Professional Documents
Culture Documents
Week 2, Lecture
Is
transaction has a two-fold effect entry records that two-fold effect entry bookkeeping requires that there
Double Double
must always be a debit entry and a credit entry when recording financial transactions
An increase in assets
A decrease in an asset
An increase in expenses
A decrease in liability A decrease in revenue A decrease in capital
A decrease in expenses
An increase in liability An increase in revenue An increase in capital
Role
Whenever a business transaction takes place, it is usual for the transaction to be recorded on a document these are termed as source documents
Examples
Sales order Purchases order Invoices credit/debit notes Remittance advices Cheque stubs(counterfoil) Petty cash vouchers Goods received notes
order a customer writes out an order or signs an order for goods or services he wishes to buy. Purchases order a business makes as order from another business for the purchase of goods or services. Credit note a document relating to returned goods or refunds when a customer has been overcharged. It can be regarded as a negative invoice Debit note might be issued instead of raising an invoice to adjust an invoice
Sales
More commonly, a debit note is issued to a supplier as a means of formally requesting a credit note
advice a letter sent by a customer to a supplier, to inform the supplier that their invoice has been paid. Cheque stubs a businesss record of payments it has made Petty cash vouchers a claim for reimbursement out of petty cash Goods received notes (GRN) filled in to record a receipt of goods, most commonly in a warehouse. Often the accounts department will require sight of the relevant GRN before paying a supplier
Remittance
Relates
Issued when business sells goods or services on credit Receives when a business buys goods or services on credit
Contents
of an invoice
Name and address of the seller and the buyer Date of the sale Description of goods/services Quantity and unit price Details of trade discount Total amount (including any taxes) Sometimes, the date by which payment is due and other terms of sale
Are
Sales day book Sales returns day book Purchases day book
Definition
Every
effect
Example
You own a car worth 1,000 You have 1,000 less cash
Debit
An
debit
An
liability is a credit
A A
Receipts
Payments
Example
Dr Cash Cr Sales
Selling
on credit
Buying
on credit
Examples
Sold goods on credit to Fiona for 2,000 Bought goods on credit from Kada Ltd for 5,500
Nominal
ledger (General Ledger) an accounting record which summarises the financial affairs of a business. It contains details of assets, liabilities, income and expenditure
Examples
Motor vehicle ( fixed asset) Total debtors (current asset) Bank overdraft (liability)
Ledger for customers personal accounts Purchases Ledger for suppliers personal accounts
Sales
Record
Transfer
Balance
necessary
Extract
a trial balance
Identify
the books of original entry and record the following transactions in the appropriate accounts The following transactions relates to Mr. Jockey for the month of May 2011.
May 1
3 Ltd 7 10 15 17 20 30 31
The
transactions are:
Identify
transactions
Date
May 1 May 3 May 7 May 10 May 15
Account to be debited
Bank 5,000 Fixtures & fittings 2,000 Purchases 650 Bruce (Debtor) 700 Rent 200
Account to be credited
Capital 5,000 Cash 2,000 Abel (Creditor) 650 Sales 700 Bank 200
May 17 May 20
May 30 May 31
Cash & Bank Account May 1 May 17 Capital Bruce 5,000 May 3 300 May 15 Fixtures & fittings Rent 2,000 200
May 20
May 30 May 31
Delivery expenses
Drawings Wages
50
200 300
Mr. Jockey Trial Balance as at 31 May 2011 Accounts Debit 2,550 2,000 650 650 700 400 200 50 200 300 6,350 6,350 Credit
Capital
Cash and bank Furniture and fittings Purchases Creditors Sales Debtors Rent Delivery expenses Drawings Wages Total
5,000
Business Accounting
Chapters 2, 4, 5 &6
ACCA Paper
Chapters 4 & 5