Debits' and 'credits' - liability & equity accounts - Accounting entries required (Client money)-FS

Question 1

In accounting, how are increases to liability accounts shown?

Answer 1

Increases to liability accounts are recorded as credits.

Question 2

Why is a bank loan shown as a credit in a liability account?

Answer 2

Because the loan is money the business owes, and liabilities increase with credits.

Question 3

When a bill is issued to a client, what are the correct accounting entries?

Answer 3

• Debit accounts receivable
• Credit profit costs (revenue/equity)

Question 4

When the owner invests money into the business, how is this recorded?

Answer 4

Debit the cash account, credit the owner’s capital account.

Question 5

What does the double-entry for a bank loan paid into the business look like?

Answer 5

Debit the cash account, credit the bank loan account.

Question 6

What do equity and liabilities have in common in double-entry bookkeeping?

Answer 6

Both increase through credits and decrease through debits.

Question 7

When a client pays a bill, what are the correct accounting entries?

Answer 7

• Debit cash account
  
  • Credit accounts receivable

Question 8

Why is revenue (e.g., profit costs) classified under equity in legal accounting?

Answer 8

Because it represents income owed to the business owner, increasing owner’s equity.

Question 9

What does the balance sheet reflect in solicitor bookkeeping?

Answer 9

It shows assets on the left and liabilities plus owner’s equity on the right, and both sides must balance.