Ledger Accounting and Double Entry

Question 1

What does a nominal ledger include?

Answer 1

Plant and machinery at cost
Owner’s capital
Inventories - finished goods
Trade receivables
Trade payables
Wages and salaries
Sales

Question 2

What is DEAD CLIC?

Answer 2

Debits increase Expenses, Assets, Drawings
Credits increase Liabilities, Incomes, Capital

Question 3

What is a trade discount?

Answer 3

A reduction in costs from bulk buying. Deducted from list price

Question 4

What is an early settlement discount?

Answer 4

A reduction in amount payable in return for immediate or early payment.

Question 5

Double entry for early settlement discount expected to be/ not be taken

Answer 5

Dr receivables, Cr Sales Income

Question 6

Double entry for early settlement discount expected to be taken and then taken

Answer 6

Dr cash, Cr Receivables

Question 7

Double entry for early settlement discount expected to be taken and then not taken

Answer 7

Dr cash (no discount applied), Cr receivables (discount amount), Cr sales income (difference)

Question 8

Double entry for early settlement discount not expected to be taken and then taken

Answer 8

Dr cash (discount applied), Dr sales income (difference), Cr receivables (full amount)

Question 9

Double entry for early settlement discount not expected to be taken and then not taken

Answer 9

Dr Cash, Cr receivables

Question 10

When should businesses include/ exclude VAT

Answer 10

Include VAT for trade receivables and payables
Exclude VAT for income and expenses

Question 11

What do debits and credits represent in VAT account?

Answer 11

Debits - amounts owed from HMRC (current asset)
Credits - amounts owed to HMRC (current liability)

Question 12

Gross VAT =

Answer 12

Net VAT * 1.2