9706 · 1.2.1
The accounting system flashcards
Revision flashcards for Cambridge 9706 The accounting system (syllabus 1.2.1). Flip, recall, then mark a real past-paper question.
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DEAD CLIC?
Debit: Expenses, Assets, Drawings. Credit: Liabilities, Income, Capital.
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Sales day book?
Lists credit sales — total DR debtors control, CR sales.
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Purchases day book?
Lists credit purchases — DR purchases, CR creditors control.
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Cash book?
Records all bank/cash receipts and payments — also a ledger account.
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General ledger?
Contains all the accounts needed for the trial balance (e.g., Sales, Purchases, Rent). Also known as the nominal ledger.
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What is a Book of Prime Entry?
A book where transactions are first recorded chronologically before being posted to the ledgers. Examples include the Sales Day Book, Purchases Day Book, and Cash Book. They are not part of the double entry system.
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What is the purpose of the General Journal?
It is a book of prime entry used to record non-routine, non-cash transactions that do not fit in any other specialised journal. Examples include the purchase/sale of non-current assets on credit, correction of errors, and opening entries.
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Explain the DEAD CLIC mnemonic.
A tool to remember the rules of double entry. DEBIT: Expenses, Assets, Drawings. CREDIT: Liabilities, Income, Capital. For accounts in DEAD, an increase is a debit. For accounts in CLIC, an increase is a credit.
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Differentiate between the General Ledger and a Subsidiary Ledger.
The General Ledger contains all the accounts needed for the trial balance (e.g., Sales, Purchases, Rent). A Subsidiary Ledger (e.g., Sales Ledger) contains the individual accounts of credit customers, the total of which is represented by a single control account in the General Ledger.
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What is the primary purpose of a Trial Balance?
It is an internal document that lists all the account balances from the General Ledger. Its primary purpose is to verify the arithmetical accuracy of the double entry bookkeeping, ensuring that total debits equal total credits.
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What is the double entry for a credit purchase?
Debit the Purchases account (an expense) and Credit the supplier's personal account in the Purchases Ledger (a liability).
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What is the double entry for goods returned by a customer?
Debit the Sales Returns account (a contra-income account) and Credit the customer's personal account in the Sales Ledger (reducing an asset).
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What is a source document?
An original record containing the details to substantiate a transaction that has occurred. Examples include sales invoices, purchase invoices, bank statements, and credit notes.
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What is the purpose of a subsidiary ledger?
To hold the individual accounts of a similar type, such as all credit customers (Sales Ledger) or all credit suppliers (Purchases Ledger). It provides the detail for a single control account in the General Ledger.
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Briefly describe the accounting cycle.
The process of identifying, recording, and summarizing business transactions. It flows from source document -> book of prime entry -> ledger posting -> trial balance -> year-end adjustments -> financial statements.
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What is the double entry for purchases returns?
Debit the supplier's account in the Purchases Ledger (reducing a liability) and Credit the Purchases Returns account (a contra-expense).