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A Level Accounting

Double Entry

QuestionAnswer
Define Sales Return A sales return is an adjustment to sales arising from the return of goods previously sold to a customer.
Explain Goods for Own Use Goods for own use are items of inventory taken from the business for private consumption.
Define Purchase Return A purchase return occurs when goods, inventory, fixed assets, or other items are returned to the supplier.
Explain Carriage Inwards Carriage inwards is the delivery cost charged by suppliers on goods purchased, increasing the cost of purchases.
State the Cost of Sales formula Opening Inventory + Purchases − Purchase Returns − Goods for Own Use + Carriage Inwards − Closing Inventory.
State the Gross Profit formula Sales − Cost of Sales = Gross Profit.
Where do Sales Returns appear in the Statement of Comprehensive Income? After Sales and deducted from Sales revenue.
What can be deducted from Purchases in the Statement of Comprehensive Income? Purchase Returns and Goods for Own Use.
Define Provision for Doubtful Debts An estimate of the amount of trade receivables that may not be collected.
Explain Carriage Outwards Carriage outwards is the delivery cost paid by the seller on goods sold, such as free delivery.
Define Bad Debt Recovered Money received from a debt that had previously been written off as irrecoverable.
State four sources of income added after Gross Profit Commission Received, Rent Income, Bad Debt Recovered, Discounts Received, Profit on Disposal, Decrease in Provision for Doubtful Debts.
State the Net Profit formula Gross Profit + Other Income − Expenses.
Define Accrued Expenses Expenses incurred but not yet paid by the end of the accounting period.
Define Accrued Income Income earned but not yet received by the end of the accounting period.
Define Prepayment of Income Income received before it has been earned.
State the Net Assets formula Non-Current Assets + Current Assets − Current Liabilities − Non-Current Liabilities.
State the Working Capital formula Current Assets − Current Liabilities.
State the Capital Employed formula Opening Capital + Profit for the Year − Drawings.
Where does Prepaid Income appear in the Statement of Financial Position? Current Liabilities (Other Payables).
Where does Accrued Income appear in the Statement of Financial Position? Current Assets (Other Receivables).
Where do Accrued Expenses appear in the Statement of Financial Position? Current Liabilities (Other Payables).
Where do Prepaid Expenses appear in the Statement of Financial Position? Current Assets (Other Receivables).
Which two figures balance in the Statement of Financial Position? Net Assets and Capital Employed.
How is Commission Income Owing £300 treated in the final accounts? Add £300 to Commission Income and £300 to Other Receivables.
How is Rent Income Received in Advance £200 treated in the final accounts? Deduct £200 from Rent Income and add £200 to Other Payables.
How are Salaries Prepaid £100 treated in the final accounts? Deduct £100 from Salaries Expense and add £100 to Other Receivables.
Define the Sales Journal A book of prime entry listing invoices for credit sales.
Define the Purchases Journal A book of prime entry listing invoices for credit purchases.
Define the Purchases Returns Journal A book of prime entry listing credit notes received from suppliers.
Define the Sales Returns Journal A book of prime entry listing credit notes issued to customers.
Which side of the Sales Ledger increases the amount owed by a customer? Debit side.
State three accounts found in the General Ledger Sales Account, Purchases Account, Sales Returns Account, Purchases Returns Account.
Which side of a Sales Ledger records credit sales? Debit side.
Which side of a Sales Ledger decreases the amount owed by a customer? Credit side.
Which side of a Purchases Ledger decreases the amount owed to suppliers? Debit side.
Which side of a Purchases Ledger increases the amount owed to suppliers? Credit side.
How is a Sales Return recorded? Credit Trade Receivables and Debit Sales Returns.
How is a Purchase Return recorded? Debit Trade Payables and Credit Purchases Returns.
Which side can transactions appear on in the Sales Account? Credit side only.
Which side can transactions appear on in the Sales Returns Account? Debit side only.
Which side can transactions appear on in the Purchases Returns Account? Credit side only.
Which side can transactions appear on in the Purchases Account? Debit side only.
What four accounts are represented in a Cash Book? Cash, Bank, Discount Allowed and Discount Received.
Which side of the Cash Book records money coming into the business? Debit side.
How is 'Banked £500 cash from till' recorded? Dr Bank £500, Cr Cash £500.
Which side of the Cash Book shows a Bank Overdraft? Credit side.
How is £1,475 received from Murphy Ltd in full settlement of £1,490 recorded? Dr Bank £1,475 and Dr Discount Allowed £15.
Where are transactions first recorded? Books of Prime Entry.
What transactions are commonly recorded in the General Journal? Purchase or sale of non-current assets on credit and correction of errors.
With Discounts Allowed, which account is credited? Customer's Account (Trade Receivables).
With Discounts Allowed, which account is debited? Discount Allowed Account.
With Discounts Received, which account is credited? Discount Received Account.
With Discounts Received, which account is debited? Supplier's Account (Trade Payables).
State three features of a Trade Discount Offered within an industry, encourages bulk purchases, not recorded in the accounts.
How is a cheque received from Gholar for £600 with £30 discount recorded? Dr Bank £600 and Dr Discount Allowed £30.
Where are cash discounts recorded? In the Cash Book and in Discount Allowed/Discount Received accounts.
State three source documents used for the Cash Book Cheque Counterfoil, Supplier Receipts, Till Rolls.
How is a cash sale recorded? Dr Cash Book and Cr Sales Account.
Source document and book of prime entry for faulty goods returned to supplier Credit Note Received and Purchases Returns Journal.
Source document and book of prime entry for cheque payment to supplier Cheque Counterfoil and Cash Book.
Source document and book of prime entry for credit purchase of machinery Purchase Invoice and General Journal.
Source document and book of prime entry for bank transfer received from customer Bank Statement and Cash Book.
State three items recorded on the credit side of the Cash Book Standing Orders, Direct Debits, Bank Charges, Interest, Debit Card Payments, Dishonoured Cheques.
How is a credit note issued to a customer recorded? Cr Trade Receivables and Dr Sales Returns.
How is the return of faulty goods to a supplier recorded? Dr Trade Payables and Cr Purchases Returns.
Define a Sales Invoice A document issued by a seller to a buyer when goods or services are sold.
Define a Credit Note A document issued by a seller to reduce an amount owed due to returns or overcharging.
Define a Cheque Counterfoil A record of cheques issued by the business showing payee, cheque number and amount.
Define a Bank Statement A report from the bank showing money paid into and out of an account.
Define a Purchase Invoice A document received when goods or services are purchased on credit.
Define a Paying-in Slip Counterfoil A record of cash and cheques deposited into the bank.
Define a Till Roll A record of daily cash sales and receipts.
When is a Bank Statement used as a source document? For transactions not evidenced by counterfoils such as direct debits, standing orders, bank charges and credit transfers.
Define a Dishonoured Cheque A cheque rejected by the bank due to insufficient funds.
State the two places a cash discount is recorded In the Cash Book and in Discount Allowed or Discount Received accounts.
State three items found on the credit side of a Trade Receivables Ledger Receipts, Discount Allowed, Credit Notes, Contra Entries.
Define Capital Expenditure Expenditure on acquiring or improving non-current assets.
Define Revenue Expenditure Expenditure on day-to-day running costs of the business.
What does LIDIA stand for? Legal costs, Installation, Delivery, Improvement, Asset cost.
Differentiate between Capital Income and Revenue Income Capital income arises from selling non-current assets; revenue income arises from normal trading activities.
Define an Accrual A liability for an expense incurred but not yet paid or invoiced.
How is an accrued expense calculated? Monthly amount × Number of months accrued.
What is the double entry for an accrued expense? Dr Expense Account and Cr Current Liabilities.
Define a Prepayment An expense paid in advance relating to a future accounting period.
How is a prepayment calculated? Monthly amount × Number of months prepaid, then deduct from expense.
What is the double entry for a prepayment of expense? Dr Current Assets and Cr Expense Account.
Define Accrued Income Income earned but not yet received by the end of the accounting period.
What is the double entry for accrued income? Dr Current Assets and Cr Income Account.
What is the double entry for prepaid income? Dr Income Account and Cr Current Liabilities.
Define an Irrecoverable Debt A debt that will not be paid by a customer.
What is the double entry for an irrecoverable debt? Dr Irrecoverable Debts Expense and Cr Trade Receivables.
State the Straight Line Depreciation formula (Cost − Residual Value) ÷ Useful Life OR Cost × Depreciation Rate.
Define Net Book Value (NBV) Cost − Accumulated Depreciation.
What is the double entry for depreciation? Dr Depreciation Expense and Cr Provision for Depreciation.
State the formula for Profit or Loss on Disposal Disposal Proceeds − Net Book Value.
Define Irrecoverable Debt Recovered A debt previously written off that is later received.
What is the double entry for Irrecoverable Debt Recovered? Dr Bank and Cr Irrecoverable Debts Recovered.
How is a Provision for Doubtful Debts first created? Dr Doubtful Debts Expense and Cr Provision for Doubtful Debts.
How is an increase in Provision for Doubtful Debts recorded? Dr Doubtful Debts Expense and Cr Provision for Doubtful Debts.
How is a decrease in Provision for Doubtful Debts recorded? Dr Provision for Doubtful Debts and Cr Income Statement.
State the three columns on each side of a Cash Book Discount, Cash and Bank.
Which side of the Cash Book contains Discount Allowed? Debit side.
Created by: durquhart1
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