Because We encourage study with share with amp pray for each other Accounting Cycle Source Documents Record in DaybooksJournals Post to Ledgers Extract Trial Balance Prepare Financial Statements ID: 810623
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Slide1
ACT 110Is EASY POP!
Our Confession
Because, We encourage, study with, share with & pray for each other!
Slide2Accounting Cycle
Source DocumentsRecord in Daybooks/JournalsPost to LedgersExtractTrial Balance
Prepare Financial Statements
Slide3Books of Prime Entry
The Recording ProcessThe transactionsEvidencing the transactions in the form of documentsEntering the details of each transaction in a Primary book or Journal.Entering the details of each transaction in the double entry accounts
Slide4Books of Prime Entry
Lecture Notes 3
Slide5Books of Prime Entry
Why do we Need BOPE?While a firm is small all double entry accounts can be kept in one book.As the firm grows it will be impossible to just keep one book.Also if we have several bookkeepers, they could not all use the same ledger.The answer to the problem is for us to use more booksBooks of Prime Entry was created to record and summarize similar types of transactions in the same book before entering them in the ledgers.
Slide6Books of Prime Entry
DefinitionBooks of Prime Entry are the books where the first entry of a transaction is made.There is a separate book for each different kind of transaction depending on its nature.These books give the following details:Date – The transactions should be shown in in chronological order.Details columnFolio Column – for cross-referencing purposesMoney Column
Slide7Books of Prime Entry
Types of Books of Original EntrySales Day Book/Journal – for credits salesSales Return Day Book/Journal – for sales returns inwardsPurchases Day Book/Journal – for credit purchasesPurchase Return Day Book – for purchases returnsCash Book (and discount columns) – for receipts and payments of cash and chequesPetty Cash Book – For petty cash transactionsGeneral Journal – For all other items
Slide8Books of Prime Entry
Books of Original Entry & The Double Entry AccountsSales Day BookPurchases Day BookSales Return Day Book
Purchases
Return Day Book
Cash Books
General Journal
Sales Ledger
Purchases Ledger
General Ledger
Slide9The General Journal as Books of Prime Entry
Lecture Notes 3
Slide10Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] - JournalThe book of original entry is where transactions and selected other events are initially recorded. Various amounts are transferred to the ledger from the book of original entry.In practice, transactions and selected other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.
Slide11Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] – General JournalTo circumvent this problem and to have a complete record of each transaction or other event in one place, a journal [the book of original entry] is employed. [Millichamp 1992: 142,144]The Journal is used as a book of prime entry for any sequence of transactions, which are non-routine. The Journal entries form a connected story and thus items, which might properly be included in other books of prime entry are included for the sake of completeness.
Slide12Books of Prime Entry
General JournalToday the journal, if used at all is used for the following transactions:-The purchase and sale of assets on creditOpening and closing entriesThe correction of errorsTransfer between accountsAny other items not recorded in another book of original entry
Slide13Books of Prime Entry
General JournalAll credit entries [those in which no cash changed hand] – into the journal first.Unusual Cash Entries – all such cash transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first.Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.
Slide14Books of Prime Entry
Function of the General JournalThe function of the General Journal in bookkeeping can be described as:Acting as a Diary – Business events are recorded;Acting as a Book of Explanation - Brief Explanatory note or narration is given; andActing as a Book of Instruction – States which accounts to be debited and credited In Ledger [Favell, A.J. 1977:49]
Slide15Books of Prime Entry
Format of the General Journal
Date
Particulars
Folio
Debit
Credit
Jan 5
Office Equipment
Bank Account
Being purchase of computer 123 for use in the Admin Office
$650,000
$650,000
LB.17 CB1
Slide16The General Journal Exercises
Lecture Notes 3
Slide17Books of Prime EntryGeneral Journal - Exercises
Nov. 1 - Buys a new delivery truck on account from Auto Sales Ltd. $22,400Nov. 3 - Received an invoice from Evening Graphic for advertising $280.Carl, a dealer in antiques, acquired the assets of a rival business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:- Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650
Slide18Purchases Day Book
Lecture Notes 3
Slide19Books of Prime Entry
Purchases Day BookIt is also known as the Purchases Journal, Bought Journal, Purchases Book and Bought Day Book. It is used record Purchases on credit for resale.A separate ledger called the Bought or Purchases Ledger is kept for the accounts of suppliers of these goods. Aggregate amount of purchase invoices are debited to the Purchases Account in the General Ledger.
Slide20Books of Prime Entry
Purchases Day BookThe source document used to write up the purchases day book is the invoice. An invoice is a document, which is made out whenever one person sells goods to the other. It is made out by the seller, and at least one copy is sent to the buyer. [Whitehead 1074:97]
Slide21Purchases Return Day Book
Lecture Notes 3
Slide22Books of Prime Entry
Purchases Return Day BookA record of the return of goods purchased on credit is kept in a Returns Outwards Day Book. The information to record these transactions is obtained from a source document called the credit note. A credit note is a business document, which made out whenever one person returns goods to another. The credit note is made out by the original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]
Slide23Books of Prime Entry
Purchases Return Day BookThe functions of a credit note are:-To evidence the acceptance of the return of goods by the seller from the buyer. To evidence to a buyer that he need not pay for goods invoiced to him because the goods have been lost in transit.To correct errors on invoices, such errors may be over pricing or inclusion of goods not actually sent [Millichamp 1992:7]
Slide24Sales Day Book
Lecture Notes 3
Slide25Books of Prime EntrySales Day Book
It is also referred to as the Sales Journal or Sales Book, It records the sale of goods on creditA separate ledger called the Sales Ledger is kept for the accounts of customer of these goods.The aggregate amount in the Sales Day book is credited to the Sales Account in the General Ledger. A record of the return of goods sold on credit is kept in a Returns Inwards Day book. It is important to note that the day books do not form part of the double entry system.