Double entry bookkeeping Flashcards
What is double entry bookkeeping?
-A system of accounting where the two effects of each transaction are recorded.
What are the three main principles that underlie the practice of recording transactions in a double entry bookkeeping system?
-The separate entity concept: Business is a separate entity to the business.
-An accounting equation which always holds true: Assets - liabilities = capital.
-The dual effect of transactions: Every transaction that a business undertakes has two effects on the business.
What is a general ledger?
-A collection of ledger accounts, where the double entry takes place for all the transactions of the business.
What is a general ledger account (or T-account)?
-The accounts in which each transaction is recorded there will be a general ledger account for each type of transaction, such as sales and purchases, and for every type of asset and liability.
What is a credit entry?
-A posting to the right-hand side of a ledger account.
-CLIC (credits, liabilities, income, capital).
What is a receivables ledger control account?
-A general ledger account for credit customers, representing the total of all the accounts in the receivables ledger. Its is part of the double entry system.
What is a payables ledger control account?
-A general ledger account for credit suppliers, representing the total of all the accounts in the payables ledger. It is part of the double entry system.
What is balance c/d?
-In the ledger account the term used to describe the balancing figure that makes the column with the smaller figure total the larger figure.
What is balance b/d?
-The same figure as the balance carried down, but used on the opposite side of the account to the balance carried down; the balancing figure is described as the balance brought down.
What is the initial trial balance?
-A list of all the debit and credit balances brought down on the ledger accounts.
What are subsidiary ledgers?
-The receivables ledger and payables ledger, which are memorandum ledgers that are not part of the general ledger, contain a ledger account for each individual credit customer or credit supplier. Not part of the double entry system.
What is capital expenditure?
-On assets used in the long term, i.e. In more than one period (non-current assets).
What is capital income?
-From sales of assets used in the long term.
What is revenue expenditure?
-Payments for day-to-day running costs and purchases, including wages and interest paid to the bank.
What is revenue income?
-Receipts from sales and other short-term income such as interest from the bank, rent and commission.
