Double Entry Bookkeeping & Preparation of Financial Statements

Question 1

what does DEAD CLIC stand for?

Answer 1

Debit
Expenses
Asset
Drawings

Credit
Liability
Income
Capital

Question 2

what are the steps to balancing off a ledger account?

Answer 2

1. add up debit and credit side of ledger account to see which is higher
2. take the higher total and include it as the total for both sides of the account
3. on the side with the smaller total insert the figure needed to make it add up and call this figure ‘balance c/f’
4. on the opposite side of the ledger below the total figure, insert the amount of balance c/f figure and call it the ‘balance b/f’

Question 3

record all purchases of inventory as..

Answer 3

DR purchases
CR Cash/Trade Payables

Question 4

record all sales of inventory as..

Answer 4

DR cash/trade receivables
CR sales/income

Question 5

trial balance is a…

Answer 5

list of all the closing balances

Question 6

P+L ledger account contain..

Answer 6

the closing c/f balance

Question 7

asset + liability accounts

Answer 7

closing c/f balance becomes opening b/f balance for next period

Question 8

capital ledger accounts

Answer 8

• closing c/f balance on drawings ledger is transferred to capital ledger
• closing c/f balance on P+L ledger is transferred to capital account

Question 9

Anchor ltd is preparing its financial statements. After transferring the balances on all the income and expense ledger accounts to the profit and loss ledger account, the total credits in the profit and loss ledger account exceed the total debits by £4000

Answer 9

• Ancho Ltf has made a profit for the year of £4000 (increase in profit, means an increase in capital which is a credit)
• To begin to calculate the closing capital account balance, Anchor Ltd should credit the capital account and debit the profit and loss ledger account with £4000

Question 10

what are inputs?

Answer 10

source documents, standing data

Question 11

what are processes?

Answer 11

ledgers, journals , calculations , record keeping

Question 12

what are outputs

Answer 12

reports, trial balance, financial statements

Question 13

what are source documents and name some examples

Answer 13

• Sources from which financial information for a business is found
• Invoices (sales/purchases), credit notes, the bank transaction report

Question 14

what is the double entry for a net loss

Answer 14

CR P&L ledger account
DR Capital account

Question 15

what should be supplied by the supplier if they have overcharged their customer

Answer 15

credit note