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Books of BOOKS OF ORIGINAL ENTRY
INTRODUCTION
In many businesses today, some form of documentation usually supports business transactions. These source documents, as they are called, are used to record information in daily journals or books of original entries. These journals are the first form of official records of any transaction. Generally, they are not part of the double entry system. With the exception of the cash book and the general journal the terms debit and credit do not appear in any other book of original entry. In this study guide, you will be introduced to the documents that form the basis of accounting records as well as use the documents to make records in these journals. You will also learn about journals that are used to record changes in stock levels as well as cash and bank transactions. You will learn to make records in these journals as well as post them to their specific ledgers.
GENERAL OBJECTIVES
At the end of this Study Guide, you should:
1. understand the need for proper documentation of business transactions;
2. appreciate the importance of keeping records of all business transactions.
SPECIFIC OBJECTIVES
You should be able to:
1. explain the uses of the books of original entry;
2. distinguish between cash and credit transactions;
3. identify source documents related to books of original entry;
4. distinguish between cash and trade discounts;
5. use source documents to make entries into books of original entry;
6. indicate treatment of totals from books of original entry.
CONTENT
Books of Original Entry
Cash and credit transactions
Source documents
Trade and cash discounts
Discounts allowed and received
Balancing the Cash Book The imprest system and the Petty Cash Book
BOOKS OF ORIGINAL ENTRY
The use of Books of Original Entry promotes the division of the ledger which assists management in data analysis. They make it easier to retrieve information on debtors and creditors, saves time and eliminates many details from the ledger.
The following table shows a list of the books of original entry as well as the source document (s) which form the basis of the recording in the books.
BOOK OF ORIGINAL ENTRY
TRANSACTIONS RECORDED SOURCE DOCUMENT USED
SALES DAY BOOK CREDIT SALES OF INVENTORY (STOCK)
SALES INVOICES
PURCHASES DAY BOOK
CREDIT PURCHASES OF INVENTORY (STOCK)
PURCHASES INVOICES
CASH BOOK ALL CASH AND BANK TRANSACTIONS, FOR EXAMPLE, CASH SALES, RECEIPTS FROM DEBTORS (ACCOUNTS RECEIVABLES), PAYMENTS TO CREDITORS
BANK DEPOSIT AND WITHDRAWAL SLIPS, CHEQUES DEBIT AND CREDIT CARD RECEIPTS
RETURN INWARDS JOURNAL
GOODS RETURNED BY CUSTOMERS CREDIT NOTE SENT
RETURN OUTWARDS JOURNAL
GOODS RETURNED TO SUPPLIERS CREDIT NOTE RECEIVED
PETTY CASH BOOK CASH TRANSACTIONS OF SMALL VALUE
PETTY CASH VOUCHERS, CASH BILLS
GENERAL JOURNAL ALL TRANSACTIONS WHICH CANNOT BE RECORDED IN ANY OTHER BOOK OF ORIGINAL ENTRY
BILLS, RECEIPTS, VOUCHERS, CANCELLED CHEQUES.
CASH AND CREDIT TRANSACTIONS
Cash transactions occur when payment is received or made when the transaction takes place. This includes the use of credit cards and debit cards. A credit transaction is one where payment is to be made some time in the future, after the transaction. It is
important to distinguish between these two types of transactions since the accounting treatment differs as well as the impact on the balance sheet.
(Activity 3.1)
Robert is the owner of an Auto Part shop located in Papine, Kingston. He purchases 500 carburetors from Massey Marketing at $35 each, together with 100 shock absorbers at $10 each and 75 disc pads at $25 each. The goods were delivered one week after the order was placed. On checking the order Robert discovers that the disc pads were the wrong brand and he returns them to Massey Marketing. On checking, Massey Marketing did not have the correct brand in stock and so Robert was forced to purchase the disc pads for cash at Car Tech Limited.
Answer the following questions which are based on the scenario above:
Identify the document Robert receives from Massey Marketing with his order. Name the document Massey Marketing would issue to Robert after he returns the disc
pads.(Activity 3.1 – cont’d)
What document would Robert receive from Car Tech Ltd when he purchases the correct brand of disc pads?
Name the prime entry books in Robert’s business where the above transactions would be recorded.
Feedback
(a) The document received would be a Sales Invoice(b) Credit Note
Cash Bill Purchases Journal, Return Outwards Journal, Cash Book
Debit Cards
These are issued by commercial banks to customers allowing them to access their accounts using automatic banking machines (ABM’s). I am sure you have seen commercials for debit cards. In Trinidad and Tobago they are referred to as ‘LINX’cards. The customer’s account is immediately debited at the point of sale and the seller’s account is credited. This type of payment has become more popular to avoid a large amount of cash on the premises. The receipts from debit cards are used to make records in the cash book.
Credit Cards
Credit cards allow customers to charge their purchases of goods and services instead of paying cash. When the credit card is presented to the seller, it must be verified to ensure the sale does not exceed the approved amount. The use of computers allows the sellers’ account to be credited with the amount. A percentage of the sale price is charged by commercial banks for all credit card transactions. Popular credit card companies include VISA, Master Card and American Express.
SOURCE DOCUMENTS
A source document records the essential elements of any transaction; the date, name and address of the names of the parties involved and the value of the transaction. They form the basis for the accounting records that are kept by the business. These documents are retained for future verification. Let us now examine a very common document that is used in most transactions, an Invoice.
Invoice
An invoice is a document sent to credit customers giving a detailed description of the items, unit price and the terms and conditions of the transaction. The order number, as well as the name and address of the customer, are also printed on the invoice. Sometimes the invoice would also alert customers of interest charges when there are overdue balances. An invoice is made in triplicate and the copies are used by different departments to keep their own records. Sales invoices are used to record transactions in the Sales Journal. The Purchases Invoice is sent by vendors and is used to make records in the Purchases Journal. Both the buyer and the seller receive copies of the invoice and use them to make records.
INVOICETHE PLANT EMPORIUM
Orange Valley RoadSan Juan
Invoice No:45678Date
Customer Name Address Order No.
Telephone Fax:
Qty DescriptionUnit Price Total
TotalPayment:
Terms and Conditions E&OE
Credit Note
This is a document sent to a buyer when there is a reduction in the amount charged on an invoice. This may occur when goods are returned or when there is an error in pricing. Goods would normally be returned if they are faulty or damaged in some way.
Debit Note
If errors occur when an invoice is being prepared the document which is sent to customers to change the amount charged on the original invoice is a debit note. It is sometimes referred to as a supplementary invoice. Errors may occur if additional goods were sent to the customer or there was an error on the original invoice.
Discounts
A discount is a reduction in the price of an item. In accounting there are two types of discounts; cash discounts and trade discounts. Cash discounts are given as incentives to customers to make payments on their account within a specified period of time. Trade discounts reduce the catalogue price of an item and are intended to encourage trade. Although they are shown on the sellers invoice, trade discounts are not recorded in the ledger of the buyer or seller.
(Activity 3.2)
Grey Singh received an order from Jim Young, a credit customer with the following details on September 30 2007:
6x20 inch planter @ $18.00 each12kgs Fertilizer @12.50 per kg20 bottles of Liquid Grow @ $18.50
The following terms and conditions applied:
Trade discount 10%5½% 7 days2½% 30 daysE & O E
You are required to prepare the invoice to be sent to Jim Young.
Explain the meaning of the terms and conditions outlined.
Feedback
INVOICEGREY SINGH
Orange Valley RoadInvoice No:
1245
San JuanDATE
30/09/07Customer NameJim Young
AddressRailway RoadSea View
Order No.005
Telephone: 640 8767
Fax: 989 2007
Qty DescriptionUnit Price Total
12 kgs620
Fertilizer20” Planters - greenBottles Liquid Grow
$12.50$18.00$18.50
$150.00$108.00$370.00
$628.00
Payment: Less 10% Trade discount $62.80
Total $565.20
Terms & Conditions
5½% 7 days2½% 30 days
E&OECarriage Paid
The Terms of payment suggest a cash discount of 5½% if the total of $565.20 is paid within 7 days after receipt of the invoice. If the total due is paid within 30 days, Mr. Young is entitled to a 2½% discount. E&OE stands for errors and omissions excepted. It allows the seller the right to alter the invoice even after it has been sent to the buyer if any errors or omissions are discovered.
RECORDING TRANSACTIONS
Specialized Journals for Stock
As we discussed in an earlier Study Guide, a Journal is a daily record of business in chronological order. The Sales, Purchases and Return Journals, also called books of original entry or day books, record transactions dealing only with stock (inventories). TheSales journal record only credit sales of stock and the Purchases Journal records credit purchases of stock. The Returns Journals records goods previously bought or sold on credit that have been returned to suppliers or by customers. Cash sales and purchases of goods are not recorded here, neither the purchase nor sale of fixed assets. These are recorded in the Cash book and the General Journal, respectively. The layout of the journal is shown below.
Illustration: Format of Journal
Date
Details Folio
Amount
Date on the Invoice
Any business involved in a large amounts of credit transactions would find it advantageous to use specialized journals. Managers can quickly get totals regarding credit sales and purchases. The Purchases and Return Inwards Journal record increases in stock whilst the Sales and Return Outwards Journals records decreases in stock.
Example
Demonstrating the recording of transactions in Books of Original Entry
J. Flowers is the sole owner of The Plant Emporium. Her records show the following transactions for the month of June 2006.
June 01 Sold goods on credit to Green Leaf $110, R. Fig $689 and S. Tato $725 June 05 Received Invoices from T. Tin $1 750 and S. Steel $1 105June 10 Bought goods on credit from Planters Place $1875June 13 S. Tato returned $125 worth of goodsJune 18 Sold goods on credit to R. Fig with a list price of $1800, allowing a 2.5% Trade discountJune 20 Returned goods to T. Tin $250
Record the above transactions in the appropriate books of original entry.
Feedback to Example
JOURNAL
PURCHASES JOURNAL
Date Details Folio
Amount ($)
06/01/06 Green Leaf SL 110.00
R. Figg SL 689.00
S. Tato SL 725.00
06/18/06 R. Figg SL 1800
Less 2½% trade discount (45) 1 755.00
Total Credited to the Sales A/C
3279.00
Date Details Folio
Amount Amount
06/05 T. Tin PL 1 750.00
S. Steel PL 1 105.00
06/10 Planters Place PL 1 875.00
06/30 Total Debited to Purchases A/C
GL 4 730.00
RETURN OUTWARDS JOURNAL
Date Details Folio Amount Amount
06/20 T. Tin PL 250
Total Credited to Return Outwards a/c
250
RETURN INWARDS JOURNAL
Date Details Folio Amount
Amount
06/13 S. Tato 125
Total Debited to Return Inward a/c
125
(Activity 3.3)
Now that you are familiar with the recording procedures of the day books you are to enter up the sales, purchases, and returns day books from the following details for the month of May 2006.
May 1 Sold goods on credit to L. Long $800, S. Short $1250 and B. Stone $1 620May 3 Bought goods on credit from S. Lewis $730, J. Makoy $950May 4 S. Short returned goods to us $370May 8 Bought goods on credit from A. Ladi $840, B. Ready $1750May 9 Returned faulty goods to B. Ready $500May 10 Sold goods on credit to Tovadis Limited $1 290 less 10% trade discountMay 15 Credit purchases from S. Lewis $510, J. Makoy $ 450May 18 Returned goods to J. Makoy $190May 24 Credit sales to L. Long $2 700, B. Stone $970May 28 B. Stone returns some of the goods purchased on May 24, $180May 30 Tovadis Limited returned goods with a list price of $200
Record the above transactions and determine the amount to be transferred to the Sales a/c, Purchases a/c, Return Inwards and Return Outwards a/cs.
Feedback
Total credit sales $8 501Total credit purchases $5 230Total return inwards $730Total return outwards $690
The General Journal
We just learnt that the specialized journals are used to record transactions dealing with credit sales and purchases of stock. Other transactions that are unable to fit into those categories, such as the credit purchase or sale of fixed assets, are recorded in the General Journal. Although the format is essentially the same as that of the specialized journals, the general journal further analyses the transactions into debit and credit, indicating which account is to be debited and which account is to be credited. The format of the General Journal is shown below.
GENERAL JOURNAL
Date Details Folio A/C Debited
A/C Credited
Journalising is the process of recording entries in the Journal. As with the specialized journals, transactions are recorded in chronological order. The accounts involved are identified and the account to be debited is written first. Indented on the second line is the account to be credited. A special feature of the general journal is the narration, which follows every journal entry. The narration briefly explains the transaction recorded.
Example
Demonstrate the use of the General Journal in recording varying transactions.
May 16 2006 The Plant Emporium purchased, on credit, machinery costing $17 890, from Mackal Limited.
May 20 2006, the Cashier received a voucher for $1150 to pay the insurance for the owner’s personal car.
May 30th 2006, the owner invested a further $21000 into the business from her private savings.
Before these are recorded in the journal, the accounts involved are identified. Then, using double entry rules of entry they are recorded in the general journal.
Date Details Folio A/C Debited
A/C Credited
May 16 06
Machinery GL 17 800
Mackal Limited GL 17 800
Fixed asset purchases on credit
May 20 06
Drawings GL 1 150
Cash GL 1 150
Cash paid for owners personal insurance
May 30 06
Bank GL 21 000
Capital 21 000
Additional investment by owner
The following transactions are usually recorded in the General Journal:
1. Opening entries – this is a list of assets and liabilities used to begin a new accounting period. (See the example below).
2. The purchase and sale of fixed assets on credit.
3. Correction of errors.*
4. Closing entries.*
5. Writing off uncollectible debts (bad debts).*6. Depreciating fixed assets.*
*These topics are to be dealt with in a subsequent study guide.
The following shows the opening entries of R. Bull at February 01 2006
Date Details (Account Titles) Folio Debit$
Credit$
02/01
Motor VehiclesFurnitureBuildingCash in handBankStock on handDebtor: R. Syms
Creditor: Beltronics LimitedBank Loan
Capital
35 00060 000
120 0001 200
35 49014 500
8 210
26 10040 000
208 300
Being Assets, Liabilities and Capital as at Feb. 01.06
274400 274400
You should note that the columns are totalled.
(Activity 3.4)
J. Hermanson began his second year of trading as a sole trader on June 01 2006 with the following balances: Cash $1650; Bank $8200, Debtors: W. Wilde $750, Plant and Machinery $97000; Office Equipment $34000; Stock $4370; Creditor: S. Sweete $1450.
Journalise the above opening entries.
Feedback
Date Details (Account Titles) Folio Debit$
Credit$
1/6/06 Plant and MachineryOffice EquipmentStockCash in handBankDebtor: W. Wilde
Creditor: S.SweeteCapital
97 00034 000
4 3701 6508 200
750
1 450144 520
Being Assets, Liabilities and Capital as at Feb. 01.06
145 970 145 970
The Cash Book
I am sure you will agree that cash is the lifeblood of any business. Therefore, care should be taken when recording transactions relating to cash or bank. The Cash book is a unique book of original entry. Although it is a journal, it also acts as an account for Cash and Bank. This is the only book of original entry that is balanced and the double entry is completed in the ledger. The cash book records the receipts and payments of cash and bank. Discounts received and allowed are also recorded in the cashbook for convenience. The format of the Cash book is also unique, in that the accounts for cash and bank stand side by side along with the discount column. All receipts are debited and payments credited. The illustration below shows the basic format of a three-column cash book, (which includes the discount columns). A two column cash book is one without the discount column.
THE CASH BOOK
Date
Details(RECEIPTS)
F Cash
Bank Dis All
Date
Details(PAYMENTS)
F Cash
Bank DisRec
DEBIT SIDE CREDIT SIDE
Recording Entries in the Cash Book
When a document is received, the first analysis is to determine where it should be recorded. Any document relating to cash or bank, such as, cheque vouchers, cash bills and receipts are used to make records in the cash book. Again it is done in chronological order and the name of the account in the ledger is written in the details column. If the transaction involves the bank then the amount is written in the bank column. If it is a cash transaction, then the amount is written in the cash column. Any discount received or allowed is placed in the discount column.
(Activity 3.5)
List at least five source documents that can be used to make entries in a three column cash book.
Feedback
Your answer should include: Receipts, Cash bills, Payment vouchers, Deposit slips, Cash register slips, cheque counterfoil. Contra Entries
Since both cash and bank accounts are in the cash book, it is possible to complete the double entry in the cash book if the transaction involves both accounts. When this happens it is described as a contra entry. These occur when cash is deposited into the bank or cash is withdrawn from the bank for use in the office.
BALANCING THE CASH BOOK
The Cash Book is balanced to determine the amount of cash in hand and bank. To balance the Cash Book means making both sides equal. The columns for Cash and Bank on both sides of the cash book are totaled. The difference (balance) is determined and added to the side with the smaller amount. The cash column will always carry a debit balance; this means that the debit side will always be greater than the credit side, since it is not possible to overspend cash. A credit balance (also called an overdraft) on the bank account signifies that the account has been overdrawn, that is, cheques were written in excess of the amount in the bank. Sometimes this is done with the permission of the bank. If no permission is given then any cheques presented for payment would not be honored by the bank for payment.
Now that you have some idea about recording transactions in the cash book go through the following example, which demonstrate recording of transactions in a three column cash book.
Example
Record the following transactions of Seren Dippity, a retailer, in his three column cash book for the month of April 2006. $April 01 Cash at bank 1 800 03 Cash sales 1 490 08 Paid cash for cleaning 124 10 Received a cheque from B. Calm 1 500 15 Purchases paid by cheque 1 380 17 Paid rent by cheque 750 19 Received a cheque from S. Leep to settle his account of $700 less 5% discount
21 Paid cash into bank 1 20024 Received $900 cash from P. Paine to settle his account of $95026 Paid D. Serene by cheque to settle an account of $840 less 5% discount.
Balance the cash book and bring down the balance at the end of the month.
Feedback to the example
THE CASH BOOK
Date Details(RECEIPTS)
F Cash Bank Dis All
Date
Details(PAYMENTS)
F Cash Bank DisRec
4/1 Balance b/f
1800 4/8 Cleaning 124
4/3 Sales 1490 4/15 Purchases 1380
4/10 B. Calm sl 1500 4/17 Rent 750
4/19 S. Leep sl 665 35 4/21 Bank C 1200
4/21 Cash C 1200 4/26 S. Serene 798 42
4/24 P. Paine 900 50 4/30 Balance c/d 1066 2237
2390 5165 85 2390 5165 42
5/1 Balance b/d
1066 2237
(Activity 3.6)
Write up the three column cash book of S. Sui from the following details and balance the cash book at the end of the month.
Aug. 01 Started business with $1800 cash in hand and $16 000 in the bankAug. 02 Paid rent by cheque $300Aug. 03 Paid utilities by cheque $1 240Aug. 05 Cash sale $4 300Aug. 07 Received a cheque from debtor C. Lebrity $3400 after allowing $135 discountAug. 09 Cash sales paid directly into bank $2 980Aug. 11 Paid cash into bank $4 000Aug. 15 Paid account at Vendor Ltd the amount owing $2 900 received 5% discountAug. 18 Mr. Sui withdrew $1500 from the bank for personal useAug. 20 Paid for motor repairs by cash $850Aug. 25 Withdrew $500 from the bank for office use
Feedback CASH BOOK
Date Details(RECEIPTS)
F Cash Bank Dis All
Date
Details(PAYMENTS)
F Cash Bank DisRec
1/8 Balance b/f
1800 16000 2/8 Rent 300
5/8 Sales 4300 3/8 Utilities 1240
7/8 C. Lebrity 3400 135 11/8 Bank C 4000
9/8 Sales 2980 15/8 Vendor Ltd 2755 145
11/8 Cash C 4000 18/8 Drawings 1500
25/8 Bank C 500 20/8 Motor repairs
850
25/8 Cash C 500
31/8 Balance c/d
1750 20085
6600 26380
135 6600 26380
145
5/1 Balance b/d
1750 20085
The Petty Cash Book
Small cash payments and receipts can be omitted from the Cash Book to avoid overcrowding. When this is done, a Petty Cash Book is used. The format of the PCB facilitates the analysis of transactions so that certain types of transactions can be posted in aggregate to the ledger. The debit side of the PCB represents receipts whilst the credit side, which represents payments, is divided into several analysis columns. (See example below).
PETTY CASH BOOK
Receipts Date Particulars
Voucher No.
Total
Traveling
Postage
Stationery
Office Expens
es
The PCB operates with an Imprest System. This means that the Petty Cashier is given a float (imprest) at the beginning of a period from which funds are disbursed. Requests for payment are written on vouchers which briefly explain the purpose of the payment and indicate the amount. At the end of the period (week or month) the total cash paid is then reimbursed by the main cashier. This is referred to as restoring the imprest. This means that the petty cashier is given the exact amount she has disbursed. The totals of the analysis columns are then posted to the general ledger. Small sums received in the office are also recorded in the petty cash book on the receipt side, although generally there is no analysis. These small receipts would reduce the amount to be reimbursed.
Example: To determine the amount to restore the imprest The imprest of a business is $1000 per week. At the end of a week the petty cashier disbursed funds for the following: car wash $50, Stationery $145, received for telephone calls $15, cleaning $175, Coffee and Tea $230.
Determine the amount to be reimbursed by the cashier
Solution:
Imprest at the start of the week 1000Total expenses * 585Balance of cash remaining 415Cash required to restore imprest 585Cash at the start of the following week 1000
*The total sum disbursed = 50+145+175+230=600 less 15 (received) =$585 to restore imprest.
(Activity 3.7)
Enter the following transactions in a petty cash book, having analysis columns for postages and stationery, traveling expenses, cleaning and miscellaneous.
June 1 Received imprest from the cashier 600
June 3 Bought postage stamps V1 100June 5 Stationery V2 80June 9 Taxi fare V3 40June 10 Office Cleaning V4 72June 12 Snacks for meeting V5 100June 14 Paid for weekly newspaper V6 20June 17 Office cleaning V7 40June 20 Taxi fare V8 20June 23 Copy paper V9 30June 30 Bulbs for the office V10 16
Total the analysis columns and restore the imprest to the original amount. Voucher numbers are consecutive.
Feedback PETTY CASH BOOK
Receipts
Date
Particulars Voucher No.
Total Traveling
Postage&Stationery
Cleaning
Expenses
Misc.Expense
s
$600 1/6 Restore Imprest
3/6 Postage stamps
1 100 100
5/6 Stationery 2 80 80
9/6 Taxi fare 3 40 40
10/6 Cleaning 4 72 72
12/6 Refreshment 5 100 100
14/6 Newspaper 6 20 20
17/6 Cleaning 7 40 40
20/6 Taxi fare 8 20 20
23/6 Copy paper 9 30 30
30/6 Bulbs 10 16 16
518 60 210 112 136
30/6 Balance c/d 82 GL GL GL GL
600 600
82 1/7 Balance b/d
518 1/7Cash
(restored imprest)
KEY POINTS
Books of Original Entry are useful in eliminating bulky details from the ledger.
Credit transactions occur when payment is made some time in the future, whereas a cash transaction is where payment is immediate.
Source documents record the essential elements of any transaction and are kept for future reference.
Sales and Purchases Invoices, receipts, bills, debit notes and credit notes are examples of source documents used to make records in books of original entries.
Trade discounts are reductions in the catalogue price of goods and are not recorded in the books whereas cash discounts are given as incentive for prompt payment and recorded in the cash book.
The Sales, Purchases, Return Inwards and Return Outwards journals are used to record the credit stock transactions.
The General Journal records unusual and onetime transactions and is unique in the way each transaction is analyzed and recorded.
All non-credit transactions involving cash or bank are recorded in the cash book. This would include credit and debit card transactions.
The Petty Cash Book is an analysis book that records all small cash transactions such as the purchase of postage stamps and gas for office car.
CONCLUSION
As a business grows, the number of transactions increases and it becomes necessary to separate the transactions and record in different journals. The format of the journals, with the exception of the cash book, is very similar and recording in all the journals is done from original source documents.
This Study Guide would have enabled you to develop the skills needed to record transactions in the books of original entries, total the books and determine total credit sales and purchases. You should also be able to record transactions in the cash book and balance the cash book. You should now be able to complete the end test and the tutor marked assignment.
Holdip, G. and Lamorell, C.
Principles of Accounts for Caribbean Examinations,Oxford: Macmillan Educational, 2004.
Wood, F. Principles of Accounts for the Caribbean, London: Longman Publishing.
SUGGESTED FURTHER READINGS
END TEST
1. The purchases day book(journal) records all
(a) purchases of assets on credit(b) credit purchases(c) goods for resale purchased on credit(d) purchases
2. A business may offer trade discounts to customers in order to
(a) save money(b) encourage trade(c) encourage early payment(d) discourage late payment
3. The information needed to record transaction in the sales journal is taken from the
(a) bank statement(b) credit note(c) debit note(d) sales invoice
4. The total of the sales journal represents total
(a) sales for the period(b) creditors for the period(c) debtors for the period(d) liability for the period
5. When a customer returns goods, the seller will prepare
(a) a debit note(b) a credit note(c) a statement(d) an invoice
Complete the following sentences with words or phrases taken from the following word list:
Journalising Trade discounts Cash Discount Credit note Debit note Return outwards
6. A _____________ is sent by the seller to let the buyer know that the amount on the invoice was overstated.
7. A __________ is issued when too many goods have been supplied to the customer and he agrees to keep them.
8. As a means of encouraging trade a business may offer _______________ to customers.
9. When a customer pays off the amount owing before the due date a ______________ is allowed.
10. The act of recording transactions in a book of original entry is referred to as ________________________.
1. c
2. b
3. d
4. c
5. b
6. Credit note
7. Debit note
8. Trade discounts
9. Cash discount
10. Journalising
FEEDBACK FOR THE END TEST
TUTOR MARKED ASSIGNMENT
The Sports Depot, a sole trading business, sells a wide variety of sporting equipment and clothes. Goods are bought and sold for cash and on credit. The invoice is used to enter information in the Sales and Purchases journals. On March 1st 2006 the business had $2500 in cash and $8000 in the bank. The following transactions took place during the month:
March 02March 03March 08March 10
March 12March 15March 15March 18March 20March 21March 24March 24March 25March 29March 30
March 31
Purchased T Shirts for cashBought Stationery for cashSold basketball uniforms to Ball Boyz Club on creditPurchased the following on credit from the Outlet:
50 Polo Shirts @ $45 each20 Shorts @ $10 each
6 Warm up suits @ $100 each100 Assorted pairs of football socks @ $5 per pairA 10% trade discount was obtained.
Sold uniform to Sando Knicks on creditCash salesCash sales paid into bankPaid wages by chequePaid utilities by chequeCash drawing by the ownerCash paid into bankSando Knicks returned 3 uniformsPurchased goods on credit from Gator ClothingReturned 10 shorts @ $10 each to the OutletReceived a cheque for $1 300 from Bal Boyz to settle their account.Paid Gator Clothing by cheque the amount owing received a 5% discount
$500400
1 390
1 8501 20016702 5901 700
8501500
3501 500
You are required to:
1. Record these transactions in the specialized journals of the Sports Depot.
2. Prepare the invoice from the Outlet with the information on March 10th.
3. Determine the following: Total net credit sales and total net credit purchases.Posted by The Business Teacher at 9:56 AM 1 comment: Email ThisBlogThis!Share to TwitterShare to FacebookShare to Pinterest
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