Outcome 1b Flashcards
Assets
Increase - Dr
Decrease - Cr
Liabilities
Increase - Cr
Decrease - Dr
Owners Equity
Increase - Cr
Decrease - Dr
Revenue
Increase - Cr
Decrease Dr
Expense
Increase - Dr
Decrease - Cr
Trial Balance
List of general ledger accounts with their balances used to check that the total value of all debits equals the total of all credits
Purpose of Trial Balance
The trial balance ensures that all entries made into ledger accounts are correct
This is done by checking the balance of credits and debits
The total balance of debits should equal the total amount of credits
Errors Detected by Trial Balance
A trial balance assists in detecting calculation errors such as extracting an incorrect balance
It also detects transcription errors such as entering a debit balance in the credit column or vice versa
Markup: Cost Price -> Sale Price
Sale Price divided by 1 + markup (expressed as a decimal)
Markup: Sale Price -> Cost Price
Cost Price X 1 + markup (expressed as a decimal)
Purpose of the General Ledger
The general ledger holds the relevant day to day transaction information required to prepare reports. This benefits the business as by posting the ledger they are able to produce reports in which can help improve operations
Purchase Return (Business returns to Supplier)
GST Clearing increases
Sales Return (Customer returns to business)
GST Clearing decreases
State two ways account payable might respond if the owner says
‘Don’t pay accounts payable, they can wait, they want our money;
Refuse to supply inventory to the business in the future
Refuse to offer credit terms on purchases
