Double entry, documents and journals

Swansea supplies Cardiff with goods on credit.
Which business document might Cardiff send to Swansea?

• Debit note

• Credit note

• Invoice

• Statement of account

Answer explanation

Cardiff is the customer / buyer.

The only document sent by the customer is debit note when requesting to return goods.

Which document is used by a supplier to notify a customer of goods supplied, goods
returned and payments received in a month?

• Credit note

• debit note

• invoice

• statement of account

Answer explanation

Statement of account is a summary of all transactions in a month, sent by supplier to remind customer of the amount owing at the end of the month

Which statement about a debit note is correct?

• It is sent to a customer to request for payment of an account

• It is sent to a customer when his order cannot be supplied in full

• It is sent to a supplier to order additional goods

• It is sent to a supplier when goods are received damaged

Answer explanation

Debit note is sent by customer to his supplier when requesting to return damaged goods.

What would be recorded by a debit entry in a ledger account?

• a decrease in an asset

• an increase in a liability

• an increase in an asset

• an increase in capital

Answer explanation

PEDARi

these accounts will be debited when increased

• A

• B

• C

• D

Answer explanation

Purchases a/c is used when 'bought goods' or 'took goods' only.

Office equipment a/c will be debited because we bought office equipment, office equipment increases in the business.

(Office equipment is an asset: increase = debit)

We paid by cheque, money in the bank a/c will decrease. (Bank a/c is an asset: decrease = credit)

• A

• B

• C

• D

Answer explanation

PEDARi SCRoLI

Return inwards a/c will always be debited

Return outwards a/c will always be credited

Sami is the one returning the goods, so Sami is the customer and Javed is the supplier.

In Javed's books, this will be a return inwards from Sami (his customer).

• A

• B

• C

• D

Answer explanation

Aisyah = customer (the one buying)

Nayla = supplier (the one selling)

Nayla's records means Nayla's point of view.

Nayla sold goods to Aisyah on credit.

Debit Aisyah a/c (amount owing increase, trade receivables: Asset increase)
Credit Sales a/c (SCRoLI)

• A

• B

• C

• D

Answer explanation

TRADE DISCOUNT will be shown in journals only.

CASH DISCOUNT will only be deducted if payment made within period given and only shown in cash book and ledger accounts.

trade discount = $300 (working: $1200 x 25%)

so amount after trade discount is $900 ($1200 - $300)

• A

• B

• C

• D

Answer explanation

Ayub's records = Ayub's point of view.

Ayub is the one returning the goods to Mahmud. So this is a return outwards to Mahmud.

Trade discount must be deducted from the list price. trade discount = 25% x $200 = $50.
So, return outwards = $200 - $50 = $150.

Return outwards a/c will always be CREDITED. (SCRoLI)

so Mahmud a/c will be debited. Amount owing to trade payables decreased. (Trade payables = liabilities)

• A

• B

• C

• D

Answer explanation

Drawings a/c is not affected. The owner did not take the money for own use. Cash is taken out from bank a/c but money/cash stays inside the business.

Money in the bank decreases. Bank a/c credited.

Money in hand increases. Cash a/c debited.