Topic 3: Journals and Ledgers

Question 1

Debit means?

Answer 1

Left hand side of Ledger

Question 2

Credit means?

Answer 2

Right hand side of Ledger

Question 3

What is the nature of Assets and Expenses?

Answer 3

DEBIT
Increase accounts - Debit Entry
Decrease accounts - Credit Entry
*Left Hand Side (+), Right Hand Side (-)

Question 4

What is the nature of Revenue, Liabilities and Owner’s Equity?

Answer 4

CREDIT
Increase accounts - Credit Entry
Decrease accounts - Debit Entry
*Left Hand Side (-), Right Hand Side (+)

Question 5

What is the definition of Duality?

Answer 5

Every transaction has a 2 sided effect on the accounting equation to maintain the balance of the accounting equation.
*Each transaction will have a Debit entry and a corresponding Credit entry.

Question 6

Why is the Stock account inactive?

Answer 6

No transactions are entered into the Stock account during the accounting period.
*Except Opening Balance.

Question 7

What ledger is buying stock recorded under?

Answer 7

Purchases

Question 8

What ledger is recorded when business returns stock?

Answer 8

Purchases Returns

Question 9

What ledger is selling stock recorded under?

Answer 9

Sales

Question 10

What ledger is recorded when the customer returns stock?

Answer 10

Sales Returns

Question 11

What ledger is recorded when the owner withdraws stock from the business?

Answer 11

Purchases

Question 12

Are Drawings a Debit or Credit Entry?

Answer 12

Drawings are always Debit entries.

D for Drawings - D for Debit.

Question 13

What is a Trial Balance?

Answer 13

List of the balances of all the ledger accounts.

Therefore a checking device to see if total debit entries equal total credit entries.

Question 14

What are common mistakes, should the Trial Balance not Balance?

Answer 14

1. A transaction may have only been entered on one side (no duality)
2. An adding error was made balancing the ledgers

Question 15

Should the Trial Balance balance, why is there still no guarantee that it is correct?

Answer 15

1. A complete entry may have been missed

2. An entry may have been entered twice

Question 16

What are the requirements to successfully construct a general journal?

Answer 16

1. Debit entries are always recorded first & credit entries are indented
2. Total Debit entries must always equal the Total Credit Entries
3. A narration must be written for each transaction (to explain reason)
4. Do not group together transactions in the same day! (treat separately)

Question 17

What are the advantages of using and recording information into journals?

Answer 17

• Groups together like transactions

- Records transactions in chronological order

Question 18

What transactions are recorded in the Cash Receipts Journal?

Answer 18

Records all cash received by the business for whatever reason.

Question 19

What transactions are recorded in the Cash Payments Journal?

Answer 19

Records all cash leaving the business for whatever reason.

Question 20

What transactions are recorded in the Sales Journal?

Answer 20

Credit Sales to customers (Debtors)

Question 21

What transactions are recorded in the Sales Returns Journal?

Answer 21

Credit sales brought back by customer (Debtors)

Question 22

What transactions are recorded in the Purchases Journal?

Answer 22

Stock bought on credit (Creditors)

Question 23

What transactions are recorded in the Purchases Returns Journal?

Answer 23

Stock returned to supplier (Creditor)

Question 24

What Journals are used for Debtors Control Account?

Answer 24

1. CRJ
2. Sales
3. Sales Returns

Question 25

What Journals are used for Bank Account?

Answer 25

1. Opening Balance 2. CRJ 3. CPJ

Question 26

What Journals are used for Creditors Control?

Answer 26

1. CPJ 2. Purchases 3. Purchases Returns

Question 27

What Journals are used for Sales Account?

Answer 27

1. Cash Sales | 2. Credit Sales (SJ)