Unit 3 Acc Chapter 03 Review Questions (General Ledger) Flashcards
RQ 3.1 // Ledger Accounts
Q1. Explain the role of a ledger account.
A ledger account is an accounting record where transactions are written down, with a separate ledger account for each item in the firm’s records.
RQ 3.1 // Ledger Accounts Q2 In reference to ledger accounts, define the following terms: ● General Ledger ● debit side ● credit side
● General Ledger – the collective name for the main group of ledger accounts
● debit side – the ‘left’ side of the ledger account
● credit side – the ‘right’ side of the ledger account.
RQ 3.2 // Double Entry Recording in Ledger Accounts
Q1. State the two rules of recording in ledger accounts.
1) Every transaction must be recorded in at least two ledger accounts.
2) Every transaction must be recorded on the debit side of one ledger account and the credit side of another.
RQ 3.2 // Double Entry Recording in Ledger Accounts
Q2. Identify on which side of a ledger account a transaction would be recorded in order to:
● increase an asset account
● decrease an asset account
● increase a liability or owner’s equity account
● decrease a liability or owner’s equity account
● increase an asset account – debit side
● decrease an asset account – credit side
● increase a liability or owner’s equity account – credit side
● decrease a liability or owner’s equity account – debit side.
RQ 3.3 // Recording in Ledger Entries
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RQ 3.3 // Recording in Ledger Entries
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RQ 3.3 // Recording in Ledger Entries
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RQ 3.4 // Recording Rules for Revenues & Expenses
Q1. Referring to their relationship to owner’s equity, explain why:
● revenue accounts increase on the credit side
● expense accounts increase on the debit side
● revenue accounts increase on the credit side – revenue represents an increase in owner’s equity, so a revenue is recorded on the credit side
● expense accounts increase on the debit side – expenses represent a decrease in owner’s equity, so an expense is recorded on the debit side.
RQ 3.4 // Recording Rules for Revenues & Expenses
Q2. Draw a table to summarise the rules for recording in ledger accounts.
ASSETS:
Increase: Debits
Decrease: Credits
LIABILITIES:
Increase: Credits
Decrease: Debits
OWNER’S EQUITY:
Increase: Credits
Decrease: Debits
REVENUE:
Increase: Credits
Decrease: Debits
EXPENSES:
Increase: Debits
Decrease: Credits
RQ 3.4 // Recording Rules for Revenues & Expenses
Q2. Draw a table to summarise the rules for recording in ledger accounts.
ASSETS:
Increase: Debits
Decrease: Credits
LIABILITIES:
Increase: Credits
Decrease: Debits
OWNER’S EQUITY:
Increase: Credits
Decrease: Debits
REVENUE:
Increase: Credits
Decrease: Debits
EXPENSES:
Increase: Debits
Decrease: Credits
RQ 3.4 // Recording Rules for Revenues & Expenses
Q3. Explain the role of an Analysing Chart.
An Analysing Chart is a tool used to identify the steps for recording transactions in the General Ledger.
RQ 3.5 // Some Challenging Entries
Q1. Part A:
Show the debit and credit entries necessary to record:
● a cash sale of stock
BANK:
Debit
SALES:
Credit
COST OF SALES:
Debit
STOCK CONTROL:
Credit
RQ 3.5 // Some Challenging Entries
Q1. Part B:
Show the debit and credit entries necessary to record:
● a credit sale of stock
DEBTOR’S CONTROL:
SALES:
COST OF SALES:
STOCK CONTROL:
RQ 3.5 // Some Challenging Entries
Q1. Part C:
Show the debit and credit entries necessary to record:
● a receipt from a debtor
BANK:
DEBTOR’S CONTROL:
RQ 3.5 // Some Challenging Entries
Q1. Part D:
Show the debit and credit entries necessary to record:
● cash drawings.
DRAWINGS:
BANK:
RQ 3.5 // Some Challenging Entries
Q1. Part D:
Show the debit and credit entries necessary to record:
● cash drawings.
DRAWINGS:
BANK:
RQ 3.5 // Some Challenging Entries
Q2. Explain why a receipt from a debtor does not increase profit.
A receipt from a debtor does not increase assets overall and so it does not fit the definition of a revenue.
In addition, recording a receipt from a debtor as revenue would be double-counting the revenue; the revenue was already recorded when it was earned at the point of sale (when the goods were provided to the customer).
RQ 3.6 // The Trial Balance
Q1. State the purpose of a Trial Balance.
A Trial Balance is used to determine if total debits equal total credits.
RQ 3.6 // The Trial Balance
Q2 Referring to ledger accounts, state what is meant by the term ‘footing’.
Footing is an informal process used to determine the balance of a ledger account.
RQ 3.6 // The Trial Balance
Q3. List the steps involved in footing a ledger account.
1) Add up all the amounts on the debit side, and pencil this total below the last debit amount.
2) Add up all the amounts on the credit side, and pencil this total below the last credit amount.
3) Deduct the smaller total from the larger total.
4) Pencil this figure – the balance – on the side of the larger total, and draw a circle around it.
RQ 3.6 // The Trial Balance
Q3. List the steps involved in footing a ledger account.
1) Add up all the amounts on the debit side, and pencil this total below the last debit amount.
2) Add up all the amounts on the credit side, and pencil this total below the last credit amount.
3) Deduct the smaller total from the larger total.
4) Pencil this figure – the balance – on the side of the larger total, and draw a circle around it.
RQ 3.6 // The Trial Balance
Q4. State three errors that will be detected by the preparation of a Trial Balance.
● Two entries have been recorded on the same side of the ledger.
● Only one entry has been recorded (for example, one debit entry without a corresponding credit entry, or vice versa).
● Different amounts have been recorded on each side.
RQ 3.6 // The Trial Balance
Q5. State four errors that will not be detected by the preparation of a Trial Balance.
● A transaction has been omitted altogether.
● The debit and credit entries have been reversed.
● The transaction has been recorded in the wrong ledger account (but on the correct side).
RQ 3.6 // The Trial Balance
Q5. State four errors that will not be detected by the preparation of a Trial Balance.
● A transaction has been omitted (excluded) altogether.
● The debit and credit entries have been reversed.
(e.g: recording payment to a creditor by debiting Creditor’s Control and crediting Bank.
The entry would then be incorrectly recorded as debit to Bank and credit to Creditor’s Control)
● The transaction has been recorded in the wrong ledger accounts (but on the correct side).
(e.g: instead of recording payment in wages as debit to Wages account, transaction is incorrectly debited to Rent)
● An incorrect amount is recorded on both sides of the ledger.
RQ 3.7 // Balancing
Q1. List three differences between footing and balancing a ledger account.
● Balancing is done only at the end of the Reporting Period.
● Only asset, liability and owner’s equity accounts are balanced.
● Balancing is a more formal process, involving a proper double entry.
RQ 3.7 // Balancing
Q2. List the steps involved in balancing a ledger account.
1) Total the amounts on each side, and write the larger of these totals on both sides. This figure is ‘ruled off’ with a double line.
2) Calculate the balance by deducting the total of the smaller side from the total of the account.
3) Enter this balance (using the last day of the Reporting Period) as a proper ledger entry with a matching debit and credit above the total on the smaller side and below the total on the larger side.
The date below the double lines should be entered as the first day of the next Reporting Period.
RQ 3.7 // Balancing
Q3. Explain why the entries required to balance a ledger account are shown with different dates.
The entry above the total represents the balance carried forward from the end of one Reporting Period, and the entry below the total represents the balance brought forward to the beginning of the next Reporting Period.
