Acca f3 Financial Accounting (int) Study Text
Part C The use of double entry and accounting systems
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Part C The use of double entry and accounting systems 5: Ledger accounts and double entry 89 CAPITAL (RON KNUCKLE) $ $
Cash at bank (A) 7,000
BANK LOAN $ $ Cash at bank (D) 1,000
PURCHASES $ $ Trade accounts payable (C) 5,000
TRADE ACCOUNTS PAYABLE $ $ Cash at bank (H) 5,000
Purchases (C) 5,000
RENT $ $ Cash at bank (B) 3,500 NON-CURRENT ASSETS (SHOP FITTINGS) $ $
2,000 SALES
$ $ Cash at bank (F) 10,000 Trade accounts receivable (G) 2,500 TRADE ACCOUNTS RECEIVABLE $ $ Sales (G) 2,500 Cash at bank (I) 2,500
BANK LOAN INTEREST $ $ Cash at bank (J) 100
OTHER EXPENSES $ $ Cash at bank (K) 1,900
90 5: Ledger accounts and double entry Part C The use of double entry and accounting systems DRAWINGS ACCOUNT $ $ Cash at bank (L) 1,500
(a) If you want to make sure that this solution is complete, you should go through the transactions A to L and tick off each of them twice in the ledger accounts, once as a debit and once as a credit. When you have finished, all transactions in the 'T' account should be ticked. (b) In fact, there is an easier way to check that the solution to this sort of problem does 'balance' properly, which we will meet in the next chapter. (c)
On asset and liability accounts, the debit or credit balance represents the amount of the asset or liability outstanding at the period end. For example, on the cash at bank account, debits exceed credits by $6,500 and so there is a debit balance of cash in hand of $6,500. On the capital account, there is a credit balance of $7,000 and so the business owes Ron $7,000. (d) The balances on the revenue and expense accounts represent the total of each revenue or expense for the period. For example, sales for the period total $12,500. 5 The journal The
of prime entry. You should remember that one of the books of prime entry was the
The
journal keeps a record of unusual movement between accounts. It is used to record any double entries made which do not arise from the other books of prime entry. For example, journal entries are made when errors are discovered and need to be corrected. Whatever type of transaction is being recorded, the format of a journal entry is: Date Debit Credit $ $ Account to be debited
X Account to be credited
(Narrative to explain the transaction)
(Remember: in due course, the ledger accounts will be written up to include the transactions listed in the journal.) A
indicate the purpose and authority of every transaction which is not first recorded in a book of original entry.
An examination question might ask you to 'journalise' transactions which would not in practice be recorded in the journal at all. If you are faced with such a problem, you should simply record the debit and credit entries for every transaction. 5.1 Examples: Journal entries The following is a summary of the transactions of Hair by Fiona Middleton hairdressing business of which Fiona is the sole proprietor. Key term Exam focus point
Part C The use of double entry and accounting systems 5: Ledger accounts and double entry 91 1 January Put in cash of $2,000 as capital Purchased brushes and combs for cash $50 Purchased hair driers from Gilroy Ltd on credit $150 30 January Paid three months rent to 31 March $300 Collected and paid in takings $600 31 January Gave Mrs Sullivan a perm, highlights etc on credit $80 Show the transactions by means of journal entries. Solution
JOURNAL $ $
1 January DEBIT
Cash at bank 2,000
CREDIT Fiona Middleton – capital account
2,000
Initial capital introduced 1 January DEBIT Brushes and combs account 50
CREDIT Cash at bank
50 The purchase for cash of brushes and combs as non-current assets 1 January DEBIT Hair dryer account 150
CREDIT Sundry accounts payable * 150
The purchase on credit of hair driers as non-current assets 30 January DEBIT Rent account 300
CREDIT Cash at bank
300 The payment of rent to 31 March 30 January DEBIT Cash at bank 600
CREDIT Sales account
600 Cash takings 31 January DEBIT Trade accounts receivable 80
CREDIT Sales account
80 The provision of a hair-do on credit * Note. Suppliers who have supplied non-current assets are included amongst sundry accounts payable, as distinct from trade suppliers (who have supplied raw materials or goods for resale) who are trade accounts payable. It is quite common to have separate 'total accounts payable' accounts, one for trade accounts payable and another for sundry other accounts payable. 5.2 The correction of errors The journal is most commonly used to record corrections to errors that have been made in writing up the nominal ledger accounts. Errors corrected by the journal must be capable of correction by means of a double entry in the ledger accounts. In other words the error must not have caused total debits and total credits to be unequal. Special rules apply when errors are made which break the rule of double entry. Chapter 16 . 6 Day book analysis Entries in the daybooks are totalled and analysed before posting to the nominal ledger. FAST FORWARD Yüklə 3,78 Mb. Dostları ilə paylaş:
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