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VCE Accounting Units 3&4 > Unit 3 Acc Chapter 07 Review Questions > Flashcards

Unit 3 Acc Chapter 07 Review Questions Flashcards

1
Q

RQ 7.1 // The Need for the General Journal

Q1. Explain the role of special journals in the accounting process.

A

Special journals summarise similar transactions so that totals can be posted to the General Ledger, in the process reducing the number of ledger entries required and improving the efficiency of the recording system.

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2
Q

RQ 7.1 // The Need for the General Journal

Q2. Explain the role of the General Journal.

A

The General Journal is used to record infrequent, non-cash transactions, which cannot be recorded in the special journals.

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3
Q

RQ 7.1 // The Need for the General Journal

Q3. List seven types of transactions that will be recorded in the General Journal.

A 
●	commencing entries
●	non-cash transactions with the owner
●	bad debts
●	correcting entries
●	use of stock for advertising purposes
●	closing entries
●	balance day adjustments
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4
Q

RQ 7.2 // Format of the General Journal

Q1. Explain why there are no classification columns in the General Journal.

A

There are no classification columns because the General Journal is used to record a variety of transactions, unlike the special journals, which record similar and frequent transactions.

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5
Q

RQ 7.2 // Format of the General Journal

Q2. Explain how the rules of double-entry accounting apply to the General Journal.

A

In common with all transactions, the debits must equal the credits.
Therefore, the entries in the General Journal must have corresponding debit and credit entries so that posting to the General Ledger will ensure it balances.

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6
Q

RQ 7.2 // Format of the General Journal

Q3. In relation to the General Journal, define the term ‘narration’.

A

A brief description of a transaction recorded in the General Journal, including a reference to the relevant source document.

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7
Q

RQ 7.2 // Format of the General Journal

Q4. Explain why narrations are necessary in the General Journal, but not in the special journals.

A

Transactions recorded in the special journals are all of a similar nature, thus a narration is not required.
However, as the General Journal records a variety of transactions, it is necessary to provide a narration for each entry.

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8
Q

RQ 7.3 // Commencing Entries

Q1. Define the term ‘commencing entry’.

A

A General Journal entry to establish double-entry records by entering existing asset, liability and owner’s equity balances in the ledger accounts.

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9
Q

RQ 7.3 // Commencing Entries

Q2. State two reasons why a commencing entry may be necessary.

A

● when the business is just starting and the owner is contributing starting capital

● when the business has been operating for some time already, and the owner decides to switch from single-entry accounting to double-entry accounting

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10
Q

RQ 7.3 // Commencing Entries

Q3. In reference to a commencing entry, explain how the entry to the Capital account is determined.

A

The Capital amount is determined by using the accounting equation (Assets = Liabilities + Owner’s Equity) so that all debit entries match the credit entries.

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11
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q1. Explain why drawings of stock must be recorded in the General Journal.

A

Drawings of stock is a non-cash transaction.

Thus, it cannot be recorded in the Cash Payments Journal but rather must be recorded in the General Journal.

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12
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q2. Show the General Journal entries necessary to record drawings of stock.

A

SIDES:

DRAWINGS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

STOCK CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner withdrew stock for personal use (Memo x)

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13
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q2. Show the General Journal entries necessary to record drawings of stock.

A

SIDES:

DRAWINGS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

STOCK CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner withdrew stock for personal use (Memo x)

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14
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q3. Show the effect of drawings on the accounting equation.

A

ASSETS:
Decrease (Stock Control)

LIABILITIES:
No effect

OWNER’S EQUITY:
Decrease (Drawings decreases Capital)

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15
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q2. Show the General Journal entries necessary to record drawings of stock.

A

Sides:

DRAWINGS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

STOCK CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner withdrew stock for personal use (Memo x)

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16
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q3. Show the effect of drawings on the accounting equation.

A

Assets:
Decrease (Stock Control)

Liabilities:
No effect

Owner’s Equity:
Decrease (Drawings decreases Capital)

17
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q4. Show the General Journal entries necessary to record a capital contribution of a vehicle.

A

Sides:

VEHICLE:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

CAPITAL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner contributed vehicle to business (Memo x)

18
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q2. Show the General Journal entries necessary to record drawings of stock.

A

Sides:

DRAWINGS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

STOCK CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner withdrew stock for personal use (Memo x)

19
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q3. Show the effect of drawings on the accounting equation.

A

Assets:
Decrease (Stock Control)

Liabilities:
No effect

Owner’s Equity:
Decrease (Drawings decreases Capital)

20
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q4. Show the General Journal entries necessary to record a capital contribution of a vehicle.

A

Sides:

VEHICLE:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

CAPITAL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner contributed vehicle to business (Memo x)

21
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q4. Show the General Journal entries necessary to record a capital contribution of a vehicle.

A

Sides:

VEHICLE:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

CAPITAL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

Narration :
Owner contributed vehicle to business (Memo x)

22
Q

RQ 7.4 // Non Cash Transactions with the Owner

Q5. Show the effect of a capital contribution on the accounting equation.

A

Assets:
Increase

Liabilities:
No effect

Owner’s Equity:
Increase

23
Q

RQ 7.5 // Bad Debts

Q1. Define the term ‘bad debt’.

A

A bad debt is an expense incurred when a debt is written off because it is deemed to be irrecoverable.

24
Q

RQ 7.5 // Bad Debts

Q2. Referring to one accounting principle, explain when a bad debt should be recognised.

A

According to the conservatism principle, a bad debt should be recognised as an expense when the loss is probable, so that assets (Debtors Control) are not overstated.

25
Q

RQ 7.5 // Bad Debts

Q3. Show the General Journal entries necessary to record a bad debt.

A

Sides:

BAD DEBTS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

DEBTORS CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

DEBTOR (name):

  • General Ledger // nothing
  • Debtor’s Schedule?? // Credit

Narration:
Debt written off as irrecoverable (Memo x)

26
Q

RQ 7.5 // Bad Debts

Q3. Show the General Journal entries necessary to record a bad debt.

A

Sides:

BAD DEBTS:

  • General Ledger // Debit
  • Subsidiary Ledger // nothing

DEBTORS CONTROL:

  • General Ledger // nothing
  • Subsidiary Ledger // Credit

DEBTOR (name):

  • General Ledger // nothing
  • Debtor’s Schedule?? // Credit

Narration:
Debt written off as irrecoverable (Memo x)

27
Q

RQ 7.5 // Bad Debts

Q4. Show the effect of a bad debt on the accounting equation.

A

Assets:
Decrease (Debtors Control)

Liabilities:
No effect

Owner’s Equity:
Decrease (Bad debts expense decreases Net Profit)

28
Q

RQ 7.6 // Correcting Entries
Q1. Explain why in some situations errors may be corrected in the appropriate special journal, but in others a General Journal entry is required.

A

When errors are detected before the journals are posted to the ledger, they can be corrected in the special journals.

However, if the journals have already been posted to the ledger, errors must be corrected using a General Journal entry.

29
Q

RQ 7.6 // Correcting Entries

Q2. List three types of errors that may need to be corrected via the General Journal.

A

● recording a transaction in the wrong ledger account
● omitting a transaction
● recording an incorrect amount

30
Q

RQ 7.6 // Correcting Entries

Q2. List three types of errors that may need to be corrected via the General Journal.

A

● recording a transaction in the wrong ledger account
● omitting a transaction
● recording an incorrect amount

31
Q

RQ 7.6 // Correcting Entries

Q3. List the two basic steps for correcting an error involving the use of the wrong ledger account.

A

1) Undo the incorrect entry by reversing it; that is, record a debit entry to undo an incorrect credit, and vice versa.
2) Enter the correct entry.

32
Q

RQ 7.6 // Correcting Entries

Q3. List the two basic steps for correcting an error involving the use of the wrong ledger account.

A

1) Undo the incorrect entry by reversing it; that is, record a debit entry to undo an incorrect credit, and vice versa.
2) Enter the correct entry.

VCE Accounting Units 3&4 (41 decks)

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