BIT 163

INTRODUCTION TO ACCOUNTING

CHAPTER THREE

Books of original entry and ledgers

Books of original entry: Are use to record all the

transaction for the first timea. Journalb. Cash Book

Books of original entry and ledgers JOURNAL There are two type of Journal a. General Journal b. Special Journali. Purchase Journal-use to record purchase of

goods on creditii. Sales Journal-use to record sale of goods on

creditiii. Return Outwards Journal-use to record goods

returned to the creditorsiv. Return Inwards Journal-use to record goods

returned by the debtors

JOURNALGeneral Journal-use to record the transactions that cannot recorded in special

journal.-some of the main uses of journal are listed below:The purchase and sale of fixed assets on creditThe correction of errorsWriting off bad debtsOpening entriesTransactions such as drawings, additional capital by ownerAdjustment of balance day

Format of General Journal

General Journal

Date Details Folio Debit (Dr) Credit (Cr)

         

ExplanationDate: to record the date of the transactionDetails: to record the name of account (s) to be debited

and the name of the account (s) to be credited.Folio: to record the reference number of ledger.Debit: amount (s) to be debitedCredit: amount (s) to be credited

Special Journal

Purchase Journal-use to record purchases goods on

credit.-the purchaser will receive purchases

invoices when goods bought on credit.

-the purchaser enters the details from the invoice in his purchases journal.

Example of Purchase Journal

Purchase Journal

Date Details Invoice No Folio Amounts

         

Purchase Journal Date: use to record date of the

transactions. Details: use to record name of the

creditors. Invoice no: use to record the

reference number of the invoice. Amounts: use to record the final

amount of invoice.

Sales Journal

To record sales good on credit The seller will send sales invoice to

debtors when goods sold on credit. The sellers enters details from the

invoice in his sales journal.

Example of Sales Journal

Sales Journal

Date Details Invoice No Folio Amounts

         

Explanation of Sales Journal

Date: use to record date of the transactions

Details: use to record name of the debtorsInvoice no: use to record the reference

number of the invoice.Folio: use to record the number of ledgerAmounts: use to record the final amount

of invoice.

Return Outwards Journal

Use to record amount of goods returned to the creditors.

The purchaser will receive debit note when goods returned to creditors.

The purchaser enter details from thedebit notes in his return outwards

journal.

Format of Return Outwards Journal

Return Outwards Journal

Date Details Debit Notes No Folio Amounts

         

Explanation of Return Outwards JournalDate: use to record date of the transactions.Details: use to record name of creditors.Debit notes: use to record the reference number of the

debit note.Folio: use to record the reference number ledger.Amounts: use to record the final amounts of debit notes.

Return Inwards Journal

Use to record amounts of goods returned by the debtors.

The seller will send debit note to the debtors when goods returned by them.

The seller enters details from debit notes in his return inwards journal

Format of Return of Inwards Journal

Return Inwards Journal

Date Details Debit Notes No Folio Amounts

         

Explanation of Return Inwards Journal

Date: use to record the date of transactions.Details: use to record the name of debtors.Debit Notes: use to record the reference

number of Debit NotesFolio: use to record the reference number

of ledgerAmounts: use to record the final amounts

of debit notes.

CASH BOOK

Use to record cash and bank transactions.Receiving money either by cash or

cheque will be recorded in debit side=increase the cash and bank balance.

Paying money either by cash or cheque will be record in credit side =decreases the cash and bank balance

Two types of Cash Book as per below:

Two column Cash Book

Date Details F Cash Bank Date Details F Cash Bank

                   

Three column Cash Book

Date Details F Dis Cash Bank Date Details F Dis Cash Bank

                       

Three column Cash Book

Discounts allowed-cash discounts allowed by a company to its debtors when they pay before maturity or on time.

Discounts received-cash discounts received by a company from its suppliers when its pay their account before maturity or on time.