2 Lesson ObjectiveMust be able to give a basic description of the different ‘books & ledgers’ usedShould be able to describe the process of recording transactions in a book of original entryCould be able to explain what each book of original entry is used for as well as justify the need for these books
3 QuestionIf you were going to record the transaction of selling a car to Mr Smith, what details would you want to write down (record)Make a list of what you would record and why you would need this information.
4 Books of original entry First record of transactionsSeparate book for each type of transactionSalesPurchasesCashReturns in etcDate of transaction (Date order)Details relating to the salesFolio column (cross-reference to source document)Monetary amounts
5 What books are used? Day Books – records the daily transactions Sales day bookPurchases day bookReturns inwards day bookReturns outwards day bookCash Book – records the receipts & payments of cash & chequesJournal (General Journal)– all other items not included in the books aboveJournal can also be interchanged with the words “day book”
6 What are ledgers? Summary of the day books made each day Summaries placed in the LedgersSales ledger – customer personal accountsPurchase ledger – suppliers personal accountsGeneral ledger – remaining accountsExpensesNon-current assetsCapital
7 Flow Diagram All business transactions Classify – put same type of transactions togetherCredit SalesCredit PurchasesReturns InwardsReturns OutwardsCash receipts & PaymentsOther TypesEnter in Sales Day BookEnter in Purchases Day BookEnter in Returns inwards Day BookEnter in Returns Outwards Day BookEnter in Cash BookEnter in JournalEnter in double entry accounts in the various ledgers – Sales, Purchases & General Ledger
8 Types of Accounts Separated into two types of accounts Personal Accounts –DebtorsCreditorsImpersonal Accounts –Real Accounts (possessions)BuildingsMachineryInventory etcNominal AccountsExpensesIncomeCapital
9 Day Books Activity Pg 14 & 15 of your text book Complete the activity using the template givenPg 21 of your text bookComplete the exam style question using the text book to help you.
10 Cash Book Type of Ledger Can be Two or Three column Contains all details of cash & cheques receivedCan be checked against the BANK STATEMENT when received from the bank
11 Posting Completing the entry of transactions into the accounts “POST” items from sales day book to the sales ledger“POST” items from cash book to the sales ledger
12 Folio Columns Mentioned before in the Day Books Details that allow cross-reference to the Double EntryDetails of the name of the book and page numberFor Examplein the cash book - SL45 – refers to the sales ledger, page 45In the sales ledger – CB37 – refers to the cash book, page 37
13 Discounts allowed/received Discounts are given for paying an account earlyUsually a % of the total amount dueAppears in the “profit & loss” section of the Income StatementNOT a cost of goods soldNOT a deduction from the selling priceDiscounts ALLOWED – given to the customersDiscounts RECEIVED – given to the business from suppliers
14 Adding discounts to the General Ledger Total of discounts on the receipts side of cash bookEnter on DEBIT side of discounts ALLOWED accountTotal of discounts on the payments side of the cash bookEnter on the CREDIT side of the discounts RECEIVED accountNOTE that the totals of the discounts are NOT ‘brought down’ in the Cash book as per the cash & bank accounts