Ledger accounting

Question 1

Define cash transaction.

Answer 1

A transaction which is paid for immediately.

Question 2

Define credit transaction.

Answer 2

A transaction that is only paid after an agreed period of time.

Question 3

Examples of debits

Answer 3

Money IN

Increase in asset

Decrease in liability

Increase in expense

Question 4

Examples of credit.

Answer 4

Money OUT

Increase in liability

Decrease in asset

Increase in income

Question 5

A payment of £10,000 into the business bank account by the owner.

Which account is debited and which account is credited?

Answer 5

Debit the bank account (money in)

Credit the capital account (increase in liability - amount owed to owner)

Question 6

Purchase of goods for cash of £3,000

Which account is debited and which account is credited?

Answer 6

Debit the purchases account (increase in expenses)

Credit the bank account (money out)

Question 7

Sale of goods for cash £4,000

Which account is debited and which account is credited?

Answer 7

Debit bank account (money in)

Credit sales account (Increase in income)

Question 8

Payment of rent in cash £500

Which account is debited and which account is credited?

Answer 8

Debit the rent account (increase in expense)

Credit the bank account (money out)

Question 9

Purchase of goods for £6,000 on credit

Which account is debited and which account is credited?

Answer 9

Debit the purchases account (increase in expenses)

Credit the payables account (increase in liability)

Question 10

Sale of goods on credit for £8,000

Which account is debited and which account is credited?

Answer 10

Debit the receivables account (increase in asset)

Credit the sales account (increase in income)

Question 11

Part payment of money owed to credit supplier of £1,500

Which account is debited and which account is credited?

Answer 11

Debit the payables account (reduction in liability)

Credit the bank account (money out)

Question 12

Receipt part of money owed by a credit customer of £5,000

Which account is debited and which account is credited?

Answer 12

Debit the bank account (money in)

Credit the receivables account (reduction in asset)

Question 13

How do you close off the accounts?

Answer 13

First by making both debit and credit columns equal. This is done by totaling both sides and placing the highest number as the total for both debit and credit. Then working out the amount needed to balance both sides. This amount needs to be entered on either the debit or credit side and is known as balance carried down (balance c/d)

On the first day of the next accounting period we bring the balance down from the previous period (balance b/d)

Question 14

Balance c/d is always….

Answer 14

Above the total line and dated the last day of the accounting period.

Question 15

Balance b/d is always…

Answer 15

Below the total line, on the opposite side from the balance c/d, dated the first day of the next accounting period.