Introduction to Ledger Accounting and the golden rules

Question 1

What are the two transactions entered into an account?

Answer 1

Debit (Dr) transactions (money going in) and Credit (Cr) transactions (money going out).

Question 2

What details must be included on an account?

Answer 2

The title of account, the dates of each individual debit transaction, the details of each individual debit transaction, the amount of each debit transaction in £, the dates of each individual credit transaction, the details of each individual credit transaction, the amount of each individual credit transaction.

Question 3

Which side do debit transactions and credit transactions go in?

Answer 3

Debit transactions are always inputted on the left hand side, whereas credit transactions are always inputted on the right hand side.

Question 4

What does a debit entry represent?

Answer 4

An increase (in the value of) to an asset, a decrease to a liability, an increase to an item of expense, a decrease to an item of income.

Question 5

What does a credit entry represent?

Answer 5

A decrease (in the value of) to an asset, an increase to a liability, a decrease to an item of expense, an increase to an item of income.

Question 6

What mnemonic must we remember to use for these entries?

Answer 6

DEAD CLIC.

Question 7

What does the ‘DEAD’ side of the mnemonic represent?

Answer 7

Debits increase: Expenses, Assets, Drawings

Question 8

What does the ‘CLIC’ side of the mnemonic represent?

Answer 8

Credits increase: Liabilities, Income, Capital.

Question 9

What happens in ledger accounting wherever the bank is concerned?

Answer 9

Money paid into the bank account is a debit to the bank ledger account, whereas money paid out of the bank account is a credit to the bank ledger account.