Basic Bookkeeping

Question 1

What is DEADCLIC?

Answer 1

DEBIT
- Drawings
- Expenses
- Assets

CREDIT
- Liability
- Income
- Capital

Question 2

What is the Accounting Equation?

Answer 2

Assets - Liabilities = Capital

Question 3

Name Non-Current and Current Assets

Answer 3

Assets are something a business has use of/could sell

Non-Current Assets = Land, buildings, plant & machinery (the intention that these assets will be kept for at least a year)

Current Assets = Money in the bank, receivables, inventory (these will fluctuate through the year)

Question 4

Name Current and Non-Current Liabilities

Answer 4

Liabilities are something a business owes

Non-Current - Bank Loan, mortgage (anything payable over 1 year)

Current - Bank overdraft, trade, sundry payables (will be paid over first year)

Question 5

What is Capital?

Answer 5

The amount that is owed by the business to the owner as a separate entity.

Question 6

What is Capital made up of?

Answer 6

• Initial Capital introduced plus
• The business income less
• The business expenses less
• The owners drawings

Question 7

What is the Dual Effect

Answer 7

Always be two accounts that need entries, one will be DEBITED one will be CREDITED.

Question 8

Explain debits in T accounts

Answer 8

• Always on the left hand side
• Any increase in Asset or Expense will be shown on the debit side of the T account

Question 9

Explain Credits in T accounts

Answer 9

• Always on the left hand side
• Any increase in Capital, Liabilities, or Income will be shown on the credit side of the T account

Question 10

Explain where Money in and Money out lies in T accounts

Answer 10

Money In recorded on Debit side, INCREASING the asset of the bank

Money Out recorded on Credit side, REDUCING asset of the bank

Question 11

Explain the Dual effect of Sales and Purchases

Answer 11

• When you make a sale to a customer the Credit entry will always be posted to the Sales T account (you will never record anything to the Debit side of the sales account)
• When you purchase goods the Debit entry will always be posted to the Purchases T account (you will never record anything to the Credit side)

Question 12

Hillary buys some stock for a new business what is the effect?

Answer 12

Increase Purchases

Question 13

A business sells goods to a customer on credit. When the customer pays their bill, this will:

Answer 13

Increase Cash in the bank
Decrease receivables

Question 14

Give examples of the items that will be recorded on the DEBIT side of the trial balance?

Answer 14

• Inventory
• Motor Vehicles
• Purchases
• Petty Cash
• Stationery

Question 15

Give Examples of the items that will be recorded on the CREDIT side of a Trial Balance?

Answer 15

• Payables
• Capital
• Sales
• Bank Loan

Question 16

Which items appear in the top half of the Statement of Financial Position?

Answer 16

• Payables
• Cash (Bank)
• Receivables
• Motor Vehicles
• Bank Loan

Question 17

What is the Cost of Sales?

Answer 17

Opening Inventory + Purchases - Closing Inventory