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certificate level: accountancy > Journals > Flashcards

Journals Flashcards

1
Q

What is the journal needed to write off inventory?

A

DEBIT Other Expenses
CREDIT Purchases

Inventory needs to be removed from CoS (purchases) as it will not be matched against sales in the year. Thus, the written off inventory is reallocated to other expenses

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2
Q

What is the journal needed if an insurance claim will cover the cost of inventory that has been written off

A

DEBIT Cash
CREDIT Other Income

The write off has already been accounted for, so this journal just needs to consider the income from the insurance claim

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3
Q

What journal is necessary if insurers agree to pay for a write off of inventory stock, but the money have not paid yet?

A

DEBIT Other Receivables
CREDIT Other Income

The write off has already been accounted for, so this journal just needs to consider the future income from the insurance claim

Insurance pay-out is separate from the write off so only impacts income, not expenses

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4
Q

What is the necessary journal if an owner takes inventory for their own (non-business) use?

A

DEBIT Drawings
CREDIT Purchases

The inventory stock does not need to be adjusted in this journal as it will be accounted for by stock takes.

Purchases need to be reduced as by the amount taken by the owner as it will not be matched against sale in year

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5
Q

How do you account for an accrual?

A

DEBIT Expenses
CREDIT Accruals

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6
Q

How do you account for a prepayment

A

DEBIT Prepayments
CREDIT Expense

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7
Q

What is the journal needed to reverse a prepayment?

A

DEBIT Expense
CREDIT Prepayments

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8
Q

What is the journal needed to reverse an accrual?

A

DEBIT Accruals
CREDIT Expense

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9
Q

How do you account for accrued income

A

DEBIT Accrued Income
CREDIT Income

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10
Q

How do you account for deferred income?

A

DEBIT Income
CREDIT Deferred Income

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11
Q

How do you account for depreciation expense in the year?

A

DEBIT Depreciation Expense
CREDIT Accumulated Depreciation

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12
Q

How do you account for an impairment loss?

A

DEBIT Impairment Expense
CREDIT Asset

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13
Q

What is the three-step process to account for a profit or loss on disposal?

A
  1. Remove the cost of the asset:

DEBIT Disposal Account
CREDIT Asset

  1. Remove the accumulated depreciation

DEBIT Accumulated Depreciation
CREDIT Disposal Account

  1. Account for sale proceeds (Full Amount)

DEBIT Cash
CREDIT Disposal Account

The disposal account is temporary - these journals can be done in one step when we know the Profit or Loss on disposal

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14
Q

How do you account for a loss on disposal

A

CREDIT Asset (with cost of disposal)
DEBIT Accumulated Depreciation (with depreciation eliminated on disposal)
DEBIT Cash (with full amount of sale)
DEBIT Loss on disposal (with balancing figure/loss amount)

Profit or loss on disposal account is an income account (credit balance), thus, a loss on disposal would be a debit entry

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15
Q

How do you account for a profit on disposal

A

CREDIT Asset (with cost of disposal)
DEBIT Accumulated Depreciation (with depreciation eliminated on disposal)
DEBIT Cash (with total sale proceeds)
CREDIT Profit on disposal (with balancing figure/profit on disposal)

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16
Q

How do you account for development costs that are classed as capital expenditure?

A

DEBIT Asset
CREDIT Cash/Payables

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17
Q

How do you account for research and development costs that do not increase an assets useful life?

A

DEBIT Expense
CREDIT Cash/Payables

18
Q

How do you account for writing off an irrecoverable debt?

A

DEBIT Irrecoverable debt expense
CREDIT Trade Receivables

19
Q

How do you account for an unexpected payment for an irrecoverable debt that had previously been written off?

A

DEBIT Cash
CREDIT Irrecoverable debt expense

20
Q

How do you increase or insert a provision for irrecoverable debt?

A

DEBIT Irrecoverable debt expense (to account for costs as soon as you forsee them)
CREDIT Allowance for receivables

The provision for irrecoverable debt is a liability against the asset of trade receivables

21
Q

How do you decrease or remove a provision for irrecoverable debt?

A

DEBIT Allowance for receivables
CREDIT Irrecoverable debt expense

The provision for irrecoverable debt is a liability against the asset of trade receivables

22
Q

How do you account for a contra entry for a customer who is also a supplier?

A

DEBIT Trade Payables
CREDIT Trade Receivables

Both accounts reduce

23
Q

How do you account for shares that are issued at nominal value and fully paid for?

A

DEBIT Cash
CREDIT Share Capital

24
Q

How do you account for shares that are issued at a premium to their nominal value?

A

DEBIT Cash
CREDIT Share Capital (with nominal value)
CREDIT Share Premium (with difference between nominal value and sale price)

25
Q

How do you account for a bonus shares issue?

A

DEBIT Share Premium (or retained earnings if there is not enough SP)
CREDIT Share Capital

26
Q

How do you account for a dividend payment in the period?

A

DEBIT Retained Earnings (capital account)
CREDIT Cash

27
Q

What is the necessary journal when dividends are declared but not paid in year?

A

DEBIT Retained Earnings
CREDIT Dividends Payable

28
Q

What is the necessary journal when dividends on redeemable preference shares are paid in the year?

A

DEBIT Finance Costs
CREDIT Cash

29
Q

How do you account for dividends on redeemable preference shares that are declared but not paid in the year?

A

DEBIT Finance Costs
CREDIT Other Payables

30
Q

How do you account for an interest payment?

A

DEBIT Finance Costs
CREDIT Cash

31
Q

How do you account for interest that has been incurred on a loan within the period but not paid by the entity yet?

A

DEBIT Finance Costs
CREDIT Other Payables

32
Q

How do you account for an expense that is greater than its provision allowance?

E.g. if a settlement payment is larger than the provision made for it?

A

CREDIT Cash
DEBIT Provision
DEBIT Expense (with difference)

33
Q

How do you insert or increase a tax liability?

A

DEBIT Tax expense
CREDIT Tax payable

34
Q

How do you account for a tax payment in the year?

A

DEBIT Tax payable (reduces the liability)
CREDIT Cash

35
Q

How do you account for interest on a loan that a partner has made to their own business?

A

DEBIT Finance costs
CREDIT Partner’s current account (capital)

36
Q

What is the 2 step process to remove profit from the P&L and share it amongst partners?

A

DEBIT Profit or Loss account (capital)
CREDIT Profit Appropriation account

DEBIT Profit Appropriation account
CREDIT Partner’s current accounts (capital)

37
Q

What is the necessary journal to remove opening inventory?

A

DEBIT Cost of Sales
CREDIT Inventory

38
Q

What is the necessary journal to account for purchases at the year end?

A

DEBIT Cost of Sales
CREDIT Purchases

CoS = Opening Inventory + Purchases - Closing Inventory

39
Q

How do you account for closing inventory?

A

DEBIT Inventory
CREDIT Cost of Sales

CoS = Opening Inventory + Purchases - Closing Inventory

40
Q

How do you record interest earned on partners’ capital account balances?

A

DR P&L appropriation account
CR partners current account

Interest on partners capital is an appropriation of profit (debit profit appropriation, as it is a credit balance so DR will decrease is)

Current account is a credit balance so dr will increase for interest earned

41
Q

What journal is necessary to record interest payable on partner’s’ drawings?

A

DR Partners Current Account
CR P&L appropriation account

Will increase profit available for app and reduces balance on partners current account

42
Q

In a partnership, does interest on drawings affect the cash position, net profit available for appropriation, or neither?

A

Neither

Interest on drawings is an appropriation of profit so doesn’t affect net nor cash

certificate level: accountancy (11 decks)

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