Lecture Three

Question 1

When do u balance each T account

Answer 1

at the end of each period

Question 2

Main steps for balancing the T accounts

Answer 2

1. Add up both sides of the T account
2. Determine which of both debit/credit has the highest total
3. Write the total on both sides under the transactions
4. From the one that has less then the total -> add the missing amount ONTOP of the total (ontop of how its displayed) Ensure that they are balanced
5. Of the one that u just added more ontop of the total (the one that was intially less - label it for the 31st of the month and then label it “Balance C/d”
   5.For the other side - the one that was already the biggest - need to put the additional amount (the one u added on to make the other side equal) UNDER the total and label it is “Balance b/d) and label it 1st of the next month

Question 3

What does balance cd mean

Answer 3

Balance carried downw

Question 4

What does balance bd mean

Answer 4

Balance brought down

Question 5

What date is the balance bd

Answer 5

Always the 1st of the next monthW

Question 6

When do we put the balance cd

Answer 6

At the 31st of the month

Question 7

What if theres a balance bd inside of the t account

Answer 7

Carry as normal and treat it as a normal transaction

Question 8

What to do if the T account both sides already are equal

Answer 8

Just write the total and leave it - no need for the balance cd/bd because ur not bringing anything down

Question 9

What are the income/expense accounts

Answer 9

They are profit/loss acounts - they dont need b/d c/d

Question 10

How to do a profit/loss account differently from the balance c/d account

Answer 10

Same method as the balance c/d account except
-Once u have determined the value needed for both sides to be equal - u dont put balance c/d - u put P&L: the closing balance

-u dont bring down anything. nor do u c/d. just work out the totals and replace c/d with p&L.

Question 11

When is it a ‘credit balance’

Answer 11

When the total of credit entries > total debit entries

Question 12

What is the Trial balance

Answer 12

A list of all the account balances and their total - and which side the total is on - which balance they are

Question 13

Is there a specific order for the trial balance

Answer 13

No just list all of the T accounts in any order

Question 14

What must the trial balance equate to

Answer 14

Debit balance = credit balance

-both sides MUST BE equal

Question 15

Is there a specific time in which the trial balance should be made

Answer 15

No

Question 16

What does the trial balance tell us

Answer 16

If there are any booking errors made:

• entering one side of transaction
  -using one figure debit entry for a credit
  -errors in adding when balancing off

Question 17

Does the trial balance tell us all the errors?

Answer 17

no,
* Wont highlight all errors – e.g. if there’s no transaction / same transaction twice (duplicate)

Question 18

Why is the trial balance good

Answer 18

instant overview of a the balances in the business
-good tool for accountants to check where mistake has been made
-gibes a summery of all balances can be used for a financial statement quick

Question 19

Is there any exception for the trial balance for determining if its credit/debit

Answer 19

One major exception

• Cash at bank because u can get overdrawn – can get negative
• e.g. spending more then u have – a negative asset

Question 20

What key mnemonic does the trial balance follow

Answer 20

Deadclic

Question 22

What is the SPL

Answer 22

Statement of Profit and Loss

Question 23

What is SPL also known as

Answer 23

Income statement

Question 24

What does the SPL sum up to?

Answer 24

Incomes earned - Expenses incurred = Profit/loss

Question 25

What does the SPL show

Answer 25

1- incomes earned in a period, even if money hasnt been received yet 2- the expenses incurred even if it hasnt been paid yet =accural basis of accounting

Question 26

What is the accural basis

Answer 26

the matching concept – match all the income earned and the expenses earned

Question 27

When is the SPL computed

Answer 27

At the end of the year - its the income for the whole year

Question 28

For what type of business is there no format for spl

Answer 28

sole trader

Question 29

How to work out gross profit

Answer 29

sales revenue – cost of sales

Question 30

How to work out Net profit

Answer 30

Gross profit – expenses

Question 31

What is Returns inward

Answer 31

Goods COME BACK from CUSTOMERS

Question 32

What is Returns Outward

Answer 32

Goods SENT BACK TO SUPPLIERS

Question 33

What is the Return inward computed in SPL

Answer 33

It is deducted from the SALES

Question 34

How is the Returns Outward computed in the SPL

Answer 34

It is deducted from PURCHASES

Question 35

Is drawings an expense

Answer 35

drawings isn’t an expense – doesn’t affect the profit – only the capital

Question 36

What is meant by 'Less' in: e.g. 'less cost of goods' or 'less returns outward'

Answer 36

-Means minus - minus cost of sales =not necessary ro write this

Question 37

What is the main outline of the SPL format

Answer 37

Non current asset Asset Total Asset Current Liabilities Non Current Liabilities Total Liabilities Net Assets Capital Opening capital Net Profit Drawings Closing Capital

Question 38

What does the SPF stand for

Answer 38

Statement of Financial Position

Question 39

Another name for SPF

Answer 39

Balance sheet

Question 40

What on the SPF doesnt come from the trial balance

Answer 40

-Closing inventory (post tb adjustment) -Net profit for the period - comes from the SPL