Double Entry Flashcards
What are ledgers
They record and analyse all the individual transactions of a business
What is the nominal ledger
The nominal ledger groups together all the individual ledgers (T accounts)
What do debit accounts increase and decrease
They increase:
Expenses
Assets
Drawings
They decrease:
Liabilities
Income
Capital
What do credits increase and decrease
They increase:
Liabilities
Income
Capital
They decrease:
Expenses
Assets
Drawings
How do we show a trade discount in the associated ledger
The discount is deducted from the list prices arriving from the sales/purchase figure
How do we show a trade discount in the associated ledger
The discount is deducted from the list prices arriving from the sales/purchase figure
How to we post an early settlement discount
IF the discount is expected to be taken we record the purchase net of the settlement fee
Otherwise we record at the original price.
What is extra entry do we post if a customer doesn’t take the early settlement when expected to
Cr sales income the XS cash
What do we record if the customer takes an unexpected early settlement
Dr sales income the amount
What is the difference between trade payables account/trade receivables accounts, and the receivables/payables ledger accounts
Trade receivables/TP are nominal ledger accounts and contain aggregated amounts,
While the payables ledger contain customer specific data
What’s the difference in balancing SOFP and p+L accounts
SOFP accounts have a carried down amount for next year that reps the opening balance
P+L account have a balance taken through to P+L ledger as they’re only relating to that specific period and don’t accumulate through periods
What is a trial balance
It is a list of the nominal ledger balances shown in debit and credit columns
The credits and debits should cancel out
What do we do if there is an error in the trial balance
We create correcting journals, the adjustments are made in the nominal ledger accounts needed and then we adjust the first TB to create a final TB
