Ledger Accounting & Double Entry - 50%

Question 1

What is ledger accounting ?

Answer 1

The process by which a business keeps a record of its transactions;
- chronological order
- built up in cumulative totals

Question 2

What is the nominal ledger

Answer 2

This is an accounting record which summarises the financial affairs of a business

Question 3

What are the 5 nominal ledgers

Answer 3

• plant and machinery ( non- current asset)
• inventory ( current asset )
• sales (income)
• Rent ( expenses )
• Trade Payables ( current liability )

Question 4

Basic principles of double entry

Answer 4

-Every accounting transactions has Theo equal but opposite effects
- Equality of assets and liabilities is preserved

Question 5

What is a credit ?

Answer 5

A credit entry indicates a payment made by a business; the matching debit entry is then made in an account denoting an expense paid, an asset purchase or liability settled

Question 6

What is a debit

Answer 6

An entry in the cash book indicates cash received by the business; the matching credit entry is then made in a account denoting revenue received, a liability created or an asset realised

Question 7

Debits

Answer 7

• an increase in an expense
• an increase in an asset
• a decrease in a liability

Question 8

Credits

Answer 8

• an increase in income
• an increase in liability
• a decrease in an asset

Question 9

Double entry for a business selling goods

Answer 9

Debit - sales ledger control accounts
Credit - Sales

Question 10

Double entry for a sole trader withdrawing goods for their personal use

Answer 10

Debit - Drawings
Credit - Bank

Question 11

Double entry for drawing of goods for their own use

Answer 11

Debit Drawings
Credit purchases