Double Entry And The Accounts Ledger Flashcards
What is the purpose of the books of prime entry?
To provide information for entries into ledger accounts.
What are ledger accounts made up of?
They are made up of journals for each different category of income and expense.
What additional ledgers are included besides income and expense journals?
A receivables ledger and a payables ledger.
Name 3 examples of ledgers accounts
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
How are transactions recorded in the ledger account?
Using the double entry bookkeeping system.
What is double entry bookkeeping made up of?
Debits and credits.
Where are debits recorded in the ledger or T account?
On the left-hand side.
Where are credits recorded in the ledger or T account?
On the right-hand side.
What ensures that debit entries balance with credit entries?
For every debit, there is a corresponding credit, so the total of debits equals the total of credits.
What tool can be used to visualize debits and credits in double entry bookkeeping?
A T account.
What does DEAD CLIC stand for?
Debits increase
Expenses
Assets
Drawings
Credit increase
Liabilities
Income
Capital
What happens to the relevant expenses ledger when a new expense is recorded?
It increases as a debit according to DEAD CLIC.
How is a sale recorded in the ledger?
A sale increases income, so it is recorded as a credit.
What does DEAD CLIC help with in bookkeeping?
It provides a guideline for understanding debits and credits in ledger accounts.
How is information from the sales daybook used in ledger accounts?
Totals for the week are taken and entered into the ledger accounts at the end of the week.
What type of sales are recorded in the sales daybook?
Sales made on credit.
Which two accounts are involved when recording credit sales?
Sales and sales ledger control (receivables).
Why are sales recorded as a credit in the ledger?
Sales are a form of income, and income corresponds to the ‘I’ in DEAD CLIC.
Why are receivables recorded as a debit in the ledger?
Receivables are money owed to the business, making them a form of asset, and assets correspond to the ‘A’ in DEAD CLIC.
What must be true for all ledger entries?
The debits and credits must always equal each other.
What happens to a ledger account at the end of an accounting period?
It is balanced off for transfer to the Statement of Profit and Loss or carried forward to the next accounting period.
What is the first step to balance off a ledger account?
Total the highest side of debits or credits and enter the figure at the bottom of the ledger account.
What is the second step in balancing a ledger account?
Enter the same total on the opposite side of the ledger account.
How is the balance to carry down (bal c/d) calculated?
Find the difference between the total on the lower side and the total of all the entries.
Where is the balance to carry down (bal c/d) recorded?
It is entered so that both sides of the ledger now equal each other.
What is the balance brought down (bal b/d)?
The bal c/d figure entered on the opposite side, representing the ledger’s balance at the start of the next accounting period.
What book are purchases of materials and expenses on credit recorded in?
Purchase Day Book
What can the totals in the Purchase Dat Book be used for?
To make entries in ledgers accounts
What accounts would be needed for purchases made on credit?
Purchase Account (for materials/items for resale), Purchase Ledger Control Account or Payables Account
And the various Expense Ledgers
What is recorded in the Cash Book?
Money received from customers
Payments made by suppliers
What is written on the debit side of the cash book?
Money received
What is written on the credit side of the cash book?
Payments made to suppliers
What do the Receivables or Sales Ledger Control Account summarise?
The customer accounts
Why do businesses use subsidiary/memorandum accounts?
To keep track of which customer owes what
What is the Sales Ledger Control Account a total of?
The individual Sales Ledger Subsidiary Accounts
What is the trade receivables figure?
The Sales Ledger Control Account’s closing balance
What should the balance of the Sales Ledger Control Account always match?
The total of all the Subsidiary Sales Ledgers
