double entry book keeping Flashcards
what is DEBK?
the system in which accountants use to record financial data
recognises that every transaction has a two fold effect
what is meant by a two fold effect?
each party is affected
what are three important terms for DEBK?
- liabilities
- capital
- assets
what are assets?
possessions/resources owned and controlled by the company, can be tangible and intangible (rights)
what is a liability?
amount of money that the entity owe to other parties
what are examples of liabilties?
loans, overdraft, creditors (trade payable)
what is capital?
amount owners invested into an entity, amount of money entity owes to the owner
what are the characteristics of assets?
measurable in monetary terms
probable future benefit
own it out right
exclusive rights to control
what is non current asset?
asset which brings economic benefit for more than one accounting period
what is a current asset?
asset in which benefit will be used up in one accounting period
what is a non current liability?
amounts due to a third party not liable for repayment within one accounting period
what is a current liability?
amounts due to a third party due for repayment within one accounting period
what is the basis for the DEBK?
the accounting equation
what is the accounting equation/
assets + expenses = liabilities + revenue +liabilities
if assets increase where do you put the amount in a t account?
in the debit side
if assets decrease where do you put the amount?
credit
if liabilities increase where do you put amount in t account?
credit
what is meant by balance brought down?
balance kept in account for next account period
what is meant by balance carried down?
difference between credit and debit
amount is moved aver the there lowest side
what do you do if there is a sale on credit?
open up a trade receivables
sales is credited and TR is debited
why do you open a TR account?
for sales on credit
what do you do if you purchase on credit?
open up a trade payables (creditor)
debit the purchase, credit TP, the credit bank when paid and debit TP
how do you do a sales return?
reverse the sale transaction
sales credit and bank debit to bank credit and sales debit
how do you do a discount?
debit trade payables with the discount
credit the discount account
credit your bank with the amount minus what is discounted
