Double-entry bookkeeping: further transactions

Question 1

The buying and selling of goods are recorded in which accounts?

Answer 1

purchases account and sales account

Question 2

eg. A shoe shop buys shoes from the manufacturer and records this in which account?

Answer 2

purchases account

Question 3

eg As shoes are sold, the transactions are recorded in what account?

Answer 3

sales account

Question 4

The normal entry on a purchases account is on which side?

Answer 4

debit side - the account has gained value, business has bought goods for resale

Question 5

The normal entry on a sales account is on which side?

Answer 5

credit side - the account has given value, the business has sold goods

Question 6

When a business buys an item for the business (e.g. computer), is this debited to the purchases account or separate account?

Answer 6

separate, because a non-current asset has been purchased.

Question 7

What are credit purchases?

Answer 7

goods or services obtained from a supplier, with payment to take place at a later date.
From the buyer’s viewpoint, the supplier is a trade payable.

Question 8

What are the bookkeeping entries for credit purchases?

Answer 8

debit purchases account
credit trade payable’s (supplier’s account)

Question 9

What are the bookkeeping entries for payment made to trade payable?

Answer 9

debit trade payable’s account
credit bank account or cash account

Question 10

What are the bookkeeping entries for credit sale?

Answer 10

debit trade receivable’s (customer’s) account
credit sales account

Question 11

What are the bookkeeping entries for payment received from trade receivable?

Answer 11

debit bank account or cash account
credit trade receivable’s account

Question 12

What are the bookkeeping entries for purchase of a non-current asset on credit?

Answer 12

debit non-current asset account, eg computer account
credit trade payable’s (supplier’s account)

Question 13

What are the bookkeeping entries for payment made to a trade payable?

Answer 13

debit trade payable’s account
credit bank account or cash account

Question 14

What are the bookkeeping entries for purchases returns?

Answer 14

debit trade payable’s (supplier’s) account
credit purchases returns (or return outwards) account

Question 15

What are the bookkeeping entries for sales return?

Answer 15

debit sales returns (or return inwards) account
credit trade receivable’s (customer’s) account

Question 16

What is a carriage?

Answer 16

the cost of transporting goods

Question 17

What is carriage inwards?

Answer 17

where the buyer pays the carriage cost of purchases

Question 18

example of carriage inwards

Answer 18

where the seller pays the carriage charge

Question 19

What is carriage outwards?

Answer 19

where the seller pays the carriage charge

Question 20

Example of carriage outwards

Answer 20

an item is sold to the customer and described as ‘delivery free’

Question 21

What are the bookkeeping entries for carriage inwards?

Answer 21

debit carriage inwards account
credit bank account

Question 22

What are the bookkeeping entries for carriage outwards?

Answer 22

debit carriage outwards account
credit bank account

Question 23

What do debits include?

Answer 23

-purchases of goods for resale
-sales returns (or returns inwards) when goods previously sold are returned to the business
-purchase of non-current assets for use in the business
-expenses and overheads incurred by the business
-trade receivables where money is owed to the business
-money received into the business through cash account or bank account
-drawings made by the owner of the business
-loan repayment, where a loan liability is reduced/repaid

Question 24

What do credits include?

Answer 24

-sales of goods by the business
-purchases returns (or returns outwards) of goods previously bought by the business
-sale of non-current assets
-income received by the business
-trade payables where money is owed by the business
-money paid out by the business through cash account or bank account
-capital introduced into the business by the owner
-loan received by the business

Question 25

What are the 2 types of accounts?

Answer 25

impersonal accounts and personal accounts

Question 26

What are personal accounts?

Answer 26

accounts in the name of people or businesses eg the accounts for trade receivables and trade payables

Question 27

What are impersonal accounts?

Answer 27

accounts of ‘things’ eg cash, bank, computers, vehicles, inventory and accounts recording income and expenses eg sales, purchases, wages

Question 28

What is the purchases account used for?

Answer 28

record the purchase of goods in which the business trades

Question 29

What is the sales account used for?

Answer 29

record the sale of goods in which the business trades