books of oe recording transactions
TRANSCRIPT
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Source documents&
Books of original entry
Section 3Objective 5
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Use source documents to make entries into books of original entry:
• Purchases journal• Sales journal• Returns inwards
journal/sales returns journal
• Returns outwards journal/purchases returns journal
• Cash book• Petty cash book
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• It is important to prepare accounting records as they occur.
– Also the information must be in chronological (date)order
• The sequence (procedure or steps to follow) is known as the accounting cycle.
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• The first two stages of the diagram below identifies the process of collecting source documents
&• using the information from
the documents and record in the books of original entry.
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• The accounting cycle:
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• Documents used to record in the books of original entry are linked (matched) to each other in the table
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– Purchases journal
– Sales journal– Returns inwards
journal– Returns
outwards journal – Cash book and– Petty cash book
Templates of books of original entry
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– The following details should be recorded in the journal:• Transaction date• Name of the supplier• Purchase invoice number• Total amount to be paid on the invoice
Purchases journal: Keeps a record of credit purchase
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– Source documents for making credit entries in the journal are purchase invoices
– after the entries are made the journal is totalled at the end of the period
– The following are not to be recorded in the purchase journal• Cash purchases• Purchase of fixed assets
(non-current assets) on credit
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Template• Purchases Journal Page
Date Supplier Invoice number Folio Amount due
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Sales journal: Keeps a record of credit sales
• the following details are to be recorded in the sales journal:
• Date of transaction• Name of credit customer• Sales invoice number• Amount due to be paid
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– Source documents for making credit entries in the journal are sales invoices
– after the entries are made the journal is totalled at the end of the period
– The following are not to be recorded in the sales journal• Cash sales• Sales of fixed assets (non-
current assets) on credit
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Date Customer Invoice number Folio Amount due
Template Sales journal
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Returns outwards & returns inwards journals
• Goods are returned and recorded in the journals for several reasons:
• When goods are found to be damaged on receipt
• When the wrong goods were sent out by the supplier
• When goods ordered were received very late ( that is, it was received past due the selling date)
– The source document used for both journals are credit notes
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– Returns outwards journal: Returning goods to a supplier which were previously purchased on credit
–A business returns goods to the supplier and then receives a credit note.
–The document indicates how much will be deducted from the purchase invoice price
Credit notes used for both returns journals are as follows:
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– Returns inwards journal: Goods returned by a customer which were previously sold to that customer on credit
–The business selling the goods would send a credit note to customer
–The document states how much will be deducted from the sales invoice price
Credit notes used for both returns journals are as follows:
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Template ofReturns inwards journal
Date Customer Credit note number
Folio Amount due
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Template of Returns outwards journal
Date Supplier Credit note number
Folio Amount due
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Cash book• Some businesses
may use two-column or three-column cash books.– The following
documents are used to prepare both cash books
• Cash register bills (tapes)
• Cash receipts• Cash vouchers• Bank paying
deposit slips or withdrawals slips
• Cheque counterfoils
• Bank statements
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The two column cash
• records information from source documents– sets out transactions in date order– format is presented as a ledger
account– information shown on the left
hand side of the book represents receipts (money collected)
– In ‘lay man accounting terms’ the left side is known as the debit side
– information shown on the right hand side of journal represents payments (money paid out)
– The right side using the ‘lay man accounting terms’ is known as the credit side
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Template of two-cash book
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Three column cash book
– records information from source documents
– sets out transactions in date order
– format is presented as a ledger account
– additional columns on either side of the cash book for discounts
– information shown on the left hand side of the book represents receipts (money collected)
– information shown on the right hand side of journal represents payments (money paid out)
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Template of three-column cash book
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Petty cash
– Use to record small cash payments– Business operates a system called
the imprest system– The business document used is
known as the petty cash voucher– The first few columns in the journal
operates as a cash account to record the amount received for the imprest, details and payments made with the relevant voucher number
– Additional columns shown in the petty cash are used to analyse the petty cash payments.
– The analysis columns totals are used to determine the types of payment to be recorded as expenses in the general ledger
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Template of petty cash book