Question 1 · Section A · Syllabus C2 marks
Double entry
Thorne Co made this transaction: bought goods for resale on credit.
What is the double entry to record it? (2 marks)
Financial accounting exam prep
Double-entry bookkeeping explained
Every transaction has two effects, recorded once as a debit and once as a credit of the same amount. Get this right and most of the financial accounting syllabus follows.
| The equation | Assets = capital + liabilities |
|---|---|
| Debit increases | Assets, expenses and drawings |
| Credit increases | Liabilities, capital and income |
| Check | Total debits equal total credits in the trial balance |
The rule
Ask two questions of every transaction: which two accounts change, and does each go up or down? An asset going up is a debit; a liability going up is a credit. A sale on credit is debit receivables, credit revenue; paying a supplier is debit payables, credit bank.
T-accounts and balancing off
A T-account has debits on the left and credits on the right. To balance it, total both sides, enter the difference on the smaller side as the balance carried down, and bring it down on the other side at the start of the next period.
The trial balance
List every balance as a debit or a credit. If the totals differ, an error has been made, and a suspense account holds the difference until it is found. A balancing trial balance does not prove the books are right: errors of omission, commission and principle leave it balancing.
Try 3 questions
Question 2 · Section A · Syllabus C2 marks
Balancing a ledger account
This is the account of one credit customer in Ingleby Co's receivables ledger for January.
| Details | Debit $ | Credit $ |
|---|---|---|
| Balance b/d | 820 | |
| Invoice 1 | 3,900 | |
| Bank | 2,800 | |
| Invoice 2 | 1,190 | |
| Credit note | 90 | |
| Bank | 1,080 |
What is the balance brought down at the start of the next month, and on which side? (2 marks)
| Answer | |
|---|---|
| Balance b/d ($) | |
| Side |
Question 3 · Section A · Syllabus F2 marks
Correcting an error
Marlow Co found this error. The amount was $1,270.
Repairs to a machine were debited to the plant and machinery cost account.
What is the journal to correct the error? (2 marks)
| Account name | Debit $ | Credit $ |
|---|---|---|
Leave any spare lines blank.
Next step
Questions people ask
What is double entry?
Recording every transaction twice, as a debit in one account and a credit of the same amount in another, so the accounting equation always balances.
Is a debit an increase or a decrease?
It depends on the account: a debit increases an asset, expense or drawings, and decreases a liability, capital or income.
Which errors does a trial balance not reveal?
Errors of omission, commission, principle, original entry, reversal of entries and compensating errors leave debits equal to credits.