Topic 3: Journals and Ledgers Flashcards
Debit means?
Left hand side of Ledger
Credit means?
Right hand side of Ledger
What is the nature of Assets and Expenses?
DEBIT
Increase accounts - Debit Entry
Decrease accounts - Credit Entry
*Left Hand Side (+), Right Hand Side (-)
What is the nature of Revenue, Liabilities and Owner’s Equity?
CREDIT
Increase accounts - Credit Entry
Decrease accounts - Debit Entry
*Left Hand Side (-), Right Hand Side (+)
What is the definition of Duality?
Every transaction has a 2 sided effect on the accounting equation to maintain the balance of the accounting equation.
*Each transaction will have a Debit entry and a corresponding Credit entry.
Why is the Stock account inactive?
No transactions are entered into the Stock account during the accounting period.
*Except Opening Balance.
What ledger is buying stock recorded under?
Purchases
What ledger is recorded when business returns stock?
Purchases Returns
What ledger is selling stock recorded under?
Sales
What ledger is recorded when the customer returns stock?
Sales Returns
What ledger is recorded when the owner withdraws stock from the business?
Purchases
Are Drawings a Debit or Credit Entry?
Drawings are always Debit entries.
D for Drawings - D for Debit.
What is a Trial Balance?
List of the balances of all the ledger accounts.
Therefore a checking device to see if total debit entries equal total credit entries.
What are common mistakes, should the Trial Balance not Balance?
- A transaction may have only been entered on one side (no duality)
- An adding error was made balancing the ledgers
Should the Trial Balance balance, why is there still no guarantee that it is correct?
- A complete entry may have been missed
2. An entry may have been entered twice
What are the requirements to successfully construct a general journal?
- Debit entries are always recorded first & credit entries are indented
- Total Debit entries must always equal the Total Credit Entries
- A narration must be written for each transaction (to explain reason)
- Do not group together transactions in the same day! (treat separately)
What are the advantages of using and recording information into journals?
- Groups together like transactions
- Records transactions in chronological order
What transactions are recorded in the Cash Receipts Journal?
Records all cash received by the business for whatever reason.
What transactions are recorded in the Cash Payments Journal?
Records all cash leaving the business for whatever reason.
What transactions are recorded in the Sales Journal?
Credit Sales to customers (Debtors)
What transactions are recorded in the Sales Returns Journal?
Credit sales brought back by customer (Debtors)
What transactions are recorded in the Purchases Journal?
Stock bought on credit (Creditors)
What transactions are recorded in the Purchases Returns Journal?
Stock returned to supplier (Creditor)
What Journals are used for Debtors Control Account?
- CRJ
- Sales
- Sales Returns
What Journals are used for Bank Account?
- Opening Balance
- CRJ
- CPJ
What Journals are used for Creditors Control?
- CPJ
- Purchases
- Purchases Returns
What Journals are used for Sales Account?
- Cash Sales
2. Credit Sales (SJ)
