Ledger Accounting Flashcards
We are able to calculate a profit figure, but unable to determine?
Which part of the profit is sales and which part is expenses
How can we determine which part is profit and which is expenses?
You have to account for sales and purchases, rather than simply the movement of inventory.
What is another limitation of the accounting equation?
It would be far to time consuming to write up the accounting equation each time that the business undertakes a transaction
What happens instead of the accounting equation?
The two effects of each trans are recorded in ledger accounts
How many sides does a ledger account have and what are they?
2, credit and debit
What titles are within each side of the ledger account?
Date, details, ref, amount
What is the golden rule for making entires in ledger account?.
Every debit entry must have an equal and opposite credit entry
What does the golden rule reflect?
The dual effect of each trans, and ensures that the accounting equation always balances (double entry book keeping)
What is an easy way to remember if an entry should be made as debit or credit?
DEAD CLIC
What does DEAD CLIC stand for ?
Debit increase Credit increases
Expense Liability
Assets Income
Drawings Capital
What does a debit entry represent ?
An increase in the value of an asset
A decrease in the value of a liability
Increase of an item of expenditure
A decrease to an item of income
What does a credit entry represent?
A decrease in the value of an asset
An increase in the value of a liability
An increase of an item of income
A decrease of an item of expense
