Theory question 103
Double Entry and the Ledger3. (a) Write short notes on the following: (i) errors of commission (ii) accrued expenses; (iii) the ledger. (b) State four uses of the general journal.
Show the model answer
(a)(i) An error of commission occurs when an amount is entered on the correct side but in the wrong account of the same class, e.g. a credit sale to Bampo debited to Bamfo's account; it does not affect the trial balance.
(ii) Accrued expenses are expenses incurred in a period but not yet paid at its end (e.g. wages owing); they are added to the expense in profit and loss and shown as current liabilities.
(iii) The ledger is the main book of account containing all the accounts of the business, each with a debit and a credit side; it is often divided into sales, purchases and general ledgers.
(b) Any four uses of the journal: opening entries when a business starts; correction of errors; purchase and sale of fixed assets on credit; transfers between accounts and closing entries; writing off bad debts; adjustments such as depreciation and provisions; issue of shares.
Explain each term in one or two sentences with an example.