Acca f3 Financial Accounting (int) Study Text
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92 5: Ledger accounts and double entry Part C The use of double entry and accounting systems 6.1 Sales day book In the previous chapter, we used the following example of four transactions entered into the sales day book. SALES DAY BOOK
20X0
$ $ Jan 10
247 Jones & Co 105.00 60.00
45.00 248
Smith Ltd 86.40
86.40 249
Alex & Co 31.80
31.80
250 Enor College 1,264.60 800.30
464.30
1,487.80 946.70 541.10
We have already seen that in theory these transactions are posted to the ledger accounts as follows. DEBIT
Trade accounts receivable $1,487.80
CREDIT Sales account
$1,487.80 However a total sales account is not very informative, particularly if the business sells lots of different products. So, using our example, the business might open up a 'sale of shoes' account and a 'sale of boots' account. Then the ledger account postings are:
$ $
DEBIT Trade accounts receivable 1,487.80
CREDIT Sale of shoes account
541.10 Sale of boots account
946.70
That is why the analysis of sales is kept. Exactly the same reasoning lies behind the analyses kept in the other books of prime entry. 6.2 Sales returns day book We will now look at the sales returns day book from Chapter 4 . SALES RETURNS DAY BOOK Date Credit note Customer and goods Amount 20X8
$ 30 April CR008 Owen Plenty 3 pairs 'Texas' boots 135.00
This will be posted as follows:
$ $ DEBIT Sales returns book
135.00
CREDIT Trade accounts receivable
135.00 6.3 Purchase day book and purchases returns day book The purchase day book and purchases returns day book in Chapter 4 can be posted in a similar way. 6.3.1 Purchases
$ $ DEBIT Purchases 444.40
116.80
CREDIT Trade accounts payable
561.20 6.3.2 Purchase returns
$ $ DEBIT
Trade accounts payable 46.60
CREDIT Purchases returns
46.60 Part C The use of double entry and accounting systems 5: Ledger accounts and double entry 93 7 The imprest system In the last chapter, we saw how the petty cash book was used to operate the imprest system. It is now time to see how the double entry works. A business starts with a cash float on 1.3.20X7 of $250. This will be a payment from cash at bank to petty cash, ie: DEBIT Petty cash $250
CREDIT
Cash at bank
$250 Five payments were made out of petty cash during March 20X7. The petty cash book might look as follows.
Payments Receipts Date Narrative Total Postage Travel $
$ $ $ 250.00
1.3.X7 Cash
2.3.X7 Stamps
12.00 12.00
8.3.X7 Stamps
10.00 10.00
19.3.X7 Travel
16.00
16.00 23.3.X7 Travel
5.00
5.00 28.3.X7 Stamps
11.50 11.50
250.00
54.50 33.50
21.00 At the end of each month (or at any other suitable interval) the total payments in the petty cash book are posted to ledger accounts. For March 20X7, $33.50 would be debited to postage account and $21.00 to travel account. The total payments of $54.50 are credited to the petty cash account. This completes the double entry. The cash float needs to be topped up by a payment of $54.50 from the main cash book, ie: $ $ DEBIT Petty cash 54.50
CREDIT Cash
54.50
So the rules of double entry have been satisfied, and the petty cash book for the month of March 20X7 will look like this. Payments Receipts Date Narrative Total Postage Travel $
$ $ $ 250.00
1.3.X7 Cash
2.3.X7 Stamps
12.00 12.00
8.3.X7 Stamps
10.00 10.00
19.3.X7 Travel
16.00 16.00
23.3.X7 Travel
5.00 5.00
28.3.X7 Stamps
11.50 11.50
31.3.X7 Balance c/d 195.50 250.00 250.00
33.50 21.00
195.50 1.4.X7
Balance b/d
54.50
1.4.X7 Cash
As you can see, the cash float is back up to $250 on 1.4.X7, ready for more payments to be made. The petty cash account in the ledger will appear as follows. PETTY CASH $ $ 1.3.20X7 Cash 250.00 31.3.20X7 Payments 54.50
1.4.20X7 Cash
54.50 1.4.20X7 Balance c/d 250.00
304.50 304.50
1.4.20X7 Balance b/d
250.00
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