Topic 4 - The Recording Process

Question 1

What is an account?

Answer 1

An individual accounting record of increases and decreases in a specific asset, liability or equity item.

Question 2

How does an account help in the recording process?

Answer 2

y

Question 3

Why do expenses have a debit nature?

Answer 3

They decrease equity.

Question 4

Why do revenues have a credit balance?

Answer 4

They increase equity.

Question 5

What are the basic steps in the recording process?

Answer 5

Analyse each transaction, enter transaction in a journal and transfer journal information to ledger accounts

Question 6

What is a journal?

Answer 6

A chronological record of all transactions.

Question 7

How does a journal help in the recording process?

Answer 7

It discloses the complete effect of a transactions and helps prevent errors as debit and credit amounts are easily compared.

Question 8

What is posting?

Answer 8

The procedure of transferring journal entries to ledger accounts.

Question 9

How does posting help in the recording process?

Answer 9

y

Question 10

What is the purpose of a trial balance?

Answer 10

It proves the mathematical equality of debits and credits after posting.

Question 11

What do accountants record?

Answer 11

Those transactions which have a financial effect.

Question 12

What three things do you need to analyse when you analyse transactions?

Answer 12

Is there an economic effect?
Its effect on assets, liabilities and equity.
The amount to be recorded.

Question 13

Explain the double entry system.

Answer 13

• Each transaction affects at least two accounts

- Total debits must equal total credits

Question 14

What does the general ledger contain?

Answer 14

All asset, liability and equity, revenue and expense accounts.

Question 15

Which side is the Debit and Credit on?

Answer 15

Debit = Left side of the account
Credit = Right side of the account

Question 16

What are the steps of posting?

Answer 16

1. Enter date in account to be debited.
2. Enter name of ledger account to be credited.
3. Enter amount to be debited.
4. Enter the posting reference (tick account #) in general journal to show entry has been posted.

Question 17

What are the steps of balancing the ledger accounts?

Answer 17

1. Add up the debit side.
2. Add up the credit side.
3. Take the smaller from the bigger to find the difference.
4. Put the difference on the smaller side to get the debit and credit sides to balance (closing balance).
5. Transfer the difference to the larger side to start the new period (opening balance).

Question 18

What is a trial balance?

Answer 18

A list of all the accounts and their balances at a given time listed in order as they appear in the general ledger.