Ledger accounts

Question 1

Left side of ledger account

Answer 1

debit

Question 2

Right side of ledger account

Answer 2

credit

Question 3

Step 1 of balancing ledger account

Answer 3

Add up both sides separateley

Question 4

Step 2 of balancing ledger account

Answer 4

Take the higher total from the debit and credit sides of the account.

When entering the totals, ensure they appear on the same line. Leave a space after the last entry, especially if the credit side has a lower total. The blank row helps balance the figures.

Finally, place the total figures at the bottom of the account. In accounting software, this step is done automatically.

Question 5

Step 3 of balancing ledger account

Answer 5

Insert a balancing figure into the account with the lower total, placing it above the total from Step 2. Label it ‘Balance c/d’ (balance carried down).

Question 6

Step 4 of balancing ledger account

Answer 6

The final step is to enter the same balancing figure on the opposite side of the account, below the total. This is the balance brought down, ready to start the next period. Label this amount “Balance b/d”.

Question 7

Debit balances

Answer 7

an asset
an expense
drawings

Question 8

Credit balances

Answer 8

a liability
income
capital

Question 9

Accounting equation

Answer 9

Assets - Liabilities = Capital

Question 10

Accounts for assets & expenses

Answer 10

debit means more
credit means less

Question 11

Accounts for liabilities and income

Answer 11

debit means less
credit means more

Question 12

Assets

Answer 12

Items owned by the business and money owed to the business

Question 13

Liabilities

Answer 13

Amounts owed by the business to other organisations or people

Question 14

Capital

Answer 14

The capital of the business is:

• the owner(s) investment in the business
• increased by profits generated
• decreased by any amounts taken out by the owner (drawings) and/or losses made.

The value of the business’s capital will change over time.

Capital is also known as equity.

Question 15

Asset examples

Answer 15

Buildings
Vehicles
Equipment
Inventory
Amounts owed to the business (Trade receivables)
Cash and money in the bank

Question 16

Liabilities examples

Answer 16

Bank loans
Other loans
Amounts owed to suppliers (Trade payables)

Question 17

Capital examples

Answer 17

The capital of the business is made up of:

investment in the business by owner(s)
increase in value generated by profit, less any amounts taken out by the owner (drawings).

The capital of the business will change over time.