Ledger Accounting Flashcards
Describe the 2 primary limitations of the accounting equation
We are unable to determine which part of the profit is from sales and which part is from expenses.
In reality it would be too time consuming to white up the accounting equation every time the business undertakes a transaction.
In a typical ledger account which side is debit and which side is credit
LEFT = DEBIT RIGHT = CREDIT
What would go in the details / narrative column of a general ledger?
The title of the other account that holds the second part of the dual effect.
It my also have a brief description of the nature of the entry.
What would go in the folio column of the general ledger?
A reference to the source of the information (eg: sales day book page 9)
This column is nor always present.
What is the golden rule making entries in the ledger accounts?
EVERY DEBIT ENTRY MUST HAVE AN EQUAL AND OPPOSITE CREDIT ENTRY
What is the mnemonic for remembering debit and credit entries
DEAD CLIC
DEBIT: Expenses, Assets, Drawings
CREDIT: Liabilities, Income, Capital
Define trail balance
A list showing the balance brought down on every ledger account.
It is a check point to ensure that every debit has an equal and opposite credit entry and the totals of the trail balance columns should match
List the four steps for balancing a ledger account
- Total both the debit and credit sides.
- Insert the higher of the two totals as the total on both sides of the ledger.
- On the side with the smaller figure, insert the figure needed to make this column add up to the total. Call this figure the balance carried down (b/d)
- On the other side, below the total, insert the same figure and call it the balance brought down (b/d)
Describe the accounting entries for a credit sale with VAT (3 STEPS)
DEBIT receivables account with gross amount
CREDIT sales account with net amount
CREDIT vat control account with vat amount
Describe the accounting entries for a receivable makes a payment (3 STEPS)
DEBIT Bank account
CREDIT Receivable account
Describe the accounting entries for a prompt payment discount that has been accepted(3 STEPS)
DEBIT discounts allowed with the net amount
DEBIT vat account with the vat account
CREDIT receivable account with the gross amount
Describe the accounting entries for a credit purchase with VAT (3 STEPS)
DEBIT purchases account with net amount
DEBIT vat account with vat amount
CREDIT payables account with gross amount
Describe the accounting entries for when we make a payment (2 STEPS)
DEBIT payable account
CREDIT bank account
Describe the accounting entries for when we receive a prompt payment discount (3 STEPS)
DEBIT payables with the gross amount
CREDIT vat account with the vat amount
CREDIT discounts received with the net amount
