Lecture 4 (Concluding book-keeping) Flashcards
What are the 3 purposes of Trail balances?
Check all of the transactions for a particular period have been entered correctly into the ledger system
Confirm that the balance on each account
Assist in the preparation of financial statements
If the Trial balance is Invalid it is key to go back and check through accounts due to …
Is there a complete omission of a transition?
Have you posted something wrong to the account
Is there a credit record which was a debit?
Is there an imbalance of credit/debit?
What is produced after the trail balance?
a ‘trading’ income statement and balance sheet.
Cost of sales =
opening stock + purchases - closing stock
What is the cost of sales
Cost of sales is what the cost of the company was for the goods that had been sold
Because goods are often sold at a higher price, this leaves a surplus to cover the other expenses of the business
It will not often be the case that all goods purchased have been sold
Stock is valued at its cost price and not its resale
Explain the t-accounts produced if a business sells a handbag for 1000, but stipulate that if bought immediately we will give you a 20% discount
Debit cash - (initial payment - discount) (Increase Asset)
Credit trade debtors by the above amount (-Asset)
Debit discount (the discount amount) (+Expense)
Credit trade debtors (-Asset)
