Archive about 'Bookkeeping to Trial Balance'

Explain why Revenue and Expense Accounts are designated as Temporary or Nominal accounts

Tweet Below explained what accounts are known as temporary or nominal account: The increase in capital resulting from revenue is TEMPORARY, since capital will be reduced by expenses in the same period. These accounts are closed out at the end of the accounting period and the net balance ( for example, the excess of revenue […]

Explain whether it is true by giving an example that the Trial Balance provides “arithmetic proof of the accuracy of the records, it does not provide “theoretical proof”

Tweet It is true that Trial balance provides arithmetic proof of the accuracy of the records when the total of debits and credits agree and the trial balance is in balance merely indicating the equality of the debits and credits for the hundreds or thousands of transactions entered in the ledger. However, it does not […]

Explain what is a compound journal entry ?

Tweet Compound journal entry is an entry having more than one debit or more than one credit   Example of compound journal entry: Factory land was bought (debit) for $500,000, with a downpayment of cash (credit) of $100,000 and a mortgage(credit) of $400,000    

What do we mean by debit and credit balances when balancing the ledger accounts?

Tweet At the end of an accounting period, a balance is struck on each account in turn. This means that all the debits on the account are totalled and so are all the credits.If the TOTAL DEBITS EXCEED THE TOTAL CREDITS, there is said to be a DEBIT BALANCE on the accounts; If the TOTAL […]

Explain the term Cash Sales, Credit Sales, Purchases for cash and Purchases on Credit

Tweet Cash Sales: If the sale is for cash, it occurs when the goods or services are given in exchange for an immediate payment whether in term of notes, coins, cheque or credit card Credit Sales: If the sale is on credit, the business will issue sales invoices for the goods or services supplied showing […]

Double Entry Rule or System to account for Discount Allowed and Discount Received

Tweet Earlier article on discount allowed and discount  received refers. Accounting Double Entry for Discount Allowed: Debit : Discount Allowed Account Credit: Debtor’s Account Subsequently, discount allowed will be credited and charged to the Profit & Loss Account/Income statement. Discount Received: Debit: Creditor’s Account Credit: Discount Received Account Subsequently, discount received will be debited and […]

Summary of Some Major Adjustments in Ledger on Balance Day

Tweet Ledger adjustments for the following major adjustments on Balance Day: Type of Ledger Adjustments Debit Credit Shown in Balance Sheet  As Accruals or Accrued  Expenses Expenses Account Accrued Expenses account Current Liability Prepayment or Prepaid Expenses Prepaid Expenses Account Expenses Account Current  Asset Accrued Revenue Accrued Revenue Account Revenue Account Current Asset Revenue Received […]

Basic Bookkeeping double entry on dealing with WITHDRAWALS by Owner

Tweet Salient points: (a)    When an owner take goods, cash or other assets out for his private use, this is call DRAWINGS (b)   ANY drawings from business reduces the owner’s equity in the business (c)    A temporary account called DRAWINGS Account is open to record all drawings from the owner to ensure proper control and […]

How to write up a full set of books up to the drawing up of the Final accounts and Balance Sheet

Tweet { This article can be printed on pdf.format} Please read article on Accounting Cycle & the Steps involved to understand the overall process of  taking up transactions from source documents to the stage of final accounts and then the Financial Statements. Below presented in pictorial diagram with explanation on the writing up of a […]

How to Prepare Final Account and Deals with Adjustments in Final Accounts

Tweet (Print this article in PDF format) Every accounting student needs to go through the stage of preparing final accounts from the Trial balance and dealing with ADJUSTMENTS in Final Accounts. Below are some guidelines and simple snapshots for students to take note of when preparing and adjusting items in Final Accounts. Students should aim […]