Question

1)Explain, in writing, how you would develop and maintain an asset register. What would be your source information and what would be included in the register? (150–180 words)

2)Explain in 150 words what a general journal entry is and why journal entries are necessary.

3)Explain in 150 words double?entry principles and how and why they are used.

4)Explain a general ledger system in 150 words.

Answer 1

1)

It is the responsibility of the Finance/Accounts manager to maintain a complete and accurate fixed asset register. The fixed assets register will be maintained on an excel spreadsheet or a book and should have the following details:

a) Identification or serial number

b) Acquisition date

c) Description of asset

d) Location

e) Class of asset

f) Cost of acquisition

2) The journal is the point of entry of business transactions into the accounting system. It is a chronological record of the transactions, showing an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount.

The journal entry is the first entry of a transaction in the accounting system. Before the entry is made, the following decisions must be made:

which accounts are affected by the transaction, and

which account will be debited and which will be credited.

Once entered in the journal, the transactions may be posted to the appropriate T-accounts of the general ledger. Unlike the journal entry, the posting to the general ledger is a purely mechanical process - the account and debit/credit decisions already have been made.

3) Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity.

4) A general ledger contains all the accounts for recording transactions relating to a company's assets, liabilities, owners' equity, revenue, and expenses. In modern accounting software or ERP, the general ledger works as a central repository for accounting data transferred from all subledgers or modules like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. The general ledger is the backbone of any accounting system which holds financial and non-financial data for an organization.[1] The collection of all accounts is known as the general ledger. Each account is known as a ledger account. In a manual or non-computerized system this may be a large book.