Double Entry Checks

Question 1

Can there ever be a debit in the sales account?

Answer 1

No, because sales = income = cr balance

Question 2

Can there ever be a credit in the purchase account?

Answer 2

No, because purchases = expenses = dr balance

Question 3

Do sales returns and purchase returns have separate accounts?

Answer 3

Yes, they do not get put into the same accounts as sales and purchases

Question 4

Can there ever be a credit in sales returns?

Answer 4

No, sales is a cr balance, therefore, sales returns must be a dr balance

Question 5

Can there ever be a debit in purchase returns?

Answer 5

No, purchases is a dr balance, therefore, purchase returns must be a cr balance

Question 6

What does bank account represent?

Answer 6

Cash at bank

Question 7

What type of balance would you have if you have cash (asset)?

Answer 7

Debit balance

Question 8

What type of balance would you have if you have an overdraft (liability)?

Answer 8

Credit balance

Question 9

What happens if there is an increase in cash and an increase in debit balance?

Answer 9

We debit the bank

Question 10

What happens if there is a decrease in cash and a decrease in debit balance?

Answer 10

We credit the bank

Question 11

What do we debit the bank with?

Answer 11

Capital invested or cash from sales

Question 12

We credit the bank when cash is paid out for what?

Answer 12

Cash purchases, non-current/fixed assets, wages, rent, electricity, light and heat

Question 13

What is cash in a business bank account?

Answer 13

An asset to the balance - dr balance

Question 14

If you have money in your personal bank account are you a debtor or creditor?

Answer 14

A creditor to the bank, they owe you so you are a liability and your bank account is a credit balance to them

Question 15

If you owe the bank money (in your overdraft) are you a debtor or creditor?

Answer 15

A debtor to the bank, you have to pay them bank and your bank account is a debit balance to them

Question 16

What happens at the end of an accounting period?

Answer 16

Income and expense accounts relating to that period are closed down by transferring all balance to a P&L holding account

Question 17

What happens to assets, liabilities and income at the end of an accounting period?

Answer 17

They are brought forward to the next period

Question 18

What accounts appear in the balance sheet?

Answer 18

Asset, liabilities and capital accounts

Question 19

What accounts appear in the profit and loss?

Answer 19

Income, returns and expense accounts

Question 20

What happens to the P&L holding account at the end of the accounting period?

Answer 20

It is closed down by transferring the balance to P&L retained reserves (balance sheet account which belongs to the owner but separated from capital account)

Question 21

What are errors that may occur, even if the trial balance balances?

Answer 21

Error of omission, reverse entry, wrong account, wrong amount and compensating errors

Question 22

What could you do if you encounter errors?

Answer 22

You can draw up individual accounts and make adjustments or make a note of changes as you go