1. 6-1 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson Chapter 6 – Cash and Credit Journals Learning Outcome The outcome for this chapter is to prepare four special journals from source documents

2. 6-2 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson KEY TERMS Cash journals Cash payments journal (CPJ) Cash receipts journal (CRJ) Credit journals Journal Purchases dissection journal (PJ) Sales dissection journal (SJ) Trial Balance

3. 6-3 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson SOURCE DOCUMENTS Source documents that generate accounting entries: –sales invoices –receipts/cash register tapes –purchase invoices –cheques –adjustment notes –memoranda

4. 6-4 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson PROCESS TO TRIAL BALANCE Sales invoices/purchase invoices/receipts or cash register tapes/ cheques and electronic payments/adjustment notes/memoranda Transactions from source documents The four cash and credit journals and the General journal Lead to accounting entries in Posted to the general ledger and to the debtors and creditors subsidiary ledgers Which are Prepare a Trial Balance at the end of the accounting period To

5. 6-5 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson INVENTORIES—STOCK OR GOODS Balance of inventories on hand is an asset. Purchase of inventories sold is an expense: –Cash purchases—CPJ –Credit purchases—PJ. Sale of inventories is revenue: –Cash sales—CRJ –Credit sales—SJ.

6. 6-6 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson PERIODIC INVENTORY SYSTEM Inventory balance determined by stocktake Profit determined by deducting inventory balance from cost of goods sold at end of period For purchase: DR: Cost of goods sold (purchases) DR: GST input tax credits CR: Accounts payable/cash

7. 6-7 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson PERPETUAL INVENTORY SYSTEM Separate inventory cards for each item Show continual stock movement Physical stocktakes allow comparison with stock records Distinguishes between cost and selling price For purchase: DR: Inventories DR: GST input tax credits CR: Accounts payable/cash

8. 6-8 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson FOUR CASH AND CREDIT JOURNALS Sales dissection journal, including sales returns journal –Records credit sales –Records goods returned by debtors Purchases dissection journal, including purchases returns journal –Records credit purchases –Records stock returned to creditors

9. 6-9 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson FOUR CASH AND CREDIT JOURNALS cont… Cash receipts journal –Details cash received Cash payments –Details cash paid out

10. 6-10 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson JOURNALISING TRANSACTIONS

11. 6-11 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson CREDIT JOURNALS Sales dissection journal Records credit sales Records inventory returns Records sales of non-current assets Source documents –Sales invoice –Credit or adjustment note

12. 6-12 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson CREDIT JOURNALS cont… Purchases dissection journal Records credit purchases Records inventory returned Records purchases of non-current assets Records expenses for items received but not yet paid Source documents –Purchase invoice –Credit or adjustment note

13. 6-13 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson CASH PAYMENTS JOURNAL Records all cash paid out from bank accounts for payment of: trade creditors other creditors cash purchases and expenses other liabilities (e.g. loans, leases)

14. 6-14 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson CASH RECEIPTS JOURNAL Records all cash received and paid into bank accounts from: trade debtors other debtors cash sales receipts from other sources of revenue (e.g. interest and dividends received)

15. 6-15 Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Introductory Accounting 2r, by David Willis By Kaye Watson ADVANTAGES OF USING SPECIALISED JOURNALS Records only one type of transaction Totals posted to ledgers rather than individual transactions Different staff use the journals, providing an internal control to reduce error and fraud