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
