13 terms in 3.3
The double entry model
Every financial transaction a business makes gets recorded twice — once as a debit and once as a credit. Businesses firs
The double entry model
The double entry model
At the end of an accounting period, a business closes its revenue and expense accounts by moving their totals into an in
The double entry model
The double entry model
Source documents are the original paper or digital records that prove a transaction happened. Each type of transaction p
The double entry model
The double entry model
Books of prime entry are the first place a business records a transaction. Each book handles a specific type of transact
The double entry model
The double entry model
A business keeps three separate ledgers to organise its accounts. The receivables ledger tracks money customers owe. The
The double entry model
The double entry model
Some transactions need special double entry treatment. These include discounts given to customers, selling or scrapping
The double entry model
The double entry model
Businesses split their spending and income into two types. Revenue items relate to day-to-day trading. Capital items rel
The double entry model
The double entry model
Adjustments correct the raw figures in the accounts so they reflect reality at the year end. Each adjustment requires sp
The double entry model
The double entry model
An income statement shows whether a business made a profit or a loss over a period. You build one by taking figures from
The double entry model
The double entry model
A statement of financial position lists everything a business owns and owes at one point in time. It groups items under
The double entry model
The double entry model
A prepayment is an expense paid early that belongs to a future period. An accrual is an expense already used but not yet
The double entry model
The double entry model
An irrecoverable debt is money a customer owes but will never pay. Accountants remove it from the records and treat it a
The double entry model
The double entry model
Depreciation spreads the cost of a non-current asset across its useful life. You record it each year using two ledger ac
The double entry model