principles of account

Question 1

One reason why a trial balance must always be in balance

Answer 1

the answer for this is that, in a trial balance the value of the debit entries must be equal to the value of credit entries.

Question 2

two errors that are not revealed by the trial balance

Answer 2

error of omission, error of commision, error of principle.

Question 3

what is error of commission ?

Answer 3

This is when you debit the wrong persons account

Question 4

what is error of principle ?

Answer 4

this is when the account is placed incorrectly in the system.

Question 5

what is the complete reversal of entries?

Answer 5

this is where the account which was supposed to be debited was credited and vice versa.

Question 6

things that we expect to last longer than 1 year

what are non current assets

examples

Answer 6

Non-current assets are for long-term use by the business and are expected to help generate income.

machinery and equipment

Question 7

what are current liabilites

example

Answer 7

the short term obligations that are expected to be paid within a year

accounts payable

Question 8

what is working capital

calculation

Answer 8

It’s the money you have available for your day-to-day operations.

calculated as the current assets minus the current liabilities.

Question 9

what is accounts receivable

asset or liability

Answer 9

money owed to a company by its debtors.

asset

Question 10

what is accounts payable

asset or liability

Answer 10

money owed by a company to its creditors.

liability

Question 11

what is liquidity

Answer 11

the ease of conversion of an asset to cash

Question 12

what term describes the reduction in the value of equipment

Answer 12

depreciation

Question 13

what are creditors and debtors

Answer 13

creditors are like the givers
debtors are the receivers

Question 14

what are current assets

examples

Answer 14

hese are things you own that can be quickly turned into cash within a year,

cash, accrued revenues, prepaid expenses

Question 15

non current liabilities

Answer 15

obligations that are not expected to be paid within one year.

Question 16

account: Anil A Credit Customer ? Which ledger

Answer 16

Sales ledger

Question 17

how many ledgers are there ?

Answer 17

3 ledgers
purchases
sales
general

Question 18

what is your sales ledger for

Answer 18

any business to whom you have sold goods on credit

Question 19

what is your purchases ledger for ?

Answer 19

any entity from whom you have purchased on credit or anybody who you owe money to

Question 20

what is your general ledger for ?

Answer 20

holds all other assets, liabilities, expenses

Question 21

which ledger is purchases return found

Answer 21

Thegeneral ledger

Question 22

which ledger is the cash account found

Answer 22

the general ledger

Question 23

Return inwards

Answer 23

Sold goods and some were returned

Question 24

return outwards

Answer 24

bought goods and sent some back

Question 25

carriage inwards

Answer 25

delivery charges on goods

Question 26

carriage outwards

Answer 26

Carriage outwards is basically the money a business spends to ship stuff out to its customers.

Question 27

what are expenses ?

Answer 27

Expenses are costs incurred by a business to generate revenue.

Question 28

why do expenses have debit balances ?

Answer 28

So, when you spend money on expenses, like buying supplies for your business, you record that as a debit in your expense account.

Question 29

what is equity

Answer 29

. It represents the residual interest in the assets of a business after deducting its liabilities. In simpler terms, equity is what’s left over for the owners of the business after all debts and obligations have been paid off.