Chapter 8&9 Flashcards
What are 5 books of prime entry?
- The sales day book
- The sales returns day book
- The purchases day book
- The purchases returns day book
- The journal
For Sales day book (SDB) give an example of a Credit/ Debit account?
Sales day book (SDB):
Debit - Credit customer accounts with the
amount of each invoice.
Credit - Sales account with the
total for the period as shown in SDB.
For Purchases day book (PBD) give an example of a Credit/ Debit account?
Debit - Purchases account with the
total for the period as shown in PDB.
Credit - Credit suppliers accounts with the
amount of each invoice.
For Sales returns day book (SRDB) give an example of a Credit/ Debit account?
Debit - Sales returns account with the total
for the period as shown in the SRDB.
Credit - Credit customer accounts with the
amount of each credit note.
For Purchase returns day book (PRDB) give an example of a Credit/ Debit account?
Debit - Credit suppliers accounts with the
amount of each credit note.
Credit - Purchases returns account with the total for the period as shown in the PRDB.
What is a common item in the journal?
- the most common being the purchase and sale of non-current assets on credit.
Non-current assets
*Assets not specifically bought for resale but to be used in the production or distribution of those goods normally sold by the business.
*Life of more than one year; e.g. land and buildings, plant and machinery, motor vehicles, fixtures and fittings, office
equipment, etc.
What is the format of journal entries
-The journal has date and details columns,
followed by two money columns, one debit
and the other credit. They are not a part of
the double entry system, but rather are
intended to indicate what entries are going to be made in the ledger in respect of a given transaction or item.
- Each journal entry thus consists of the name of the account to be debited in the details column, and the amount in the debit money column; and on the next line, the name of the account to be credited in the details column, and the amount in the credit money column. The nature of the entry must also be explained in a narrative on the next line.
What is a cash discount?
- Cash discount is a reduction given by the supplier of goods to a buyer if the latter pays for them within a period stipulated by the seller at the time of sale.
- It is not deducted on the invoice, but calculated as a percentage of the amount of the invoice (eg 5%), and deducted at the time of payment.
For cash-discount double entry give an example of discounts allowed in a credit/debit account?
Discount allowed:
Debit - Discount allowed account
Credit - Credit customers account
For cash-discount double entry give an example of discounts received in a credit/debit account?
Discount received:
Debit - Credit suppliers account
Credit - Discount received account
What is a two-column cash book?
- In practice cash received and paid is usually recorded in a separate cash book (now typically online) and the historically named ‘cash book’ now typically consists of a two-columns - bank and discount columns and mostly deals with bank transactions.
- The cash book is used instead of the bank
account in the ledger, and is written up from the bank paying-in book, cheque book stubs, debit card receipts and bank statements.
What is a two-column cash book also known for?
-It is a book of prime entry, and the column on each side that are used to record bank receipts and payments form part of the double entry system.
- The other columns (discount) on each side are memorandum and, like the day books, intended to provide a means of ascertaining the total discount allowed and total discount received to facilitate the bulk
posting of transactions to the ledger.
What is a three-column cash book?
- It combines and replaces the cash and bank accounts in the ledger.
- It is a book of prime entry, and the cash and bank columns are a part of the double entry system.
- The discount columns are used in the same way as those in the two-column cash book.
What is the petty cash book?
- This is used to record the receipt and payment of small amounts of cash.
- It is written up from the receipts and petty cash vouchers.
- It replaces the cash account in the ledger.
- It is both a book of prime entry and part of the double entry system.
What is the columnar petty cash book?
- This contains analysis columns on the credit side, each of which relates to a particular type of expenditure (and name of a ledger account).
- These are intended to facilitate the bulk posting of transactions to the ledger.
- At the end of each calendar month the total of each analysis column is debited to the relevant ledger account.
What is the imprest system?
- At the beginning of each period (week or month) the petty cashier has a fixed amount of cash referred to as a ‘float’. At
the end of each period (or start of the next) the petty cashier is reimbursed the exact amount spent during the period, thus
making the float up to its original amount. - The reimbursement usually takes the form of a bank withdrawal.
- The amount of the petty cash float is determined by reference to the normal level of petty cash expenditure in each period.
What does the imprest system do?
- Facilitates control of the total petty cash expenditure in each period as the petty cashier cannot spend more than the amount of the float, except by applying to the management for an increase.
- Deters theft of cash by the petty cashier since a large cash balance cannot be accumulated by drawing cash from the bank at irregular intervals.
- The entries in the petty cash book are kept up to date because the cash expenditure is not reimbursed until the petty cash book is written up and the total amount of
expenditure for the period is known.
