Double Entry Bookkeeping

Question 1

What is the concept of dual effect ?

Answer 1

Every transaction has a dual or double effect and therefore be recorded in two places

Question 2

What is the double entry for sales returns

Answer 2

Dr sales return ( reduces income )

Cr cash or receivables

Question 3

What is the double entry for purchase returns

Answer 3

Dr cash or payables

Cr purchase returns ( reduces expense)

Question 4

What is discounts allowed to customers?

Answer 4

A business will often give discounts to its customers:

• In some cases a discount is given to a regular customer, or a customer buying in bulk, at the point of sale, known as a trade discount. Here, the sale is simply recorded at the lower price agreed, and there is no accounting entry for a discount.
• In other cases, where sales are on credit, a discount is provided to a customer who pays within a certain time limit, such as 7 days, of the invoice. This is known as an early settlement discount, and it is recorded in the financial statements. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 5

What is discounts received?

Answer 5

suppliers may provide a discount to a business for prompt payment

Note: Discounts received is an income account in the statement of profit or loss (LSBF)

Discounts received are shown beneath the gross profit line in the statement of profit or loss.

The reason for this accounting treatment is that the incentive to pay on time is a matter of administration rather than an element of the sale and production process. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 6

What is a trial balance?

Answer 6

• A trial balance summarises the balancing figures for each ledger account, total debits recorded should equal total credits recorded. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 7

Returns are recorded as

Answer 7

• Separate ledger accounts are used to record sales and purchase returns (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 8

Difference between discounts in statements

Answer 8

• Trade discounts do not give rise to an accounting entry whereas early settlement discounts do. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 9

Trail balance is used

Answer 9

• Figures from the trial balance are entered into statement of financial position and statement of profit or loss proformas to produce the financial statements (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 10

How to calculate the closing capital value..?

Answer 10

Closing capital= opening capital + capital introduced + profits - drawings