Books of Original Entry, Ledgers
Discount allowed account
*see photo in notes
How do we post from Sales Return journal to the ledgers?
1. *Credit* EACH customers account shown in the Sales Returns Journal. Their account will be found in the Sales Ledger. 2. *Debit* Sales Returns account (in general ledger) with the total of the Sales Returns Journal on the last day of the month.
What do we NOT post from the petty cash book to the ledgers?
1. Balance b/d and c/d 2. Cash account (goes in Cash book) 3. Bank account (goes in cash book)
What items do we NOT post from the cash book to ledgers
1. Balance b/d's and c/d's 2. Cash account 3. Bank account *Don't post cash or bank if in details column in cash book also*
How do we post from the Purchases Journal to the Ledgers?
1. CREDIT *each* suppliers account shown in the Purchases Journal. The supplier's account will be found in the Purchases Ledger. 2. DEBIT the Purchases account (General Ledger) with the total of the Purchases Journal on the last day of the month.
How do we balance the petty cash book (mention restoring float and analysis columns)
1. Calculate the totals of both the debit and credit side. 2. Calculate the balance c/d by subtracting the lesser from the larger side. 3. The Balance c/d will go on the side with the lowest total and will then become the balance b/d at the start of the next period on the opposite side. 4. We then subtract this balance from the original float to find out how much money is required to restore the float (imprest system). 5. For the analysis columns, we just calculate their totals and underneath that, we write which ledger the categories belong to. (e.g. postage and stationary go in the nominal/general ledger).
How do we post from the Purchases return journal to the ledgers?
1. DEBIT *each* supplier's account shown in the Purchases return journal (as this will mean they are your trade payable and the amount you owe them will decrease). The supplier's account will be found in the purchases ledger. 2. Credit the purchases return account (general Ledger) with the total from the Purchases Return Journal on the last day of the month.
How do we post from Sales Journal to ledgers?
1. Debit EACH customer's account shown in the sales journal. The customers account will be found in Sales Ledger. 2. Credit the Sales account (in the General ledger) with the total of the sales journal on the last day of the month.
What are 2 reasons why a business maintains a petty cash book?
1. To monitor usage of petty cash 2. To record the details of the petty cash book
What is recorded in the Cash Book?
1. Transactions or business documents dealing with cash and cheques received and paid. 2. Cash discounts allowed to debtors/ credit customers and cash discounts received from creditors/ credit suppliers
What are the various types of Books of original/prime entry?
4 -> Deal with stock/Inventory on credit. *Sales Journal, Sales Returns Journal, Purchases Journal, Purchases Returns journal 2 -> Deal with cash and cheques *Cash book, petty cash book 1 -> For accounts/transations that don't fall into any of the other categories (the dustbin) *General Journal
What is the sales return journal?
A book of original entry which is used to record goods/stock returned to firm by customers and overcharges. See image in notes.
What is a dishonoured cheque?
A cheque sent by a debtor that the bank refuses to pay because the debtor does not have enough money in his/her bank account. This will reduce the money in the business' bank account as no money would've been put in from the cheque. Other reasons for dishonoured cheques are there is a mistake on the cheque.
What is float?
A fixed amount of money from which petty cash payments are made that comes from the cash book (bank account)
Balancing in the Cash Book: Bank Columns
Balance. Debit value less credit value. Balance will be c/d and b/d
Balancing in the Cash Book: Cash Columns
Balance. Debit value less credit value. Balance will be c/d and b/d
How to we calculate the % of the discount.
Discount $ value divided by original number, then multiplied by 100.
How do we find cash discount?
Discount = amount owed x decimal discount multiplier *Decimal discount multiplier: subtract the % from 100 and then divide by 100. e.g. if our rate was 3%, then our decimal discount multiplier would look like 0.97.
How do we post from the accounts on the credit side of the cash book to other accounts in the ledgers?
For all other accounts on the CREDIT side of the cash book: post to the DEBIT side of the account shown in the details column in the cash book. Enter Cash, Bank, or discounts received in the details column of the relevant account. This will complete double entry.
How do we post from the accounts on debit side of the cash book to other accounts in the ledgers?
For all other accounts on the DEBIT side of the cash book: post to the CREDIT side of the account shown in the details column in the cash book. Enter Cash, Bank, or discounts allowed in the details column of the relevant account. This will complete double entry.
How do we know if cash discount has been subtracted from amount owing?
If you see $ paid or received, this means that the $ received or paid is AFTER the discount has been subtracted. If you see paid or received amount owed or debt. This means the discount has not been subtracted.
Meaning of Imprest amount
Imprest amounts is another way of saying float
The different formats of the Petty Cash Book... date and details columns...
In some questions, you may have two date and details columns - on the both the credit and debit sides. In others, you may only have one date and details column which splits the credit and debit sides.
What business document is used to update the sales journal?
Invoice issued by the supplier (business)
What is the function of ledgers?
Ledgers (like folders) hold accounts (which are like the pages).
How do we calculate the original value before discount was deducted?
New value + monetary value of discount
Do we record the trade discount in the journals/accounts?
No. Always record the amount AFTER deducting the trade discount. (List price x decimal discount multiplier)
How do we post the total of the discount received from the cash book to ledger?
Post to the credit side of the discount received account in the nominal (general) ledger. *Discount received is revenue/income and the value is increasing*
How do we post the total of the discount allowed from the cash book to ledger?
Post to the debit side of the discount allowed account in the Nominal (General) ledger at the *end of the period*. *Discount allowed is an expense and the value is increasing*
How to post from the general journal to ledgers.
Post to the side indicated in journal. Usually, the account that is debited is recorded above the account that is credited.
How do we post the totals of the analysis columns from the petty cash book to the ledgers?
Post totals of the analysis columns to the debit side of the account in the nominal (general) ledger.
What does the Imprest System refer to?
Refunding the amount paid as the end of each period so that the petty cashier can start the new period with the float or imprest amount.
What are the names of the ledgers and what type(s) of accounts do they hold?
Sales/Debtors Ledger - contains accounts of Trade Payables - NOT SALES!!! Purchases/Creditors ledger - contains accounts of Trade Receivables - NOT PURCHASES!!! Nominal/General Ledger - for all other accounts (like the dustbin).
Discount received account
See image in notes*
Three Column Cash Book
See picture in notes*
What business document is used to update the Sales returns journal?
The Credit Note issued by the supplier (business).
What is the General Journal
The General Journal is like the dustbin where transactions which don't fall into any of the other categories go (e.g. sales of assets, purchase of equipment)
What is the business document used to update the purchases journal?
The Invoice received by the firm (customer).
What is the Purchases Journal?
The Purchases Journal is a book or original entry which is used to record transactions dealing with the purchase of goods or Stock on credit. See image in notes.
What are the analysis columns in the petty cash book?
The analysis columns in the petty cash book break down how the petty cash is being spent. The analysis columns may consist of: postage and stationary, general expenses, ledger accounts, travel, cleaning expenses etc.
What is Bank overdraft in the cash book?
The bank allows a person to spend more than they have. It is also a type of loan and must be repaid. It is shown as a balance b/d on the credit side of the bank account in the cash book.
Meaning of petty cash voucher
The business document used to record all low cash value payments. It is also used to update the petty cash book
What business Document is used to update the purchases return journal?
The credit note received by the customer/firm.
What is a petty cashier?
The person(s) who makes small cash payments and is responsible for the petty cash book.
What is the petty cash book?
The petty cash book is used to record transactions of low value cash payments. Like the cash book, it is also a ledger account (has a debit and credit side). Information from the petty cash book must be posted to ledger accounts. (see photo in notes)
What is the Purchases Returns Journal?
The purchases return journal is a book of original entry used to record transactions dealing with goods or stock returned to the supplier.
What is the Sales Journal?
The sales journal is a book of original entry which is used to record transactions dealing with sales on credit. See picture in notes.
What do we post from the petty cash book to the ledgers?
The totals of the analysis columns
How many Ledgers are there?
There are 3 ledgers.
Balancing in the Cash Book: Discount Columns
These are added NOT balanced. DO NOT subtract discount allowed from discount received amounts.
What is a contra entry?
When both the debit and credit part of a transaction are entered in the cash book. Examples: Withdrew money from the bank for office use (cash): Dr: Cash, Cr: Bank Put cash into the bank: Dr: Bank, Cr: Cash