L2- Books of Prime Entry (Journals)

Question 1

Define Prime Entry Books?

Answer 1

These are where the first transactions are recorded.

Question 2

What are the main Books of Prime Entry?

Answer 2

Sales Day Book
Sales Returns Day Book
Purchases Day Book
Purchases Returns Day Book
Cash Book
Petty Cash
Transfer journals

Question 3

Explain Sales Day Book (SDB) / Sales Journal

Answer 3

• Records Sales (invoices/ credit notes)
• Ensure money owed is received
  -Numerical sequence

Question 4

What are your Net Sales?

Answer 4

Sales after deduction of trade discount but before VAT is added

Question 5

Explain Sales Return Day Book

Answer 5

-Chronological list of Sales Returns
-Responds to Credit Note is issue on value of goods returned
-Recorded as negative sales (DR)
-Identifies frequently returned items

Question 6

Explain Sales Ledger

Answer 6

-Records all credit sales (Receivables)
-Each credit customer has a T/ ledger acc.
-Maintained for memorandum purposes only
-Integrated Acc. System = records each creditor separately

Question 7

What is the reason for T/ ledger accounts?

Answer 7

-Shows all transactions
-Account Statements can be issued
-Answer queries
-Maintain credit limits
-Enables for contras to develop

Question 8

Difference between Integrated Acc. System and Interlocking Acc. System?

Answer 8

Integrated Acc. System- Combined Sales ledger and general ledger result in no control acc. being made. Records individual receivable acc.

Interlocking Acc. System- In general ledger, ACC. receivable/ payables totals are recorded. Then posted to Individual ACC. in the sales ledger.

Question 9

Explain Purchases Ledger

Answer 9

-Records credit suppliers (payables)

-Credit Purchases

-accounts are personal/ memorandum acc.

Question 10

Reasons for a Purchases Ledger

Answer 10

-Determine amt owed to supplier

-Tracks due dates for payments

-Ensure statement receives are correct

Question 11

Explain the Purchases Day Book PDB

Answer 11

-Record all credit invoices

-All credit purchases

-All invoices for expenses

*Form suppliers only

Question 12

Advantages of PDB

Answer 12

• Takes advantage of credit periods

-One cheque can be issued to pay for serval invoices with said supplier

Question 13

Explain Purchases Returns Day Book PRDB

Answer 13

-Records all credit notes received on returned purchases

-Included on PDB as negative values

Question 14

Explain the Cash Book

Answer 14

-Records all movement of cash through bus. bank acc

-2 components - Cash Receipt Book (CRB)

• Cash Payment Book (CPB)

Question 15

Explain the Cash Receipt Book

Answer 15

• Don’t enter VAT on credit sales

-Disc. All. column is only for memorandum purposes

-If VAT isn’t given in question then its assume that the sale was made on credit.

Question 16

Explain the Cash Payment Book

Answer 16

-Helps control the business through analyzing its payments made.

-Structure depends on - # of purchase categories and often

they are used

-Business structure

-Complexity of Cash Book

Question 17

Explain Petty Cash Book

Answer 17

-Kept in a petty cash box

-Secured

-Cashier must be knowledgeable and reliable

-Supported by invoices

-Vouchers signed by clm’t and cashier

-Regular checks to ensure accuracy of petty cash

Question 18

Explain the Imprest System

Answer 18

-Amt of $ agreed to be kept as the float (imprest amt)

-Petty Cash operates under