Books of prime entry

Question 1

Sales Journal / Daybook

Answer 1

All goods sold on credit (invoices sent)

Question 2

Purchases Journal / Daybook

Answer 2

All goods purchased on credit (Invoiced received)

Question 3

Sales returns Journal

Answer 3

All goods returned (Credit notes sent)

Question 4

Purchases returns Journal

Answer 4

All goods purchased on credit returned (Credit notes received)

Question 5

Cashbook

Answer 5

Contains all cash receipts, cash payments, bank payments

Question 6

Petty cashbook

Answer 6

Low value cash payments (Postage, travelling etc)

Question 7

General Journal

Answer 7

Not recorded in any of the above journals - Opening entries, purchase and sale of non-current assets on credit, correction of errors)

Question 8

Ledger Accounts

Answer 8

Formal bookkeeping records of the business - records both credit and debit entries. Each business transaction is entered into individual accounts.

Question 9

Sales ledger

Answer 9

Each customer is given their own account which contains records of sales made on credit, any returned goods, and payments received. Shows amount owed by specific customer.

Question 10

Purchases ledger

Answer 10

Each supplier is given their own account which contains records of purchases made on credit, any returned goods, and payments made to the supplier. Shows amount owed to specific supplier.

Question 11

General ledger

Answer 11

Collection of accounts records all other transactions such as assets, liabilities, owners capital, expense items, income items.

Question 12

A trade receivable (debtor)

Answer 12

A customer who owes money to the business.

Question 13

A trade payable (creditor)

Answer 13

A supplier to whom the business owes money to.

Question 14

Control accounts

Answer 14

‘total’ accounts which summarise a number of other accounts. Contained in the general ledger and the totals of these accounts are transferred to the trial balance.

Question 15

Sales ledger control accounts

Answer 15

Contains the total of all trade receivable accounts in the sales ledger - how much the business is owed by customers.

Question 16

Purchases ledger control accounts

Answer 16

Contains the total of all trade payable accounts in the purchase ledger - how much the business owes to suppliers.

Question 17

Trial Balance

Answer 17

Brings together the balances of all the ledger accounts in the general ledger, setting them out in two columns (debits & credits)

Question 18

Statement of profit or loss