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Assume the Position

Assume the Position. ACT 1100 Introduction to Accounting . Summer Course. Lecturer: Troy J. Wishart. Our Confession. ACT 110 Is EASY POP!. Because, Death and Life is in the Power of the Tongue. Accounting Cycle. Books of Prime Entry. The Recording Process The transactions

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Assume the Position

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  1. Assume the Position

  2. ACT 1100Introduction to Accounting Summer Course Lecturer: Troy J. Wishart

  3. Our Confession ACT 110 Is EASY POP! Because, Death and Life is in the Power of the Tongue

  4. Accounting Cycle

  5. Books of Prime Entry The Recording Process • The transactions • Evidencing the transactions in the form of documents • Entering the details of each transaction in a Primary book or Journal. • Entering the details of each transaction in the double entry accounts

  6. Lecture Notes 3 Books of Prime Entry

  7. Books of Prime Entry Why do we Need BOPE? • While a firm is small all double entry accounts can be kept in one book. • As the firm grows it will be impossible to just keep one book. • Also if we have several bookkeepers, they could not all use the same ledger.

  8. Books of Prime Entry Why do we Need BOPE? • The answer to the problem is for us to use more books • Books of Prime Entry was created to record and summarize similar types of transactions in the same book before entering them in the ledgers.

  9. Books of Prime Entry Definition • Books of Prime Entry are the books where the first entry of a transaction is made.

  10. Books of Prime Entry Definition • There is a separate book for each different kind of transaction depending on its nature.

  11. Books of Prime Entry • These books give the following details: • Date – The transactions should be shown in in chronological order. • Details column • Folio Column – for cross-referencing purposes • Money Column

  12. Books of Prime Entry • These books give the following details: • Date – The transactions should be shown in in chronological order. • Details column • Folio Column – for cross-referencing purposes • Money Column

  13. Books of Prime Entry Types of Books of Original Entry • Sales Day Book/Journal – for credits sales • Sales Return Day Book/Journal – for sales returns inwards • Purchases Day Book/Journal – for credit purchases

  14. Books of Prime Entry Types of Books of Original Entry • Purchase Return Day Book – for purchases returns • Cash Book (and discount columns) – for receipts and payments of cash and cheques

  15. Books of Prime Entry Types of Books of Original Entry • Petty Cash Book – For petty cash transactions • General Journal – For all other items

  16. Books of Prime Entry Books of Original Entry & The Double Entry Accounts Sales Return Day Book Sales Day Book Purchases Return Day Book Purchases Day Book General Journal Cash Books Sales Ledger Purchases Ledger General Ledger

  17. Lecture Notes 3 The General Journal as a Books of Prime Entry

  18. Books of Prime Entry [Kieso & Weygandt, 1992:66, 71] - Journal • Thebook of original entry is where transactionsand selected other events are initially recorded. • Various amounts are transferred to the ledger from the book of original entry.

  19. Books of Prime Entry [Kieso & Weygandt, 1992:66, 71] – Journal • In practice, transactions and selected other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.

  20. Books of Prime Entry General Journal [Kieso& Weygandt, 1992:66, 71] • To circumvent this problem and to have a complete record of each transaction or other event in one place, a journal [the book of original entry] is employed.

  21. Books of Prime Entry [Millichamp 1992: 142,144] • The Journal is used as a book of prime entry for any sequence of transactions, which are non-routine.

  22. Books of Prime Entry [Millichamp 1992: 142,144] • The Journal entries form a connected storyand thus items, which might properly be included in other books of prime entry are included for the sake of completeness.

  23. Books of Prime Entry General Journal Today the journal, if used at all is used for the following transactions:- • The purchase and sale of assets on credit • Opening and closing entries • The correction of errors

  24. Books of Prime Entry General Journal Today the journal, if used at all is used for the following transactions:- • Transfer between accounts • Any other items not recorded in another book of original entry

  25. Books of Prime Entry General Journal • All credit entries [those in which no cash changed hand] – into the journal first. • Unusual Cash Entries – all such cash transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first. • Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.

  26. Books of Prime Entry General Journal • Transactions, except for routine cash entries and sales and purchases of goodsare entered first in the journal.

  27. Books of Prime Entry Function of the General Journal The function of the General Journal in bookkeeping can be described as: • Acting as a Diary– Business events are recorded; • Acting as a Book of Explanation- Brief Explanatory note or narration is given; and

  28. Books of Prime Entry Function of the General Journal The function of the General Journal in bookkeeping can be described as: • Acting as a Book of Instruction – States which accounts to be debited and credited In Ledger [Favell, A.J. 1977:49]

  29. Books of Prime Entry Format of the General Journal Date Particulars Folio Debit Credit Jan 5 Office Equipment LB.17 CB1 $650,000 Bank Account $650,000 Being purchase of computer 123 for use in the Admin Office

  30. Lecture Notes 3 The General Journal Exercises

  31. Books of Prime Entry General Journal - Exercises • Nov. 1 - Buys a new delivery truck on account from Auto Sales Ltd. $22,400 • Nov. 3 - Received an invoice from Evening Graphic for advertising $280. • Carl, a dealer in antiques, acquired the assets of a rival business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:-  • Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650

  32. Lecture Notes 3 Purchases Day Book

  33. Books of Prime Entry Purchases Day Book • It is used record Purchases on credit for resale. • It is also known as the Purchases Journal, Bought Journal, Purchases Book and Bought Day Book.

  34. Books of Prime Entry Purchases Day Book • A separate ledger called the Bought or Purchases Ledger is kept for the accounts of suppliers of these goods.

  35. Books of Prime Entry Purchases Day Book • Aggregate amount of purchase invoices are debited to the Purchases Account in the General Ledger.

  36. Books of Prime Entry Purchases Day Book • The source document used to write up the purchases day book is theinvoice. • An Invoiceis a document, which is made out whenever one person sells goods to the other.

  37. Books of Prime Entry Purchases Day Book • An invoice is made out by the seller, and at least one copy is sent to the buyer. [Whitehead 1074:97]

  38. Lecture Notes 3 Purchases Return Day Book

  39. Books of Prime Entry Purchases Return Day Book • A record of the return of goods purchasedon credit is kept in a Returns Outwards Day Book. • The information to recordthese transactions is obtained from a source document called the credit note.

  40. Books of Prime Entry Purchases Return Day Book • A credit note is a business document, which made out whenever one person returns goods to another. • The credit note is made out by the original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]

  41. Books of Prime Entry Purchases Return Day Book • The functions of a credit note are:- • To evidence the acceptance of the return of goods • by the seller from the buyer.

  42. Books of Prime Entry Purchases Return Day Book • The functions of a credit note are:- • To evidence to a buyer that he need not pay for goods invoiced to him • because the goods have been lost in transit.

  43. Books of Prime Entry Purchases Return Day Book • The functions of a credit note are:- • To correct errors on invoices, • such errors may be over pricing or inclusion of goods not actually sent [Millichamp 1992:7]

  44. Lecture Notes 3 Sales Day Book

  45. Books of Prime Entry Sales Day Book • It records the sale of goods on credit • It is also referred to as the Sales Journal or Sales Book,

  46. Books of Prime Entry Sales Day Book • A separate ledger called the Sales Ledger is kept for the accounts of customer of these goods. • The aggregate amount in the Sales Day book is credited to the Sales Account in the General Ledger.

  47. Books of Prime Entry Sales Returns Day Book • A record of the return of goods sold on credit iskept in a Returns Inwards Day book.

  48. Books of Prime Entry • It is important to note that the day books do not form part of the double entry system.

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