Disbursement Transactions Overview

Questions and Answers

Which statement correctly reflects the relationship between debit and credit in accounting?

Debits increase owner’s equity while credits decrease it.

Debits and credits affect only the asset accounts.

Debits increase liabilities while credits decrease them.

The value of debit is always equal to the value of credit in a transaction. (correct)

When analyzing a transaction, which of the following accurately describes the effect of a debit?

It decreases asset accounts.

It increases expense accounts. (correct)

It decreases revenue accounts.

It increases liability accounts.

What will happen to asset accounts when a credit entry is made?

They will decrease. (correct)

They will increase.

They will become liabilities.

They will remain unchanged.

In the context of a Chart of Accounts, what is the primary purpose of this list?

It provides account titles and codes for referencing transactions. Signup and view all the answers

What determines the balances of accounts in accounting?

The difference between total debits and total credits. Signup and view all the answers

What is the function of a journal voucher?

To document transactions and journal entries without any other source document Signup and view all the answers

In accounting, what does a debit represent?

The value received in an economic transaction Signup and view all the answers

When accounting elements are affected, what is the significance of determining their effects?

To understand whether there is an increase or decrease in the elements Signup and view all the answers

In a T-account, where are debits recorded?

On the left-hand side Signup and view all the answers

What must be determined to identify the appropriate account title for a transaction?

The amount to be recorded and its effect on accounting elements Signup and view all the answers

Study Notes

Disbursement Transactions

Journal vouchers are documents used for transactions lacking another source document.
Essential considerations before recording include:
- Determine the value received (debit) and the value parted with (credit).
- Identify affected accounting elements (Assets, Liabilities, Owner’s Equity).
- Assess effects on these elements (increase or decrease).
- Choose appropriate account titles that reflect transaction effects.
- Establish the amount to be recorded for each account title.

Debit and Credit Fundamentals

Debit represents the value received in an economic transaction, positioned on the left side of the accounting equation.
Credit reflects the value given up, located on the right side of the equation.
Every debit entry must equal a corresponding credit entry, ensuring a balanced transaction.

Accounting Rules

Debits: Increase in Assets and Expenses; Decrease in Liabilities and Owner’s Equity.
Credits: Decrease in Assets and Expenses; Increase in Liabilities and Owner’s Equity.

T-Accounts

T-Accounts visually represent accounts, with debits on the left and credits on the right.
They reflect changes caused by economic transactions and simplify ledger representation.

Normal Balance of Accounts

Deals with how balances are established based on the difference between debit and credit totals.
Balances are presented in the trial balance.

Chart of Accounts

A structured list of all account titles and codes for tracking business transactions.
Includes sections for Assets, Liabilities, Owner’s Equity, Revenues, Cost of Sales, and Operating Expenses.
Example accounts:
- Assets: Cash, Accounts Receivable, Merchandise Inventory.
- Liabilities: Accounts Payable, Notes Payable.
- Owner’s Equity: Capital, Drawings.

Types of Accounts

Real Accounts:
- Assets: Resources expected to provide future economic benefits.
- Liabilities: Current obligations the business must pay.
- Owner’s Equity: Residual interest after liabilities are deducted from assets; includes capital and withdrawals.

Book of Accounts

General Journal:
- First point of recording business transactions with date, description, posting reference, debit, and credit.
General Ledger:
- Final entry book where account balances are compiled for financial reporting.

Transaction Examples

Recorded amounts and effects on accounts:
- Billed a customer for services, partial payment recorded.
- Purchases and payments for shop supplies and cash withdrawals noted.

Description

This quiz covers journal vouchers and the fundamental concepts involved in disbursement transactions. It focuses on identifying values received and values parted with during financial record-keeping. Aimed at enhancing understanding of transaction recording processes.