1. What is a book of original entries?
Books of original entries are books in which we first record the transactions. We record entries in them according to nature of transactions and entries are made to them on daily basis
2. What are the three different books of original entries?
1. General journal or Day book - For recording general double entries
2. Sales Journal or Sales day book - For recording credit sales
3. Purchase journal or purchase day book - For recording purchases on credit
3. Why do we need to prepare books of original entries?
The requirement for Books of original entries is significant because businesses need more information of a transaction than an account can provide. For example if a business sells goods on credits to Mr. Z, business would like to record all his contact details and personal details.
4. What is a journal?
Journal is a book of original entry. Journal is the place where a business first record the transactions and their details
5. What is the difference between a journal and a day book?
There is no difference between a journal and daybook
In accounting, the words journal and daybook are used interchangeably. Therefore, no need to be confused if you see the word daybook rather that journal or journal instead of daybook
6. What is a single entry system?
When only one (single) aspect of a transaction is recorded in the books of account, it is referred as single entry system
7. What is a double entry system?
When dual (two, double) aspects of a transactions is recorded, it is called double entry system
8. What are the special journals?
As the name suggests special journal are utilized to record special or specific journal entries in each of the specialized journal. For example all credit sales will be recorded in sales journal whereas all credit purchases will be recorded in purchases journal and so on.
9. What is a credit note?
A credit note is issued by a business to the customer or buyer, accepting the return of good by customer because of some defects in goods or any other reason
10. What is a debit note?
A debit note is sent by the customers to a business letting the business know why they have returned the goods. A credit note contains the description and reason for return of goods
11. What is the difference between credit and debit notes?
A credit note is issued by a business to the customers or buyers, accepting the return of good by customer because of some defects in goods or any other reason
On the other hand, a debit note is sent by the customers to a business letting the business know why they have returned the goods. A credit note contains the description and reason for return of goods
12. What is an invoice?
Invoice is also known as bill. An invoice is a commercial document issued by seller to buyer stating the name and description of products, quantity of goods, agreed price of goods.
13. Why is meant by the term 2/15 – n/30?
That implies 2% discount will be allowed if payment is made within 15 days or full amount is to be payable in 30 days
14. What is a compound journal entry?
A double entry wherein more than one account is debited or credited is a compound journal or double entry
15. What does folio or post ref column in a journal indicate?
Folio column is the reference to a specific ledger account or any other book of accounts. In this column, the name/title of an account and page No. on which we have entered the other part of double entry are filled in to help find out the other part of the double entry.
16. What are the benefits of folio or post ref column?
Folio column indicates that other part of double entry has been completed and it helps find out on what page No. it is located.
17. Define journalizing?
The process of recording financial information or transactions in a journal is called journalizing
18. Why journal is also known as a day book?
Transaction are recorded in the journals on a daily basis and transactions are entered in the journals on the day of their occurrence which is why journal is also known as a day book
19. What is recording in accounting?
Recording in accounting means entering each and every aspect of a transaction in the books of accounts like journals, cash book etc
20. Why is the difference between double and single entry system?
Single entry system records only one aspect of a transaction whereas double entry system records two or double aspects of a transaction or economic event
21. What are the two major benefits of double entry system?
Double entry system facilitates the preparation of financial statements such as income statement, balance sheet and cash flow statement etc
Record maintained under double entry system is regarded as more accurate and perfect as well as there are low chances of misappropriations, embezzlements and frauds
22. What is a simple journal or double entry?
A double entry which entails only two accounts, one is being debited and other is being credited. For example purchased goods for $100, purchases debit and cash credit.
23. What are the two key disadvantages of single entry system?
Single entry system doesn’t facilitate the preparation of financial statements such as income statement, balance sheet and cash flow statement etc
Record maintained under single entry system is regarded as less accurate and perfect as well as there are high chances of misappropriations, embezzlements and frauds
24. After preparing books of original entries what is the next step in accounting?
After preparing books of original entries, accountants generally prepare respective ledger accounts where they classify the entries made in journal and other books of original entries
25. How a journal is different from a ledger account?
Journal is the book of original entries that records financial information in the first place and different items are recorded in the same journal while ledger is a book of secondary entries that is prepared for an individual item and not the different items are mixed up in a ledger account
26. What is meant by casting in accounting?
Casting means summing up or adding up a list of figures or balances. Over casting means we have mistakenly added more balance than it should be and under casting implies that we have added less balance than it should be
27. What is the narration?
Narration is a concise description or explanation of a transaction written under the double entry or journal entry to be helpful in knowing some extra detail of the transaction by looking at the journal