principles of accounts school rack

7/30/2019 Principles of Accounts School Rack

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Principles of

Accounts

Revision Guide:


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Topics to be reviewed

1.Double Entry2.Books of Original Entry

3.Trial Balance4.Trading, Profit and LossAccount

5.Balance Sheet6.Control Accounts

2


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Recording transactions rules of entry

TYPE OF ACCOUNT VALUE CHANGE LEDGER COLUMN

ASSET INCREASE DEBIT

ASSET DECREASE CREDIT

LIABILITY INCREASE CREDIT

LIABILITY DECREASE DEBIT

CAPITAL INCREASE CREDIT

CAPITAL DECREASE DEBIT

EXPENSES INCREASE DEBIT

EXPENSES DECREASE CREDIT

REVENUE INCREASE CREDIT

REVENUE DECREASE DEBIT

3


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BOOKS OF ORIGINAL ENTRY / BOOKS OF PRIME

ENTRY

The General Journal

The Sales Journal

The Purchases Journal The Sales Returns / Returns

Inwards Journal

The Purchases Returns / ReturnsOutwards Journal

The Cash Book

4


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The general journal

USES

Recording:

Opening entries

Closing entries

Purchase or sale of an asset on credit

Adjustments

Writing off of bad debts

Correction of errors

Irregular transactions

5


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The general journal continued

DATE DETAILS FOLIO DEBIT CREDIT

2005

July 1

Cash

Bank

Computer

Capital

To record opening entries

GL 3 000

5 000

2 000

10 000

2005July 5

Motor VanAuto-World Ltd.

To record purchase of asseton credit

GL 30 00030 000

2005

July 8

M. Small

ComputerTo record sale of asset

GL 2 000

2 000

2005

July 31

Sales a/c

Trading a/c

To transfer Sales to the

Trading a/c

GL 29 000

29 000

6


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The general journal continued

DATE DETAILS FOLIO DEBIT CREDIT

July

31

Trading a/c

Purchases a/cTo transfer Purchases to

the Trading a/c

GL 16 000

16 000

July 31 Profit and Loss a/c

Rent expense a/c

To transfer rent expenseto the Profit and Loss

a/c

1 000

1 000

July 31 Discount received a/c

Profit and Loss a/c

To transfer discountreceived to the Profit

and Loss a/c

300

300

July 31 Bad debts

B. Tara

To record bad debtwritten off

600

600

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SALES JOURNAL / SALES DAY BOOK

USE : TO RECORD THE SALE OF STOCK ONCREDIT

Source Document: Sales Invoice

DATE DETAILS INVOICE # F AMOUNT ($)

2006

March 05 C. Croft 00036 SL 450

March 13 Clothes Palace 00037 SL 1 000

Total Credit Sales

transferred to sales a/c in

the general ledger

GL 1 450

8


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Purchases journal / purchases day book

USE: To record all stock purchased on credit for resale

Source Document: Purchases Invoice

DATE DETAILS INVOICE # F AMOUNT

($)2006

March 7 D. Bravo 0006789 PL 340

March 22 M. Mohammed 00256 PL 2 000

March 28 United Grocers 003976 PL 650

Total credit purchases

transferred to the

Purchases a/c in the

General Ledger

GL 2 990

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Sales Returns / Returns Inwards Journal

USE: To record goods which have been returnedto the seller ( a credit note is issued)

DATE DETAILS NOTE # F AMOUNT ($)

2006

March 7 C. Croft 004 SL 50

March 17 Clothes Palace 005 SL 100

Total transferred to the

returns inwards a/c in the

general ledger

150

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Purchase Returns / Returns Outwards Journal

USE:To record the value of goods purchased whichare returned to the seller (A credit note is received)

DATE DETAILS NOTE # F AMOUNT ($)

2006

March 09 D. Bravo 00056 PL 30

March 26 M. Mohammed 0000467 PL 100

March 30 United Grocers 000890 PL 20

Total transferred to the

returns outward a/c in the

general ledger

150

11


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RULES FOR POSTING IN THE DAY BOOKS

Sales journal:

Dr. Debtors a/c in Sales Ledger;

Cr. Sales a/c in General Ledger

Purchases journal:

Dr. Purchases a/c in General Ledger;

Cr. Creditors a/c in Purchases Ledger

Sales returns journal:

Dr. Sales returns a/c in General Ledger;

Cr. Debtors a/c in Sales Ledger

Purchases returns journal:

Dr. Creditors a/c in Purchases Ledger;

Cr. Purchases returns a/c in General Ledger

12


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The Petty Cash Book

A type of cash book kept especially for

small payments There are many small payments to be

made.

Cuts down on entries made in the generalledger.

Relieves the main cashier from routine

work, since a junior cashier could beassigned the task.

The imprest System: A system where arefund is made of the total paid out in a

period.


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PETTY CASH BOOK

Cash

Received

Date Details

300.00 1/9/96 Cash from bank

CASH IN

The Float

REMEMBER:

THE FLOAT IS THE

ORIGINAL AMOUNT


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.

1/9/96 Carcleaning 1

Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00

CASH OUT

S S


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.

1/9/96 Car cleaning 1

Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00

ANALYSIS

COLUMNS

Cleaning Postage Sundries

3/9/96 Tea/Coffee 3 10.00

20.00

35.00

10.00


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.


Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00


3/9/96 Tea/Coffee 3 10.00

20.0035.00

10.00

TOTALS

Total Vouchers 65.00 20.00 35.00 10.00


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.


Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00


3/9/96 Tea/Coffee 3 10.00

20.00

35.00

10.00

TotalVouchers 65.00 20.00 35.00 10.00

BALANCE c/f

235.00Cash in Box


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PETTY CASH BOOK

Cash

ReceivedDate Details


Voucher

No.


Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00


3/9/96 Tea/Coffee 3 10.00

20.00

35.00

10.00

TotalVouchers 65.00 20.00 35.00 10.00

235.00

300.00300.00

TOTALSTOTALS

Cash in Box

THIS CLOSES THE PC BOOK FOR THE WEEK


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.


Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00


3/9/96 Tea/Coffee 3 10.00

20.00

35.00

10.00

TotalVouchers 65.00 20.00 35.00 10.00

235.00

300.00300.00

BALANCE b/f

Cash in Box

Cash in Box8/9/96235.00


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PETTY CASH BOOK

Cash

Received

Date Details


Voucher

No.


Cash Paid

Out

20.00

2/9/96 Stamps 2 35.00


3/9/96 Tea/Coffee 3 10.00

20.00

35.00

10.00

TotalVouchers 65.00 20.00 35.00 10.00

235.00

300.00300.00

Cash in Box

Cash in Box8/9/96235.008/9/96 Cash from bank65.00

CASH IN

THE FLOAT IS BROUGHT BACK TO

THE ORIGINAL AMOUNT


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The cash book

USE: To record all receipts andpayment by cash and cheque, and

discount allowed and received..

N.B. Cheque receipts andpayments are recorded as bank.

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Format of the 3 columncash book

Date, details. Folio, discount allowed,cash, bank, date, details, folio, discount

received, cash, bank.

Date Details F Discount

Allowed

Cash Bank Date Details F Discount

Received

Cash Bank

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Subsidiary books

The General Ledger

The Sales Ledger

The Purchases Ledger

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The Ledgers

Date Details F Amount Date Details F Amount

25

USE: Debtors from the Sales Journal are posted to the SalesLedger

Creditors from the Purchases Journal are posted to the

Purchases Ledger

All other accounts are posted to the General Ledger

Format of the ledger account:Name of the Account


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The T Account

So called because of its shape. The nameof the account is written on the top of theaccount.

Rent a/c

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The Trial Balance

USE:

This presents a list of all

balances. The main aim isto check the accuracy of thepostings.

NB: Closing stock is no t l is ted in the

Trial Balance27


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Debit side Credit side

Assets:

Cash

Bank

DebtorsStock (opening)

Furniture

Fittings

MachineryEquipment

Motor vehicles

Land and Buildings

Liabilities:

Bank overdraft

Creditors

Bank loansMortgages

Capital

28

Format of the Trial balance


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Format of the Trial balance continued

Debit side Credit side

Expense accounts:Purchases

Wages

Salaries

Insurance

RentTransportation in (carriage inwards)

Transportation out (carriage outwards)

Telephone

Electricity

Bad debtsDepreciation

Discount allowed

Bank interest

Sales returns

Drawings

Revenue accounts:Sales

Rent received

Interest received

Commission received

Discount receivedPurchase returns

Provision for doubtful debts

Provision for depreciation

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Format For Trading Account (vertical format)

Details $ $ $

Sales

Less: Sales returns

Net sales

Less: cost of sales

Opening stock

Add: PurchasesAdd: Carriage inwards

Gross Purchases

Less: Returns outwards

Net Purchases

Cost of goods available for sale

Less: Closing stock

Cost of goods sold

Gross Profit

XXXXXXX

XXXX

(XXX)

XXXXX

(XXX)

XXXXX

XXXX

XXXXX

(XXXX)

XXXXX

(XXXX)

XXXX

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Format For Profit & Loss Account

Details $ $ $

Gross profit /Gross loss

Add: Other Income

Commission received

Discount receivedRent received

Interest received

Bad debt recovered

Total revenue received

Total gains / losses

XXXX

XXXXXXX

XXX

XXX

XXXX

XXXX

XXXX

31

Format For Profit & Loss Account Continued


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Format For Profit & Loss Account Continued

Details $ $ $

Total gains / losses

Less: ExpensesWages and salaries

Electricity

Rent

Telephone

Carriage outwards

Advertising

Depreciation expense

Bad debt expense

Discount allowed

Travelling expenses

Interest payablePrinting and stationery

National Insurance

General expenses

Total expenses

NET PROFIT / NET LOSS

XXXX

XXXX

XXXX

XXX

XXXX

XXX

XXXX

XXXX

XXXX

XXXX

XXXXXXX

XXX

XXX

XXXX

(XXXX)

XXXXX32


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Format of the balance sheet (vertical format)

Particulars $ $ $

Fixed AssetsBuildings

Less: Provision for depreciation

Machinery


Furniture

Motor van


Equipment

Total Fixed Assets

XXXXX

(XXXX)

XXXX

(XXX)

XXXX

(XXX)

XXXXX

XXXXX

XXXX

XXXXXXXX

XXXXX

33


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Format of the balance sheet continued

Particulars $ $ $

Current Assets

Cash

Debtors

Less: Provision for doubtful debt

Stock

Total Current AssetsLess: Current Liabilities

Bank overdraft

Creditors

Bank loan

Total Current LiabilitiesWorking Capital

XXXX

(XXX)

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

(XXXX)XXXX

XXXX

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Format of the balance sheet continued

Particulars $ $ $

Financed by:

Long-term Liabilities:

Mortgages

Owners Equity

Capital (opening)Add: Net Profit

Less: Drawings

Closing Capital

XXXXXXXX

XXXXX

(XXX)

XXXX

XXXXX

XXXXX

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Balance Sheet items in order of Liquidity

Assets

Current Assets

Cash in hand

Cash at bank

Prepaid expenses

Debtors

Stock

Fixed Assets

Motor vehicles

Furniture and Fittings

EquipmentComputers

Machinery

Land and Buildings

Liabilities and Capital

Current Liabilities

Creditors (expense creditor & Accruedexpenses)

Trade Creditors

Bank Overdraft

Long-term Liabilities

Loan (to be repaid in more than 1Year)

Mortgages

Owners Equity

Capital at start

Add: Net Profit

Less: Drawings

Capital at end

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Balance sheet in order ofpermanence

Reverse the order of

the balance sheet inorder of liquidity to

get the order ofpermanence

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What is a Control Account?

A control account can be used as a further check on theaccuracy of the ledgers. In effect, a control account is likea trial balance for each of the sales and the purchasesledger.

There are two types of Control Accounts:- Debtors ControlAccount and Creditors Control Account

NB:REMINDER:A few debtors may have credit balances

and a few creditors may have debit balances for reasonssuch as over- payment or undercharges


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Debtors Ledger Control AccountSource of

InformationType of

Information$ Source of

InformationType of

Information$

Last Periods

Balance

Balances b/d

of totalDebtors withDebitbalances

xxxx Last Periods

Balance

Balances b/d

of totalDebtors withcreditbalances

xxxx

Sales Journal Total CreditSales

xxxx ReturnsInwardJournal

Total ReturnsInward

xxxx

Cash book TotalDishonouredCheques

xxxx Cash book Receipts fromdebtors

xxxx

Cash book Total Refundsto debtors

xxxx Cash book TotalDiscountsAllowed

xxxx

GeneralJournal

Total BadDebts

xxxx

Balance c/d xxxx Balance c/d xxxx

xxxx xxxx


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Creditors Ledger Control AccountSource of

InformationType of

Information$ Source of

InformationType of

Information$

Last PeriodsBalance

Balances b/dof totalCreditors withDebitbalances

xxxx Last PeriodsBalance

Balances b/dof totalCreditors withcreditbalances

xxxx

ReturnsOutwardsJournal

Total ReturnsOutward

xxxx PurchasesJournal

Total CreditPurchases

xxxx

Cash book Payment toCreditors

xxxx Cash book orNotices

Charges forlate payments

xxxx

Cash book TotalDiscountsReceived

xxxx

Cash Book Total Refunds xxxx

Balance c/d xxxx Balance c/d xxxx

xxxx xxxx


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End of Revision This guide seeks to highlight all the key areas that you

need to review during your Vacation.

It will also aid you in the completion of the first crucialpart of your SBA

Any questions or queries can be forwarded to yourteachers e-mails addresses. Please contact them fortheir information.

REMEMBER: SBAs are due on the first day of thestart of the new school term

Study hard, Good Luck and do enjoy your Holidays

principles of accounts school rack

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