Double entries & T-accounts Flashcards
format for double entries (DE)
Date, Account, DR, CR
In (DE) ‘Goods’ equal to
Inventory
In (DE) ‘Electricity’ is written as
Electricity expenses
In (DE) A ‘loan’ is
A liability
Accrued expense
An accrued expense is a cost that has been incurred but has not yet been recorded yet in the company’s accounting records.
Accrued expenses can arise in a variety of situations. For example, if a company provides a service to a customer but has not yet billed the customer for the service, the cost of that service will be recorded as an accrued expense.
In t- accounts they need to be BAL B/D AND C/D
Deferred expense
A deferred expense, also known as a prepaid expense, is a cost that has been paid in advance but has not yet been fully used up or consumed. It represents a prepayment for goods or services that will be received or used in the future.
For example, if a company pays $12,000 in advance for a year’s worth of insurance coverage, it will record the $12,000 payment as a deferred expense on its balance sheet.
Dr - Deferred expense
Cr - A/C payable
In t- accounts they need to be BAL B/D AND C/D
Trail balance
A listing, divided into debit and credit column, of the balances on all accounts in a double entry system as shown in the general ledger.
- If debits equal credits no error has occurred.
- As at …. the last day of that month
- all bal b/d amounts from their T accounts will be recorded either as debit or credit until they both add up.
T accounts format (TA)
Date, Account, Amount
when to use Bal b/d & Bal c/d (TA)
B/d - at the stronger side end after close off, the date will be the first day of new month, the amount will of c/d
C/d - Weaker side end with deducted value. last day of the starting month.
For income and expense from ALICE use retained profits (TA)
Retained profits will be on the weaker side and on the last day of the month
Statement of profit or loss for the month ended… format
Sales
Less: Cost of sales
= Gross profit
Add: Gains
Less: Operating expenses
= Operating profit
Less: Interest expenses
= Profit before taxation
Less: Income tax
= Profit after taxation
Deferred income
Deferred income, also known as unearned income, is revenue that has been received by a company but has not yet been earned. It represents a liability for the company, because the company has received payment for goods or services that it has not yet fully provided or completed.
Deferred income is typically recorded as a liability
Ex) if a company receives $10,000 in advance payment for a year’s worth of consulting services or supply of goods, it will record as :
Dr - Cash at bank
Cr - Deferred income
Statement of financial position as at … (format)
Non-current assets
Current assets
= Total assets
Current liabilities
Non-current liabilities
= Total liabilities
Equity
= Total Equity
Total liabilities and equity
Non current assets
Non-current assets are long-term assets that a company expects to hold for more than one year. They are typically used in the company’s operations and are not intended for resale. Examples of non-current assets include:
1) Property, plant, and equipment: These are physical assets that are used in the company’s operations, such as buildings, machinery, and vehicles.
2) Intangible assets: These are non-physical assets that have value, such as patents, trademarks, and copyrights.
3) Investments: These are assets that are held for the purpose of generating long-term returns, such as Motor vehicles, stocks, bonds, and real estate.
Goodwill: This is an intangible asset that represents the excess of the purchase price of a business over the fair value of its net assets.
Deferred tax assets: These are assets that represent future tax benefits that a company expects to receive.
Current assets
Current assets are assets that are expected to be converted into cash within one year or within the company’s operating cycle, whichever is longer. They are typically liquid assets that can be easily converted into cash and are used to fund the company’s day-to-day operations. Examples of current assets include:
1) Cash: This includes cash on hand, as well as cash in bank accounts and other highly liquid investments.
2) Accounts receivable: These are amounts that are owed to the company by its customers for goods or services that have been provided but not yet paid for.
3) Inventory: This includes raw materials, work-in-progress, and finished goods that are held for sale.
Short-term investments: These are investments that are expected to be converted into cash within one year, such as money market funds or short-term government bonds.
Prepaid expenses: These are expenses that have been paid in advance but have not yet been fully used up or consumed.
