Chapters 4 and 5 (Double entry accounting in the general journal and general ledger)

Question 1

Double entry accounting:

Define a system of double entry accounting

Answer 1

The double-entry system of accounting is a system where for each business transaction, there will be a minimum of two ledger entries. With at least one debit entry and one credit entry.

The rule here still states that the value of the debit entries must equal the credit entries after each financial transaction.

Question 2

Double entry accounting:

Define a ledger account

Answer 2

A ledger account is a financial account that records all the debit and credit entries resulting from a business’s transactions that impact a particular section of a business. Such as the inventory account.

Question 3

Double entry accounting:

Define the general ledger

Answer 3

The general ledger is just the collection of all the individual ledger accounts of a business to which double-entry accounting applies to.

Question 4

Double entry accounting:

Briefly outline the format of a ledger account

Answer 4

The debit entries are listed on the right, while the credit entries are listed on the left.

Three main parts:
Date of transaction:
Cross-reference (Stating the other account impacted by that transaction):
Total dollar value of debit or credit entry.

Question 5

Double entry accounting:

Briefly outline how revenues and expenses impact ledger accounts

Answer 5

A revenue will always increase the owner’s equity of a business during a period. Hence, any revenue will always result in a credit entry to a particular ledger account.

An expense will always decrease the owner’s equity in a business during a period. Hence, any expense will always result in a debit entry to a particular ledger account.

Question 6

Double entry accounting:

Define the general journal

Answer 6

The general journal is a book used to record all the debit and credit entries from a business’s transactions.

This book is the initial place these entries are issued, to which they’re subsequently transferred to the appropriate ledger accounts.

Question 7

Double entry accounting:

Outline the format of the general journal

Answer 7

Date:

Details: This includes the affected accounts, and a narration (a brief description of the transaction accompanied with relevant source documents).

Debit:

Credit: