Topics in AccountsCharacteristics of Double Entry System Examples on the Principle of Double Entry System Advantages and Limitations of the Double System in Accounting Scheme of work, Financial Accounting, SS1, Third Term Scheme of work, Financial Accounting, SS1, Second Term Scheme of work, Financial Accounting, SS1, First Term Differences between Bookkeeping and Accounting Journal - Contents, Format, Characteristics and Advantages of Journal Bank Wire and Wire Transfer Chart of Accounts Meaning, Importance, Processes, Examples and Steps in Balance Sheet Reconciliations
Academic Questions in Accounts
According to the principles of the dual entry system, an increase in asset is credited.
The followings are true on the double entry system of accounting except _____.
A. Errors can't be made
B. It can be time consuming
C. It can be used as an accounting reference
D. It can be used to control a company's expenditure
E. There is completion of account transaction
F. It isn't difficult to implement
With regards to bookkeeping and accounting, which of the following statement is incorrect?
A. Accounting covers the entire practice of finance management
B. Bookkeeping is a branch of accounting
C. Bookkeeping is a necessary requirement when making financial statement of account
D. Bookkeepers record financial transaction in a chronological order
E. Accountant earn higher salaries than bookkeepers
F. Accounting reports assist business managers in making a more detailed decision
The debited and credited accounts are written in which column of a journal?
F. None of the above
A journal may also be referred to any of the following except _____.
A. Book of original entry
B. Book of primary entry
C. Book of first entry
D. Initial book
E. Day book
F. Chronological book
Which of the following statement is true concerning bank wire?
A. Another name for bank wire is cash transfer
B. The term 'wire' in bank wire signifies a computer based programmed message sent to a bank customer in regards to their account information, transaction and other important financial notifications
C. The International Bank Account Number (IBAN) must always be involved when carrying out a bank wire process
D. The term bank wire has no significant relationship with wire transfer
E. Cyber criminals cannot utilize bank wire threats like CSRS, phishing and whaling to achieve their fradulent act
F. All the above statements are true
The following are recommendations to follow during the process of balance sheet reconciliation EXCEPT _____.
A. All balance sheet accounts should be reconciled periodically, quarterly or annually
B. Comparing the trial balance of both the payables and receivables with the respective aging schedule
C. Analysis of enteries and relocating them to a sub-ledger if need be
D. Comparing the general ledger trial balance of the account to another source; for instance, a bank statement
E. Analysis of the differences in both accounts and making appropriate correction to ensure the correctness of entered information
F. None of the above
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Every accounting system is based on the principle of double entry. Before we further on the examples that reflects this principle (double entry system of accounting), it will be a great idea if we comprehend the concept on the principle of double entry. Below is a brief introduction:
Double entry system may simply be defined as the process of keeping an account with a balanced (or an equal) debit (Dr) and credit (Cr) side.
An understanding of both sides (debit and credit) of the double entry is crucial; but for now, think of the debit side as a recording point for 'one that receives' while the credit side accounts for 'one that gives out'.
Just before we look into the examples of the double entry system, a transactional knowledge of what's recorded in the debit and credit sides of the account book is very important. The link below will prove useful.
The instances below will be used to explain the double entry system:
1. Purchase of Phone
When a buyer purchases a phone, he or she automatically has a new asset; and that's the phone. An increase in asset is recorded on the debit side of the entry.
Conversely, the buyer pays out some sum of money to purchase the new phone. The money payed out represents a decrease in asset (according to the buyer) and it's recorded on the credit side of the dual entry system.
If this buyer were to record both entries into an accounting system, the newly owned phone will be recorded on the debit side while reflecting the money payed out on the the credit side.
Debit: New phone owned -> Increase in asset
Credit: Money paid out -> Decrease in asset
2. Receipt of Bank Loan
When an individual receives a loan from a bank, such will reflect as an increase in the person's asset. This is true because the money can be utilized (or invested) for its intended purpose(s). Recall that an increase in asset is recorded on the debit side of the dual or double accounting system.
Conversely, the individual who received the loan will have to repay it alongside some interest. The interest paid is considered as an increase in liability; and thus, it is recorded on the credit side of the dual accounting system.
Debit: Cash received -> Increase in asset
Credit: Money received + Interest -> Increase in liability
3. Payment of School Fees
A part-time student who does other jobs to pay his school fees will consider the paid fee (money) an expense. This is true because the student will need to save or budget some money for this purpose.
Conversely, the training and lectures received by the student will be considered as an increase in equity. Equity in this instance (of education) implies that he enjoys the necessary support needed to become successful in his chosen field of study.
If the student decided to record this inventory in a financial book, the payment of school fees will be recorded on the debit side (because it's an increase in expense) while the lectures received, on the credit side (because it's an increase in equity).
Debit: School fees -> Increase in expense
Credit: Lectures received -> Increase in equity
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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.
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Amazing facts in Accounts
It is believed that Bookkeeping is the only English word to contain three sets of double letters repeatedly.please read our article on bookkeeping vs Accounting here
NOTABLE POINTS IN Accounts
Bookkeeping can be defined as all the activities that have to do with the orderly classification and recording of financial data or business transaction.
Bookkeeping assist the process of accounting via the taking of an accurate record keeping.
Accounting is a field of study that covers the entire process and practice of managing the finances of an individual or an organization.
In smaller organizations, a bookkeeper’s job may go beyond simple transaction recording, as they may also be involved in the accounting process of the organization. On the other hand, accountants may have to record financial transaction in addition to analyzing financial transaction.
Below are the importance of bookkeeping in any organization:
It brings accuracy into the recordings of the daily business transaction.
They provide the information on which financial accounts are prepared.
Aside from its importance in business organizations, it can also be used by nonprofit organizations and individuals.
It can also take record of liabilities, assets and loans. This function of bookkeeping can be crucial for many businesses.
A journal, also called book of original entry or book of primary entry or book of first entry or day book or chronological book is a book where daily transactions are recorded in a chronological order (the order of occurrence).
A journal contains the total record of all transactions made by a company. It can be distinguished into different types which will include:
Sales Journal: For recording inventory and sales.
Cash Receipts Journal: For recording money received from sales or cash inventory.
Purchase Journal: For recording all purchases made by a company.
General Journal and so on.
The content of a journal include the followings:
The date when the transaction occurred.
The description of the transaction.
Bank Wire is a messaging system that allows banks to communicate the various events occurring on a clients’ account.
As an instance, when your account is credited by someone, you may get a notification from your bank with details concerning such transaction.
Such notification(s) from the above instance is a function of bank wire
The term 'wire' in a bank wire signifies a computer based programmed messages that are sent to the bank customers regarding their account information, transactions and other important financial notifications. These messages are always secured and may be encrypted along the wire.
Balance Sheet Reconciliations is a process of comparing the amounts on a balance sheet general ledger accounts to the details making up those balances, so that all their details agree or match.
Below are some recommendations to follow during Balance Sheet Reconciliations:
All balance sheet accounts should be reconciled periodically, quarterly or annually so as to verify that all items have been accurately posted to the account.
During the process of acount reconciliation, we will have to analyze the differences and make corrections so that the information is correct, complete and consistent on both accounts.
With the balance sheet reconciliations, it is important to compare the trial balances of both payables and receivables with the respective aging schedule balances during reconciliation.
In situations where the trial balance is more than the balance of the aging schedule, then it is likely that the entries are placed directly to the general ledger instead of the sub-ledger. One will need to analyze these entries and then relocate them to the sub-ledger.
During balance sheet reconciliation, you compare the general ledger trial balance of the account to another source which could be internal; for instance, a sub-ledger or a bank statement.