FFMA Week 3 Flashcards
FFMA-011: What is the linkage between the elements of financial statements and double entry bookkeeping?
The linkage between the elements of financial statements (assets, liabilities, equity, income, and expenses) and double entry bookkeeping is that each element corresponds to either a debit or credit side in bookkeeping. Assets and expenses are on the debit side, while liabilities, equity, and income are on the credit side. Every transaction impacts these elements in a way that maintains the balance between debits and credits.
FFMA-012: How are different elements of financial statements increased or decreased in double entry bookkeeping?
In double entry bookkeeping, to increase assets and expenses (debit side), they are debited; to decrease them, they are credited. To increase liabilities, equity, and income (credit side), they are credited; to decrease them, they are debited. This ensures each transaction is recorded with equal and opposite entries.
FFMA-013: How would you record the sale of goods for cash in double entry bookkeeping?
In double entry bookkeeping, selling goods for cash involves increasing cash (an asset) and recognizing revenue (an income). Therefore, you would debit cash (to increase the asset) and credit revenue (to increase income).
FFMA-014: How would the payment of a phone bill with cash be recorded in double entry bookkeeping?
When paying a phone bill with cash, the expense (phone bill) increases and the cash (asset) decreases. In double entry bookkeeping, this is recorded by debiting the expense (to increase it) and crediting cash (to decrease the asset).
FFMA-015: What is the double entry bookkeeping process for issuing shares for cash?
When issuing shares for cash, the share capital (part of equity) increases and cash (asset) also increases. In double entry bookkeeping, this transaction is recorded by debiting cash (to increase the asset) and crediting share capital (to increase equity).
