1. Books of Prime Entry ‘day books’

2. AAT Level 2 Foundation Certificate in Accounting Lesson 2 Objectives
Recap last lesson
Business documentation; petty cash vouchers
Understand coding systems
Understand how business documents are processed into the accounting system – books of prime entry
Introduce the sales and purchase ledger
Calculation of VAT

3. Invoices / Credit notes Receipts Payments
Cash book/ petty cash book
Sales day book
Sales returns day book
Purchases day book
Purchases returns day book
Books of Prime Entry
GENERAL LEDGER – DOUBLE ENTRY
SUBSIDIARY LEDGER – SALES LEDGER
SUBSIDIARY LEDGER – PURCHASE LEDGER

4. Books of Prime Entry
A book or computer record in which transactions are first recorded before total amounts are entered into the ledgers.
Transactions are recorded into the books of prime entry from their source document.

5. Credit Sales BUY NOW, PAY LATER Payment received from customer
Credit Sale to customer
Payment received from customer
Invoice issued to customer
Business document
Sales Day Book

6. The sales day book
It is a list of sales invoices sent to credit customers for a period of time; week, month
Details of the customer and the amount of the invoices are analysed

7. Sample sales day book Date Customer Ref Invoice number Total £ VAT Net
1/05/14
Grigsons Ltd
SL21
10356
199.20
33.20
166.00
Hall & Co
SL05
10357
103.60
15.60
88.00
Harris & Sons
SL17
10358
120.00
20.00
100.00
2/05/14
Jaytry Ltd
SL22
10359
309.60
51.60
258.00
TOTAL
732.40
120.40
612.00
Casting – adding vertically
Cross casting – adding horizontally

8. Sales Ledger
The sales ledger keeps all transaction information for each credit customer
Credit customers who owe money are known as
TRADE RECEIVABLES (Debtors)

9. Analysed sales day book : See p35
Annotate entries to GL and SL
Work through example Activity 1 p36

10. Sales returns day book
Goods may be returned to a supplier because they are faulty, inaccurate or as a result of a prior agreement
Items are sent back with a goods returned note and a credit note is then issued by the supplier
The credit note reverses all /part of the sales invoice
The sales returns day book lists returns – the invoice number column is replaced with the credit note number
If returns are low, businesses may not run a sales returns day book, but will enter credit notes as a negative number in the sales day book

11. Sales Returns day book Date Customer Ref Credit note number Total £
VAT
Net
4/05/14
Grigsons Ltd
SL21
CN668
72.00
12.00
60.00
5/05/14
Harris & Sons
SL17
CN669
96.00
16.00
80.00
TOTAL
168.00
28.00
140.00

12. Show Illustration 2: p37
Work through example activity 2
p37

13. Credit Purchases BUY NOW, PAY LATER Credit Purchase from supplier
Payment made to
supplier
Invoice issued by supplier
Business document
Purchases day book

14. The purchases day book
Similar to the sales day book but records a list of the purchases invoiced; detailing the supplier, vat and analysed goods.

15. Purchase day book
Date
Supp
Ref
Invoice number
Total
VAT
Net
Purchases
Telephone £
Stationery
1/1/16
Haley Ltd
PL25
33728
60.00
10.00
50.00
2/1/16
JJ Bros
PL14
242G
240.00
4/1/16
B Tel
PL06
530624
154.00
24.00
130.00
TOTAL
274.00
Ref – the supplier code number in the purchase ledger
Invoice number – this is on the sales invoice from the supplier
Total – gross figure including VAT as on the invoice
Net – the total on the invoice before VAT is added
Vat – the value on the purchase invoice

16. Purchase Ledger
The purchase ledger keeps records of individual credit purchases by supplier
Credit suppliers who a business owes money to are known as
TRADE PAYABLES (Creditors)

17. Show Illustration 4 p40
See p 41 Activity 3

18. Purchases returns day book
A credit note would be issued by the supplier for any purchases that are returned
These are entered into the purchases returns day book (replacing the invoice number column)
If the business does not run a purchases returns day book due to low volumes of such transactions, they will enter credit notes as a negative value in the purchases day book

19. Purchase Returns day book
Date
Supp
Ref
Credit note number
Total
VAT
Net
Purchases
Telephone £
Stationery
4/5
Haley Ltd
PL25
CN783
24.00
4.00
20.00
5/5
JJ Bros
PL14
C52246
69.60
11.60
58.00
TOTAL
93.60
15.60
78.00

20. See Illustration 5 p42
Activity 4 p42

21. The Cash Book
The cash book records cash receipts and payments, whether through the bank or in coins or notes – excluding petty cash (payments for low value everyday items comes out of a petty cash float)
Receipts and payments may be in cash, cheque or by bank transfer

22. The cash book is split into two sides:
Cash Receipts Book (CRB) = Debit side
Cash Payments Book (CPB) = Credit side

23. Credit Sales BUY NOW, PAY LATER Payment received from customer
Credit Sale to customer
Payment received from customer
Invoice issued to customer
Business document
Sales Day Book
Cash Receipts Book

24. Cash receipts book - Debit side
Date
Description
Ref
Bank £
Cash
Vat
Trade Receivables
Sales £
TOTAL
Description- such as the name of the customer paying
Ref – sales ledger code for that customer, or BACS, Cq etc
Cash = notes and coins
Total - including VAT
VAT – vat on items that have not gone through the SDB
Trade receivables are receipts from credit customers – INCUDING VAT

25. See Illustration 3 p39

26. Credit Purchases BUY NOW, PAY LATER Credit Purchase from supplier
Payment made to
supplier
Invoice issued by supplier
Business document
Purchases day book
Cash payments book

27. Cash payments book – credit side
Date
Desc
Ref
Total
Vat
Trade Payables
Cash
Purchases £
Premises
Costs
Stationery
TOTAL
Description- such as the name of the supplier you are paying
Ref – purchase ledger code for that supplier, or BACS, Cq etc
Total - included VAT
Trade payables - total amount paid to a supplier (or a ‘payable’), this would include the vat
Expenses paid will be analysed in columns such as premises costs and stationery

28. See Illustration 6 p43

29. Sales Ledger
See illustration 7 p45
Activity 5 p46

30. Purchase Ledger
See illustration 8 p47
Activity 6 p48

31. Homework lesson 2 Make sure you have:
Read chapter 1
Completed the test your learning questions p30
Completed question bank chapter 1
Know the keywords for chapter 1 p26 & 27
Completed Knowledge topic 1 all questions
Complete Knowledge topic 2 questions