Topic 3 - Recording Business Transactions: Journal Entries

Question 1

What are Transactions?

Answer 1

Transactions: events that affect the financial position financial performance or cash flow of an organisation(must effect the accounting equation)

Question 2

What is Transaction Analysis?

Answer 2

An examination of each business transaction with the aim of understanding its effect on the accounting equation.

Question 3

What is Double Entry accounting?(2)

Answer 3

• Ensuring the accounting Equation is always Balanced

- When Recording a transaction there is always a debit component and a credit component

Question 4

What is a debit transaction(2)

Answer 4

• Increase in Assets or Expenses

- Decrease in Liabilities, equity, and Revenue

Question 5

How do we record Transactions?

Answer 5

Journal Entries: shorthand version on transaction analysis, using the rules of debit and credit

Question 6

What is Deprecation?

Answer 6

• The spreading of the cost of a non-current asset over its useful life
• Represents the consumption of the assets economic value

Question 7

What Types of Depreciation are there? and what do they do

Answer 7

• Straight Line Depreciation: Depreciation expense remains the same every year
• Accelerated Depreciation: Depreciation expense decreases, by an amount every year based on how much the asset was used

Question 8

What is Depreciation expense?

Answer 8

Shows the period’s specific depreciation allocation

Question 9

What is Accumulated Depreciation?

Answer 9

The total depreciation allocated to the asset to date.