Double Entry Checks Flashcards
Can there ever be a debit in the sales account?
No, because sales = income = cr balance
Can there ever be a credit in the purchase account?
No, because purchases = expenses = dr balance
Do sales returns and purchase returns have separate accounts?
Yes, they do not get put into the same accounts as sales and purchases
Can there ever be a credit in sales returns?
No, sales is a cr balance, therefore, sales returns must be a dr balance
Can there ever be a debit in purchase returns?
No, purchases is a dr balance, therefore, purchase returns must be a cr balance
What does bank account represent?
Cash at bank
What type of balance would you have if you have cash (asset)?
Debit balance
What type of balance would you have if you have an overdraft (liability)?
Credit balance
What happens if there is an increase in cash and an increase in debit balance?
We debit the bank
What happens if there is a decrease in cash and a decrease in debit balance?
We credit the bank
What do we debit the bank with?
Capital invested or cash from sales
We credit the bank when cash is paid out for what?
Cash purchases, non-current/fixed assets, wages, rent, electricity, light and heat
What is cash in a business bank account?
An asset to the balance - dr balance
If you have money in your personal bank account are you a debtor or creditor?
A creditor to the bank, they owe you so you are a liability and your bank account is a credit balance to them
If you owe the bank money (in your overdraft) are you a debtor or creditor?
A debtor to the bank, you have to pay them bank and your bank account is a debit balance to them
What happens at the end of an accounting period?
Income and expense accounts relating to that period are closed down by transferring all balance to a P&L holding account
What happens to assets, liabilities and income at the end of an accounting period?
They are brought forward to the next period
What accounts appear in the balance sheet?
Asset, liabilities and capital accounts
What accounts appear in the profit and loss?
Income, returns and expense accounts
What happens to the P&L holding account at the end of the accounting period?
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)
What are errors that may occur, even if the trial balance balances?
Error of omission, reverse entry, wrong account, wrong amount and compensating errors
What could you do if you encounter errors?
You can draw up individual accounts and make adjustments or make a note of changes as you go
