AAT Basic Accounting 1 Assignment 2

A double-entry account has two sides, a debit side and a credit side. The debit side represents the increase in assets or expenses, while the credit side represents the increase in liabilities, equity, or revenue. This system ensures that every transaction is recorded in both sides of the account, maintaining the balance and accuracy of the financial records.

The correct general ledger entries for a purchase returns transaction involve crediting the purchases returns account, debiting the purchase ledger control account, and crediting the VAT account. This means that the purchases returns account is being increased, the purchase ledger control account is being decreased, and the VAT account is being decreased.

In accounting, a debit entry represents an increase in assets or a decrease in liabilities or equity. It is recorded on the left-hand side of the accounting equation. This is because the left side of the equation represents the sources of funds or the assets owned by the entity. Therefore, any increase in assets is recorded on the left side as a debit entry.

In account management, it is a common practice to include the name of the account at the top. This helps to identify and differentiate between different accounts easily. By including the account name at the beginning, it ensures that the account is properly labeled and organized. Therefore, the statement "The account is always headed up with its name" is true.

The correct general ledger entry for the VAT account in a purchase transaction is debit. This is because VAT is an expense that is incurred when purchasing goods or services, and expenses are typically recorded as debits in accounting.

In double-entry accounting, the debit side is actually on the left, not the right. This is because the left side of an account represents the increase in assets or expenses, while the right side represents the decrease in liabilities, equity, or revenue. Therefore, the correct answer is false.

Double-entry involves two entries. In double-entry bookkeeping, every transaction is recorded with two entries - a debit entry and a corresponding credit entry. This system ensures that the accounting equation (assets = liabilities + equity) remains in balance. Each transaction affects at least two accounts, with one account being debited and another being credited. By having two entries, it allows for accurate recording of both the source and destination of each transaction, providing a complete and balanced view of the financial transactions.

A remittance advice is a document that is sent to a supplier along with a payment, typically a cheque, to provide information about the payment. It serves as a notification to the supplier that a payment has been made and includes details such as the invoice number, amount paid, and any other relevant information. Therefore, it is true that a remittance advice is used to accompany a cheque when paying a supplier.

An analysed purchase day book is not used when businesses only purchase one category of stock. Instead, it is used when businesses purchase multiple categories of stock and want to keep track of each category separately. The analysed purchase day book allows businesses to record and analyze their purchases by category, making it easier to track expenses and manage inventory effectively.

Expenditure on assets such as buying a building or a new van is not called revenue expenditure. It is actually called capital expenditure. Revenue expenditure refers to the expenses incurred in the day-to-day operations of a business, such as salaries, utilities, and maintenance costs. Capital expenditure, on the other hand, refers to investments made in long-term assets that will benefit the business over a longer period of time.

The examples of books of prime entry are the purchases day book and purchases returns day book. These books are used to record all the purchases made by a business and any returns of purchases. They provide a detailed record of the purchases made, including the date, supplier, and amount, which can then be used to update the purchases account and other relevant accounts in the general ledger. The purchases day book is used to record all normal purchases, while the purchases returns day book is used to record any returns or cancellations of purchases.

A document issued by a supplier listing all the payments, invoices, and credit notes on the account, providing a total of the amount due is called a statement or account. This document serves as a summary of the financial transactions between the supplier and the customer, allowing the customer to review and verify the accuracy of the account balance. It helps in keeping track of the payments made, outstanding invoices, and any adjustments made through credit notes. By providing a comprehensive overview of the account, it enables effective financial management and facilitates timely payment of dues.

An Accounts Payable could result from purchasing goods and services from suppliers on credit. This means that the company has received the goods or services but has not yet paid for them. This creates a liability for the company, as they owe the suppliers money for the purchases made on credit. Purchasing supplies or property, plant, and equipment for cash would not result in an accounts payable, as these transactions do not involve credit.

When using double-entry accounting, it is necessary to ignore the way banks refer to debits and credits. This is because in double-entry accounting, debits and credits have specific meanings and are used to record different types of transactions. The terms "debit" and "credit" used by banks may not align with the accounting principles and conventions followed in double-entry accounting. Therefore, it is important to disregard the bank's terminology and focus on the correct usage of debits and credits in the context of double-entry accounting.

A subsidiary ledger such as the purchase ledger is sometimes called a memorandum account because it serves as a record or memo of specific transactions related to a particular category or type of account. It helps in providing detailed information about individual transactions, such as purchases, within a specific account category, without directly impacting the double entry system. The term "memorandum" emphasizes the auxiliary nature of the subsidiary ledger, which supports the main general ledger by providing additional information and facilitating easier tracking and analysis of transactions.