with cash
Dr Car
Cr Cash
Introduce cash to business (invest)
Dr cash
Cr capital
Buy inventory with credit
Dr Inventory
Cr Payable
Customer bought something with cash, but then returned
Sale:
Dr cash Cr sale
Return:
Dr sale Cr cash
If something was bought with a credit by a customer, but then returned
Sale:
Dr trade receivables Cr sales
Return:
Dr sales Cr trade receivables
Harry expects a 5% discount on a £30,000 I purchase on credit when paid within 10 days however, he missed this period. how do I account for this?
Initial:
Dr purchase Cr payable
Correction:
Dr payable Cr cash Dr purchases
If Harry does not expect to pay with the discount period, but ends up paying within period. How do I account for this?
Initial:
Dr purchase Cr payable
Correction:
Dr payable Cr cash Cr purchase
Because payable (liability) falls alongside cash (asset) and purchase (expense)
What is double entry for salary? (Business view)
Dr wages (gross salary + employer NICs)
Cr cash (net salary)
Cr income tax (PAYE + NIC + NIC2)
Double entry for closing inventory
Dr closing inventory (asset, SOFP)
Cr closing inventory (expense, SOPL)
Prepayment double entry
Dr Prepayment (asset)
Cr Cash (prepayment) or Expense (falls)
Both are assets but they balance out. The prepayment increases asset however reduces cash. Both are assets so the end balance is 0
Account for inventory (at Y/E)
Dr inventory (SOFP) —Asset
Cr COS or closing inv (SOPL) —Liability
Double entry for drawings
Dr drawing (equity)
Cr cash (asset)
think of it in equation. It helps to make the equation
Assets (fall) = liability + capital (falls)
Cost of NCA
Dr NCA
Cr Cash
Double entry for depreciation
Dr Depreciation (expense, SOPL)
Cr Accumulated Dep (reduce carrying amount of asset, SOFP)
Irrecoverable debt
Sale:
Dr Cash Cr sale (as not received)
Correction:
Dr IDE (irrecoverable debt expense)
Cr TR
