Double Entry And The Accounts Ledger

Question 1

What is the purpose of the books of prime entry?

Answer 1

To provide information for entries into ledger accounts.

Question 2

What are ledger accounts made up of?

Answer 2

They are made up of journals for each different category of income and expense.

Question 3

What additional ledgers are included besides income and expense journals?

Answer 3

A receivables ledger and a payables ledger.

Question 4

Name 3 examples of ledgers accounts

Answer 4

Sales
Sales returns
Purchases (items bought for resale or to make into saleable items)
Purchases returns
Bank
Cash in hand
Telephone expenses
Electricity expenses
Motor expenses
Wages
Office expenses
Machinery
Vehicles
Drawings
Receivables (money owed to the business)
Payables (money owed by the business

Question 5

How are transactions recorded in the ledger account?

Answer 5

Using the double entry bookkeeping system.

Question 6

What is double entry bookkeeping made up of?

Answer 6

Debits and credits.

Question 7

Where are debits recorded in the ledger or T account?

Answer 7

On the left-hand side.

Question 8

Where are credits recorded in the ledger or T account?

Answer 8

On the right-hand side.

Question 9

What ensures that debit entries balance with credit entries?

Answer 9

For every debit, there is a corresponding credit, so the total of debits equals the total of credits.

Question 10

What tool can be used to visualize debits and credits in double entry bookkeeping?

Answer 10

A T account.

Question 11

What does DEAD CLIC stand for?

Answer 11

Debits increase
Expenses
Assets
Drawings

Credit increase
Liabilities
Income
Capital

Question 12

What happens to the relevant expenses ledger when a new expense is recorded?

Answer 12

It increases as a debit according to DEAD CLIC.

Question 13

How is a sale recorded in the ledger?

Answer 13

A sale increases income, so it is recorded as a credit.

Question 14

What does DEAD CLIC help with in bookkeeping?

Answer 14

It provides a guideline for understanding debits and credits in ledger accounts.

Question 15

How is information from the sales daybook used in ledger accounts?

Answer 15

Totals for the week are taken and entered into the ledger accounts at the end of the week.

Question 16

What type of sales are recorded in the sales daybook?

Answer 16

Sales made on credit.

Question 17

Which two accounts are involved when recording credit sales?

Answer 17

Sales and sales ledger control (receivables).

Question 18

Why are sales recorded as a credit in the ledger?

Answer 18

Sales are a form of income, and income corresponds to the ‘I’ in DEAD CLIC.

Question 19

Why are receivables recorded as a debit in the ledger?

Answer 19

Receivables are money owed to the business, making them a form of asset, and assets correspond to the ‘A’ in DEAD CLIC.

Question 20

What must be true for all ledger entries?

Answer 20

The debits and credits must always equal each other.

Question 21

What happens to a ledger account at the end of an accounting period?

Answer 21

It is balanced off for transfer to the Statement of Profit and Loss or carried forward to the next accounting period.

Question 22

What is the first step to balance off a ledger account?

Answer 22

Total the highest side of debits or credits and enter the figure at the bottom of the ledger account.

Question 23

What is the second step in balancing a ledger account?

Answer 23

Enter the same total on the opposite side of the ledger account.

Question 24

How is the balance to carry down (bal c/d) calculated?

Answer 24

Find the difference between the total on the lower side and the total of all the entries.

Question 25

Where is the balance to carry down (bal c/d) recorded?

Answer 25

It is entered so that both sides of the ledger now equal each other.

Question 26

What is the balance brought down (bal b/d)?

Answer 26

The bal c/d figure entered on the opposite side, representing the ledger’s balance at the start of the next accounting period.

Question 27

What book are purchases of materials and expenses on credit recorded in?

Answer 27

Purchase Day Book

Question 28

What can the totals in the Purchase Dat Book be used for?

Answer 28

To make entries in ledgers accounts

Question 29

What accounts would be needed for purchases made on credit?

Answer 29

Purchase Account (for materials/items for resale), Purchase Ledger Control Account or Payables Account
And the various Expense Ledgers

Question 30

What is recorded in the Cash Book?

Answer 30

Money received from customers
Payments made by suppliers

Question 31

What is written on the debit side of the cash book?

Answer 31

Money received

Question 32

What is written on the credit side of the cash book?

Answer 32

Payments made to suppliers

Question 33

What do the Receivables or Sales Ledger Control Account summarise?

Answer 33

The customer accounts

Question 34

Why do businesses use subsidiary/memorandum accounts?

Answer 34

To keep track of which customer owes what

Question 35

What is the Sales Ledger Control Account a total of?

Answer 35

The individual Sales Ledger Subsidiary Accounts

Question 36

What is the trade receivables figure?

Answer 36

The Sales Ledger Control Account’s closing balance

Question 37

What should the balance of the Sales Ledger Control Account always match?

Answer 37

The total of all the Subsidiary Sales Ledgers