Double Entry Greenlight Flashcards
(10 cards)
The debit and credit balances on sales returns are what?
Debits are- sales returns, inventories, petty cash control, general expenses
Credits are - discounts received, sales and vat
What is the accounting equasion
Capital + liabilities = assets
Trial balance
Purchases, wages, cash = debit
Sales, discount received, capital = credit
Gregg and grove is a vat registered business and buys goods for resale from e hopper & co for £1,200 plus vat at 20% paying immediately by cheque.
What are the correct entries in gregg and groves ledgers to record the transaction.
As the payment is made immediately this is a cash transaction so the supplier account is not used. The total paid of £1,440 is credited to the bank account (to reduce the asset) the net costs of the goods £1200 is debited to purchases (to increase the expense) and the vat amount £240 is debited to the VAT account, as it can be reclaimed from HMRC thus reducing the liability
A business’ bank account is overdrawn by £3,550 so this is classified as
a
.
However, once a customer has paid £7,520 into the bank, and a credit supplier invoice for £1,766 has been entered into the accounting system, the value of the assets will be £
, the liabilities will be £
and the capital will be £
When the bank account was overdrawn it was a liability of £3,550. However, once a customer paid £7,520 into the bank the balance was increased and became an asset of £3,970 (-£3,550 + £7,520).
The credit supplier invoice for £1,766 is a liability. To work out the capital you need to apply the accounting equation (assets – liabilities = capital). The capital is therefore £2,204 (£3,970 - £1,766).
Nadia has a business with capital of £12,000. The business has liabilities totalling £4,000. The total assets of the business are
Total assets are £16,000 which is equal to the liabilities of £4,000 plus the capital of £12,000. This is based on the accounting equation: assets - liabilities = capital. However, the answer to this question can be found by rearranging the equation to: assets = capital + liabilities.
he cash book should be completed by entering £1,080 into the bank column, zero into the VAT column, and zero into the purchases column, and £1,080 into the payables column. The invoice is from a credit supplier, therefore the VAT and net amount will have been analysed when initially processed through the daybook, so isn’t analysed again in the cash book.
A debit balance b/d means the cash book is an asset. The opening balance relating to cash is £901, we add the cash sale of £123 and deduct the general expenses of £179. So, £845 is the balance c/d and will be on the credit side of the cash book.
The opening balance relating to bank is £4,263 again on the debit side. The receipt from the customer of £2,212 is added and the payments made to the supplier for £2,716 and the wages paid of £1,755 deducted. The calculation would be £4,263 + £2,212 - £2,716 - £1,755 = £2,004. This is the balance c/d which will be on the credit side of the cash book.
s this is the debit side of an integrated cash book, the entries in the cash and bank columns are half of the double entry process, and the amounts to be posted in the general ledger accounts only need to be the credit entries. The analysis columns needed to be total and posted as: VAT £254 (£200 + £54), cash sales £1,270 (£1,000 + £270) and receivables ledger control £3,462, which would be in the third analysis column in the cash book but isn’t shown in this extract.
Select only the statements which are true.
The following statements have been made about the cash book. Select the statements which are true.
Correct For transactions involving the cash book, the entry is made in the cash book before the other account(s) are posted
Correct When the cash book is part of the double entry system the balances in the cash book are used in the trial balance
Correct Where a VAT column is used in a cash book this is an example of an analysis column
Explanation of the correct answer:
They are all true.
