2. Financial Accounting 1 Lecture – 26 Recap With the increase in business, it becomes difficult to maintain separate accounts for every Debtor and every Creditor. Control Accounts are opened in the ledger for both Debtors and Creditors. Control Accounts are part of double Entry system. Subsidiary ledgers are not part of double entry system. Control Account system is used only for credit sale and credit purchase.

3. Financial Accounting 2 Lecture – 26 Subsidiary Books To reduce the volume of general ledger, number of books are opened that are called Subsidiary books.

4. Financial Accounting 3 Lecture – 26 Subsidiary Books- Debtors Three subsidiary books are maintained in case of sales / debtors. Sales Journal / Sales Day Book – individual invoice wise sales are recorded in this Journal. Sales Return / Return Inward Journal – in case the volume of returns is also high then these are also recorded in a separate register. Debtors Ledger – this ledger maintains record of individual debtor. Cash sale is not included in the debtors control accounts.

5. Financial Accounting 4 Lecture – 26 Information for Control Accounts Opening balance of debtorsList of debtors balances drawn up to the end of previous period confirms with the aggregate balance of the Control Account. Credit Sales Periodically total of sales journal is posted into the debtors control account. Sales ReturnIn case the transaction volume of sales return is high then these are recorded in the sales return journal. Periodically the total is posted in the debtors control a/c. Cheques / Cash ReceivedList of receipts is extracted from cash and bank book. Or a separate column is maintained in cash and bank books for this purpose Closing BalanceThis is the balancing figure. It can also be checked with the total of balances in debtors Control Account.

6. Financial Accounting 5 Lecture – 26 Recording of Sales Sales Journal DateInvoic e # Name / Debtor Amount Jan 01, 20--01A10,000 Jan 15, 20--02B12,500 Jan 30, 20--03C15,000 Total37,500 Debtors Ledger A Account Debit 01/1 10,000 Credit Bal 10,000 B Account Debit 15/1 12,500 Credit Bal 12,500 C Account Debit 30/1 15,000 Credit Bal 15,000

7. Financial Accounting 6 Lecture – 26 Recording of Sales Sales Journal DateInvoice #Name / DebtorAmount Jan 01, 20--01A10,000 Jan 15, 20--02B12,500 Jan 30, 20--03C15,000 Total37,500 General Ledger Sales Account Debit side. Bal 37,500 Credit side. Jan Sales 37,500 Debtors Control Account Debit side. Jan Sales 37,500 Credit side. Bal 37,500

8. Financial Accounting 7 Lecture – 26 Recording of Sales Now if we total the balance of three accounts of the debtors ledger on Jan 30,: A10,000 B12,500 C15,000 Total37,500 It will be the same as the balance in the debtors control account of the general ledger.

9. Financial Accounting 8 Lecture – 26 Recording of Sales Return Sales Journal DateName / DebtorAmount Jan 15, 20--A1,000 Jan 20, 20--A500 Jan 25, 20--B2,500 Total4,000 General Ledger Debtors Control Account Debit side. Jan Sales 37,500 Credit side. Jan Ret 4,000 Bal 33,500 Sales Account Debit side. Jan Ret 4,000 Bal 33,500 Credit side. Jan Sales 37,500

10. Financial Accounting 9 Lecture – 26 Recording of Sales Return Sales Journal DateName / DebtorAmount Jan 15, 20--A1,000 Jan 20, 20--A500 Jan 25, 20--B2,500 Total4,000 A Account Debit 01/1 10,000 Credit 15/1 1,000 20/1 500 Bal 8,500 B Account Debit 15/1 12,500 Credit 25/1 2,500 Bal 10,000 C Account Debit 30/1 15,000 Credit Bal 15,000 Debtors Ledger

11. Financial Accounting 10 Lecture – 26 Recording of Sales Return Again if we total the balance of three accounts of the debtors ledger on Jan 30,: A 8,500 B10,000 C15,000 Total33,500 It will be the same as the balance in the debtors control account of the general ledger.

12. Financial Accounting 11 Lecture – 26 Receipts From Debtors When control accounts are used we maintain cash and bank books with separate pages for receipts and payments i.e. two column cash/bank books are not used. On the receipts side of the cash and bank book a column is added in which receipts from debtors are separately noted. This type of cash / bank book is also called multi column cash / bank book.

13. Financial Accounting 12 Lecture – 26 Recording of Receipts – Multi Column Cash Book Cash / Bank Book Receipt Side DateNoNarration / Particulars Ledger Code Receipt Amount Receipt from Debtors 10,000 500 Received from A5,000 300 Received from B2,500 Received from A1,000 Received from C1,500 950 1,000 Total22,7509,000

14. Financial Accounting 13 Lecture – 26 Subsidiary Books- Creditors The recording of creditors is similar to debtors. The subsidiary books maintained in case of purchases / creditors are: Purchase Journal / Purchase Day Book – individual purchases are recorded in this Journal. Purchase Return / Return outward Journal – in case the volume of returns is also high then these are also recorded in a separate register. Creditors Ledger – this ledger maintains record of individual creditors. Cash purchase is not included in the creditors control accounts.

15. Financial Accounting 14 Lecture – 26 Subsidiary Books - Creditors Opening balance of CreditorsList of creditors balances drawn up to the end of previous period confirms with the aggregate balance of the Control Account. Credit Purchases Periodically total of purchase journal is posted into the creditors control account. Purchase ReturnIn case the transaction volume of purchase return is high then these are recorded in the purchase return journal. Periodically the total is posted in the creditors control a/c. Cheques / Cash PaidList of payments is extracted from cash and bank book. Or a separate column is maintained in cash and bank books for this purpose Closing BalanceThis is the balancing figure. It can also be checked with the total of balances in creditors Control Account.

16. Financial Accounting 15 Lecture – 26 Recording of Purchases Purchase Journal DateName / DebtorAmount Apr 01, 20--X15,000 Apr 10, 20--Y20,000 Apr 25, 20--Z10,000 Total45,000 General Ledger Creditors Control Account Debit side. Bal 45,000 Credit side. Apr Purch 45,000 Purchases Account Debit side. Apr Purch 45,000 Credit side. Bal 45,000

17. Financial Accounting 16 Lecture – 26 Recording of Purchases Purchase Journal DateName / DebtorAmount Apr 01, 20--X15,000 Apr 10, 20--Y20,000 Apr 25, 20--Z10,000 Total45,000 Creditors Ledger X Account Debit Bal 15,000 Credit 1/4 15,000 Y Account Debit Bal 20,000 Credit 10/4 20,000 Z Account Debit Bal 10,000 Credit 25/4 10,000

18. Financial Accounting 17 Lecture – 26 Recording of Purchases Now if we total the balance of three accounts of the creditors ledger on Apr 30,: X15,000 Y20,000 Z10,000 Total45,000 It will be the same as the balance in the Creditors control account of the general ledger.

19. Financial Accounting 18 Lecture – 26 Recording of Purchase Return Purchase Return Journal DateName / DebtorAmount Apr 05, 20--X5,000 Apr 15, 20--Y8,000 Total13,000 General Ledger Creditors Control Account Debit side. Apr Ret 13,000 Bal 32,000 Credit side. Apr Purch 45,000 Purchases Account Debit side. Apr Purch 45,000 Credit side. Apr Ret 13,000 Bal 32,000

20. Financial Accounting 19 Lecture – 26 Recording of Purchase Return Purchase Return Journal DateName / DebtorAmount Apr 05, 20--X5,000 Apr 15, 20--Y8,000 Total13,000 Creditors Ledger X Account Debit 5/4Ret 5,000 Bal 10,000 Credit 1/4 15,000 Z Account Debit Bal 10,000 Credit 25/4 10,000 Y Account Debit 15/4Ret 8,000 Bal 12,000 Credit 10/4 20,000

21. Financial Accounting 20 Lecture – 26 Recording of Purchase Return Again if we total the balance of three accounts of the Creditors ledger on Apr 30,: A10,000 B12,000 C10,000 Total32,000 It will be the same as the balance in the creditors control account of the general ledger.

22. Financial Accounting 21 Lecture – 26 Payment to Creditors On the payment side of the cash and bank book a column is added in which payments to creditors are separately noted.

23. Financial Accounting 22 Lecture – 26 Recording of Payments – Multi Column cash book Cash / Bank Book Payment Side DateNoNarration / Particulars Ledger Code Payment Amount Payment to Creditors 500 5,000 Received from A2,500 3,000 Received from B1,500 1,000 Received from C1,500 1,950 1,500 Total18,4505,500