Books of original entry & ledgers ACCN1

Lesson Objective Must be able to give a basic description of the different ‘books & ledgers’ used Should be able to describe the process of recording transactions in a book of original entry Could be able to explain what each book of original entry is used for as well as justify the need for these books

Question If 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.

Books of original entry First record of transactions Separate book for each type of transaction Sales Purchases Cash Returns in etc Date of transaction (Date order) Details relating to the sales Folio column (cross-reference to source document) Monetary amounts

What books are used? Day Books – records the daily transactions Sales day book Purchases day book Returns inwards day book Returns outwards day book Cash Book – records the receipts & payments of cash & cheques Journal (General Journal)– all other items not included in the books above Journal can also be interchanged with the words “day book”

What are ledgers? Summary of the day books made each day Summaries placed in the Ledgers Sales ledger – customer personal accounts Purchase ledger – suppliers personal accounts General ledger – remaining accounts Expenses Non-current assets Capital

Flow Diagram All business transactions Classify – put same type of transactions together Credit Sales Credit Purchases Returns Inwards Returns Outwards Cash receipts & Payments Other Types Enter in Sales Day Book Enter in Purchases Day Book Enter in Returns inwards Day Book Enter in Returns Outwards Day Book Enter in Cash Book Enter in Journal Enter in double entry accounts in the various ledgers – Sales, Purchases & General Ledger

Types of Accounts Separated into two types of accounts Personal Accounts – Debtors Creditors Impersonal Accounts – Real Accounts (possessions) Buildings Machinery Inventory etc Nominal Accounts Expenses Income Capital

Day Books Activity Pg 14 & 15 of your text book Complete the activity using the template given Pg 21 of your text book Complete the exam style question using the text book to help you.

Cash Book Type of Ledger Can be Two or Three column Contains all details of cash & cheques received Can be checked against the BANK STATEMENT when received from the bank

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

Folio Columns Mentioned before in the Day Books Details that allow cross-reference to the Double Entry Details of the name of the book and page number For Example in the cash book - SL45 – refers to the sales ledger, page 45 In the sales ledger – CB37 – refers to the cash book, page 37

Discounts allowed/received Discounts are given for paying an account early Usually a % of the total amount due Appears in the “profit & loss” section of the Income Statement NOT a cost of goods sold NOT a deduction from the selling price Discounts ALLOWED – given to the customers Discounts RECEIVED – given to the business from suppliers

Adding discounts to the General Ledger Total of discounts on the receipts side of cash book Enter on DEBIT side of discounts ALLOWED account Total of discounts on the payments side of the cash book Enter on the CREDIT side of the discounts RECEIVED account NOTE that the totals of the discounts are NOT ‘brought down’ in the Cash book as per the cash & bank accounts