4- Accounting for sales & purchases

Question 1

What are the accounting entries required for the general ledger following the sales day book?

Answer 1

1. The total (gross) amount is debited to the receivables account - increase in assets
2. The net amount is credited to the sales account - increase in income
3. The VAT amount is credited to the vat account - increase in liability

Question 2

What are the accounting entries for prompt payment discounts following a discounts allowed day book?

Answer 2

1. The total (gross) amount is credited to the receivables account - reduction of a receivable
2. The net amount is debited to the discounts allowed account - increase in expenses
3. The VAT amount is debited to the vat account - amount is no longer owed to HMRC, so reduction in liability

Question 3

What are the accounting entries for credit purchases following a purchases day book?

Answer 3

1. The total (gross) amount is credited to the payables account- increase in liability
2. The net amount is debited to the purchases account - increase in expenses
3. The VAT amount is debited to the VAT account - VAT amount can be offset against the amount of VAT due to HMRC, reducing the liability

Question 4

What are the accounting entries for prompt payment discounts following a discounts received day book?

Answer 4

1. The total (gross) amount is debited to the payables account - reduction in liability
2. The net amount is credited to the discounts received account - increase in income
3. The vat amount is credited to the vat account- decrease in expenses