Answer to Question #270994 in Accounting for Mnyabe

Question

The accounting equation and the balance sheet

2 The double entry system for assets, liabilities and capital

3 The asset of stock

4 The effect of profit or loss on capital and the double entry system for expenses and revenues

5 Balancing off accounts

6 The trial balance

3 18 28

38 49 57

Answer 1

Solution:

2.). The double entry system for assets, liabilities and capital - The main rule for entering a double-entry system is to "debit the receiver and credit the giver." A transaction's debit entry will be on the left side of the general journal, while the credit entry will be on the right side. If a transaction increases an asset or expense account, the value of this increase must be recorded on the debit or left side of these accounts. Similarly, in the equation, capital (C), liabilities (L), and income (I) represent credit balances on the right side of the equation.

The term "double-entry" refers to an accounting concept in which assets equal liabilities plus owners' equity.

 

3.). The asset of stock – This is also the company’s inventory, which is a financial asset that can easily be converted to cash.

 

4.). The effect of profit or loss on capital and the double-entry system for expenses and revenues - Capital (or the owner's interest) increases with profits and decreases with losses.

A debit entry is made when expenses increase and a credit entry is made when expenses decrease.

Revenue increases are credited while decreases are debited.

4.). Balancing of accounts – It acts as a check to ensure that a debit recorded in one ledger account is matched with a credit in another for each transaction. If a double-entry was made, the total of the debit balances should always equal the total of the credit balances.

5.). The trial balance - A trial balance is a bookkeeping worksheet that compiles the balances of all ledgers into equal debit and credit account column totals.