Double-entry bookkeeping: further transactions Flashcards
The buying and selling of goods are recorded in which accounts?
purchases account and sales account
eg. A shoe shop buys shoes from the manufacturer and records this in which account?
purchases account
eg As shoes are sold, the transactions are recorded in what account?
sales account
The normal entry on a purchases account is on which side?
debit side - the account has gained value, business has bought goods for resale
The normal entry on a sales account is on which side?
credit side - the account has given value, the business has sold goods
When a business buys an item for the business (e.g. computer), is this debited to the purchases account or separate account?
separate, because a non-current asset has been purchased.
What are credit purchases?
goods or services obtained from a supplier, with payment to take place at a later date.
From the buyer’s viewpoint, the supplier is a trade payable.
What are the bookkeeping entries for credit purchases?
debit purchases account
credit trade payable’s (supplier’s account)
What are the bookkeeping entries for payment made to trade payable?
debit trade payable’s account
credit bank account or cash account
What are the bookkeeping entries for credit sale?
debit trade receivable’s (customer’s) account
credit sales account
What are the bookkeeping entries for payment received from trade receivable?
debit bank account or cash account
credit trade receivable’s account
What are the bookkeeping entries for purchase of a non-current asset on credit?
debit non-current asset account, eg computer account
credit trade payable’s (supplier’s account)
What are the bookkeeping entries for payment made to a trade payable?
debit trade payable’s account
credit bank account or cash account
What are the bookkeeping entries for purchases returns?
debit trade payable’s (supplier’s) account
credit purchases returns (or return outwards) account
What are the bookkeeping entries for sales return?
debit sales returns (or return inwards) account
credit trade receivable’s (customer’s) account
What is a carriage?
the cost of transporting goods
What is carriage inwards?
where the buyer pays the carriage cost of purchases
example of carriage inwards
where the seller pays the carriage charge
What is carriage outwards?
where the seller pays the carriage charge
Example of carriage outwards
an item is sold to the customer and described as ‘delivery free’
What are the bookkeeping entries for carriage inwards?
debit carriage inwards account
credit bank account
What are the bookkeeping entries for carriage outwards?
debit carriage outwards account
credit bank account
What do debits include?
-purchases of goods for resale
-sales returns (or returns inwards) when goods previously sold are returned to the business
-purchase of non-current assets for use in the business
-expenses and overheads incurred by the business
-trade receivables where money is owed to the business
-money received into the business through cash account or bank account
-drawings made by the owner of the business
-loan repayment, where a loan liability is reduced/repaid
What do credits include?
-sales of goods by the business
-purchases returns (or returns outwards) of goods previously bought by the business
-sale of non-current assets
-income received by the business
-trade payables where money is owed by the business
-money paid out by the business through cash account or bank account
-capital introduced into the business by the owner
-loan received by the business
