Acca f3 Financial Accounting (int) Study Text

Part C  The use of double entry and accounting systems

  4:  Sources, records and books of prime entry

69

Answers to Quick Quiz 

1

Four from the following 

 Invoice 

number 

 

Seller's name and address 

 

Purchaser's name and address 

 

Date of sale 

 

Description of goods or services 

 

Quantity and unit price 

 

Trade discount (if any) 

 

Total amount, including sales tax (if any) 

 

Any special terms 

2 

A 

Sales invoice is a source document 

3 

D 

The claim form and receipt form the source document for the petty cash system. 

4 

C 

Supplier's invoices (A) are recorded in the purchase day book, customer's invoices (B) are 

recorded in the sales day book and goods returned by customers (D) are recorded in the sales 

returns day book. 

5 

The cash book records amounts paid into or out of the bank account. The petty cash book records 

payments of small amounts of cash. 

6 

B 

Under the imprest system, a reimbursement is made of the amount of the vouchers (or payments 

made) for the period. 

7 B Only 

authorised and evidenced petty cash claims are paid out of petty cash. 

Now try the questions below from the Exam Question Bank

Number

Level

Marks

Time

Q7

Examination

2

2 mins 

Q8

Examination

1

1 min 

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70

4: Sources, records and books of prime entry   Part C  The use of double entry and accounting systems 

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71

Ledger accounts and 

double entry 

Introduction

In the previous chapter we saw how to organise transactions into lists (ie 

entered into books of prime entry). It is not easy, however, to see how a 

business is doing from the information scattered throughout these books of 

prime entry. The lists need to be summarised. This is 

ledger accounting, which 

we look at in Sections 1 and 2. 

The summary is produced in the nominal ledger by a process you may have 

heard of known as 

double entry bookkeeping. This is the cornerstone of 

accounts preparation and is surprisingly simple, once you have grasped the 

rules. We will look at the essentials in Sections 3 and 4. 

In Section 5, we will deal with the final book of prime entry: 

the journal.

We will then look in detail at posting transactions from the day books to the 

ledgers in Sections 6 and 7. 

Finally, we will consider how to deal with credit transactions in Section 8. 

Topic list 

Syllabus reference 

1 Why do we need ledger accounts? 

C1(e) 

2 The nominal ledger 

C1(e), C2(a), C3(a) 

3 The accounting equation 

C1(d), D8(a) 

4 Double entry bookkeeping 

C1(c), D2(a) 

5 The journal 

C2(b)–(c) 

6 Day book analysis 

D1(a)–(b) 

7 The imprest system 

D2(d) 

8 The receivables and payables ledgers 

D1(a)–(b), D8(a) 

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5: Ledger accounts and double entry   Part C  The use of double entry and accounting systems 

Study guide 

Intellectual level

C1 

Double entry bookkeeping principles including the maintenance of 

accounting records and sources of information 

(c) 

Understand and apply the concept of double entry accounts and the duality 

concept.

1

(d) 

Understand and apply the accounting equation. 

1

(e) 

Understand how the accounting system contributes to providing useful 

accounting information and complies with organisational deadlines. 

1

C2

Ledger accounts, books of prime entry and journals

(a)

Identify the main types of ledger accounts and books of prime entry, and 

understand their nature and function.

1

(b) 

Understand and illustrate the uses of journals and the posting of journal 

entries into ledger accounts. 

1

(c) 

Identify correct journals from given narrative. 

1

C3

Accounting systems and the impact of information technology on 

financial reporting

(a)

Understand the basic function and form of accounting records in a typical 

manual system

1

D1

Sales purchases

(a)

Record sale and purchase transactions in ledger accounts and in day books.

1

(b) 

Understand and record sales and purchase returns. 

1

D2

Cash

(a)

Record cash transactions in ledger accounts.

1

(d) 

Account for petty cash using imprest and non imprest methods 

1

D8

Receivable and payables

(a)

Explain and identify examples of receivables and payables.

1

Exam guide 

This chapter is the fundamental background for all accounting. It is, therefore, 

extremely important and is 

highly likely to be examined. 

1 Why do we need ledger accounts? 

Ledger accounts 

summarise all the individual transactions listed in the books of prime entry. 

A business is continually making transactions, eg buying and selling, and we do not want to prepare an 

income statement and a statement of financial position on completion of every individual transaction. To 

do so would be a time-consuming and cumbersome administrative task. 

It is common sense that a business should keep a record of the transactions that it makes, the assets it 

acquires and liabilities it incurs. When the time comes to prepare an income statement and a statement of 

financial position, the relevant information can be taken from those records. 

The

records of transactions, assets and liabilities should be kept in the following ways. 

(a) In 

chronological order, and dated so that transactions can be related to a particular period of time. 

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