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7/30/2019 Principles of Accounts School Rack
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Principles of
Accounts
Revision Guide:
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Topics to be reviewed
1.Double Entry2.Books of Original Entry
3.Trial Balance4.Trading, Profit and LossAccount
5.Balance Sheet6.Control Accounts
2
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Recording transactions rules of entry
TYPE OF ACCOUNT VALUE CHANGE LEDGER COLUMN
ASSET INCREASE DEBIT
ASSET DECREASE CREDIT
LIABILITY INCREASE CREDIT
LIABILITY DECREASE DEBIT
CAPITAL INCREASE CREDIT
CAPITAL DECREASE DEBIT
EXPENSES INCREASE DEBIT
EXPENSES DECREASE CREDIT
REVENUE INCREASE CREDIT
REVENUE DECREASE DEBIT
3
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BOOKS OF ORIGINAL ENTRY / BOOKS OF PRIME
ENTRY
The General Journal
The Sales Journal
The Purchases Journal The Sales Returns / Returns
Inwards Journal
The Purchases Returns / ReturnsOutwards Journal
The Cash Book
4
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The general journal
USES
Recording:
Opening entries
Closing entries
Purchase or sale of an asset on credit
Adjustments
Writing off of bad debts
Correction of errors
Irregular transactions
5
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The general journal continued
DATE DETAILS FOLIO DEBIT CREDIT
2005
July 1
Cash
Bank
Computer
Capital
To record opening entries
GL 3 000
5 000
2 000
10 000
2005July 5
Motor VanAuto-World Ltd.
To record purchase of asseton credit
GL 30 00030 000
2005
July 8
M. Small
ComputerTo record sale of asset
GL 2 000
2 000
2005
July 31
Sales a/c
Trading a/c
To transfer Sales to the
Trading a/c
GL 29 000
29 000
6
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The general journal continued
DATE DETAILS FOLIO DEBIT CREDIT
July
31
Trading a/c
Purchases a/cTo transfer Purchases to
the Trading a/c
GL 16 000
16 000
July 31 Profit and Loss a/c
Rent expense a/c
To transfer rent expenseto the Profit and Loss
a/c
1 000
1 000
July 31 Discount received a/c
Profit and Loss a/c
To transfer discountreceived to the Profit
and Loss a/c
300
300
July 31 Bad debts
B. Tara
To record bad debtwritten off
600
600
7
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SALES JOURNAL / SALES DAY BOOK
USE : TO RECORD THE SALE OF STOCK ONCREDIT
Source Document: Sales Invoice
DATE DETAILS INVOICE # F AMOUNT ($)
2006
March 05 C. Croft 00036 SL 450
March 13 Clothes Palace 00037 SL 1 000
Total Credit Sales
transferred to sales a/c in
the general ledger
GL 1 450
8
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Purchases journal / purchases day book
USE: To record all stock purchased on credit for resale
Source Document: Purchases Invoice
DATE DETAILS INVOICE # F AMOUNT
($)2006
March 7 D. Bravo 0006789 PL 340
March 22 M. Mohammed 00256 PL 2 000
March 28 United Grocers 003976 PL 650
Total credit purchases
transferred to the
Purchases a/c in the
General Ledger
GL 2 990
9
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Sales Returns / Returns Inwards Journal
USE: To record goods which have been returnedto the seller ( a credit note is issued)
DATE DETAILS NOTE # F AMOUNT ($)
2006
March 7 C. Croft 004 SL 50
March 17 Clothes Palace 005 SL 100
Total transferred to the
returns inwards a/c in the
general ledger
150
10
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Purchase Returns / Returns Outwards Journal
USE:To record the value of goods purchased whichare returned to the seller (A credit note is received)
DATE DETAILS NOTE # F AMOUNT ($)
2006
March 09 D. Bravo 00056 PL 30
March 26 M. Mohammed 0000467 PL 100
March 30 United Grocers 000890 PL 20
Total transferred to the
returns outward a/c in the
general ledger
150
11
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RULES FOR POSTING IN THE DAY BOOKS
Sales journal:
Dr. Debtors a/c in Sales Ledger;
Cr. Sales a/c in General Ledger
Purchases journal:
Dr. Purchases a/c in General Ledger;
Cr. Creditors a/c in Purchases Ledger
Sales returns journal:
Dr. Sales returns a/c in General Ledger;
Cr. Debtors a/c in Sales Ledger
Purchases returns journal:
Dr. Creditors a/c in Purchases Ledger;
Cr. Purchases returns a/c in General Ledger
12
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The Petty Cash Book
A type of cash book kept especially for
small payments There are many small payments to be
made.
Cuts down on entries made in the generalledger.
Relieves the main cashier from routine
work, since a junior cashier could beassigned the task.
The imprest System: A system where arefund is made of the total paid out in a
period.
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
CASH IN
The Float
REMEMBER:
THE FLOAT IS THE
ORIGINAL AMOUNT
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Carcleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
CASH OUT
S S
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
ANALYSIS
COLUMNS
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.00
35.00
10.00
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.0035.00
10.00
TOTALS
Total Vouchers 65.00 20.00 35.00 10.00
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.00
35.00
10.00
TotalVouchers 65.00 20.00 35.00 10.00
BALANCE c/f
235.00Cash in Box
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PETTY CASH BOOK
Cash
ReceivedDate Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.00
35.00
10.00
TotalVouchers 65.00 20.00 35.00 10.00
235.00
300.00300.00
TOTALSTOTALS
Cash in Box
THIS CLOSES THE PC BOOK FOR THE WEEK
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.00
35.00
10.00
TotalVouchers 65.00 20.00 35.00 10.00
235.00
300.00300.00
BALANCE b/f
Cash in Box
Cash in Box8/9/96235.00
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PETTY CASH BOOK
Cash
Received
Date Details
300.00 1/9/96 Cash from bank
Voucher
No.
1/9/96 Car cleaning 1
Cash Paid
Out
20.00
2/9/96 Stamps 2 35.00
Cleaning Postage Sundries
3/9/96 Tea/Coffee 3 10.00
20.00
35.00
10.00
TotalVouchers 65.00 20.00 35.00 10.00
235.00
300.00300.00
Cash in Box
Cash in Box8/9/96235.008/9/96 Cash from bank65.00
CASH IN
THE FLOAT IS BROUGHT BACK TO
THE ORIGINAL AMOUNT
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The cash book
USE: To record all receipts andpayment by cash and cheque, and
discount allowed and received..
N.B. Cheque receipts andpayments are recorded as bank.
22
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Format of the 3 columncash book
Date, details. Folio, discount allowed,cash, bank, date, details, folio, discount
received, cash, bank.
Date Details F Discount
Allowed
Cash Bank Date Details F Discount
Received
Cash Bank
23
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Subsidiary books
The General Ledger
The Sales Ledger
The Purchases Ledger
24
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The Ledgers
Date Details F Amount Date Details F Amount
25
USE: Debtors from the Sales Journal are posted to the SalesLedger
Creditors from the Purchases Journal are posted to the
Purchases Ledger
All other accounts are posted to the General Ledger
Format of the ledger account:Name of the Account
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The T Account
So called because of its shape. The nameof the account is written on the top of theaccount.
Rent a/c
26
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The Trial Balance
USE:
This presents a list of all
balances. The main aim isto check the accuracy of thepostings.
NB: Closing stock is no t l is ted in the
Trial Balance27
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Debit side Credit side
Assets:
Cash
Bank
DebtorsStock (opening)
Furniture
Fittings
MachineryEquipment
Motor vehicles
Land and Buildings
Liabilities:
Bank overdraft
Creditors
Bank loansMortgages
Capital
28
Format of the Trial balance
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Format of the Trial balance continued
Debit side Credit side
Expense accounts:Purchases
Wages
Salaries
Insurance
RentTransportation in (carriage inwards)
Transportation out (carriage outwards)
Telephone
Electricity
Bad debtsDepreciation
Discount allowed
Bank interest
Sales returns
Drawings
Revenue accounts:Sales
Rent received
Interest received
Commission received
Discount receivedPurchase returns
Provision for doubtful debts
Provision for depreciation
29
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Format For Trading Account (vertical format)
Details $ $ $
Sales
Less: Sales returns
Net sales
Less: cost of sales
Opening stock
Add: PurchasesAdd: Carriage inwards
Gross Purchases
Less: Returns outwards
Net Purchases
Cost of goods available for sale
Less: Closing stock
Cost of goods sold
Gross Profit
XXXXXXX
XXXX
(XXX)
XXXXX
(XXX)
XXXXX
XXXX
XXXXX
(XXXX)
XXXXX
(XXXX)
XXXX
30
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Format For Profit & Loss Account
Details $ $ $
Gross profit /Gross loss
Add: Other Income
Commission received
Discount receivedRent received
Interest received
Bad debt recovered
Total revenue received
Total gains / losses
XXXX
XXXXXXX
XXX
XXX
XXXX
XXXX
XXXX
31
Format For Profit & Loss Account Continued
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Format For Profit & Loss Account Continued
Details $ $ $
Total gains / losses
Less: ExpensesWages and salaries
Electricity
Rent
Telephone
Carriage outwards
Advertising
Depreciation expense
Bad debt expense
Discount allowed
Travelling expenses
Interest payablePrinting and stationery
National Insurance
General expenses
Total expenses
NET PROFIT / NET LOSS
XXXX
XXXX
XXXX
XXX
XXXX
XXX
XXXX
XXXX
XXXX
XXXX
XXXXXXX
XXX
XXX
XXXX
(XXXX)
XXXXX32
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Format of the balance sheet (vertical format)
Particulars $ $ $
Fixed AssetsBuildings
Less: Provision for depreciation
Machinery
Less: Provision for depreciation
Furniture
Motor van
Less: Provision for depreciation
Equipment
Total Fixed Assets
XXXXX
(XXXX)
XXXX
(XXX)
XXXX
(XXX)
XXXXX
XXXXX
XXXX
XXXXXXXX
XXXXX
33
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Format of the balance sheet continued
Particulars $ $ $
Current Assets
Cash
Debtors
Less: Provision for doubtful debt
Stock
Total Current AssetsLess: Current Liabilities
Bank overdraft
Creditors
Bank loan
Total Current LiabilitiesWorking Capital
XXXX
(XXX)
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
(XXXX)XXXX
XXXX
34
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Format of the balance sheet continued
Particulars $ $ $
Financed by:
Long-term Liabilities:
Mortgages
Owners Equity
Capital (opening)Add: Net Profit
Less: Drawings
Closing Capital
XXXXXXXX
XXXXX
(XXX)
XXXX
XXXXX
XXXXX
35
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Balance Sheet items in order of Liquidity
Assets
Current Assets
Cash in hand
Cash at bank
Prepaid expenses
Debtors
Stock
Fixed Assets
Motor vehicles
Furniture and Fittings
EquipmentComputers
Machinery
Land and Buildings
Liabilities and Capital
Current Liabilities
Creditors (expense creditor & Accruedexpenses)
Trade Creditors
Bank Overdraft
Long-term Liabilities
Loan (to be repaid in more than 1Year)
Mortgages
Owners Equity
Capital at start
Add: Net Profit
Less: Drawings
Capital at end
36
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Balance sheet in order ofpermanence
Reverse the order of
the balance sheet inorder of liquidity to
get the order ofpermanence
37
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What is a Control Account?
A control account can be used as a further check on theaccuracy of the ledgers. In effect, a control account is likea trial balance for each of the sales and the purchasesledger.
There are two types of Control Accounts:- Debtors ControlAccount and Creditors Control Account
NB:REMINDER:A few debtors may have credit balances
and a few creditors may have debit balances for reasonssuch as over- payment or undercharges
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Debtors Ledger Control AccountSource of
InformationType of
Information$ Source of
InformationType of
Information$
Last Periods
Balance
Balances b/d
of totalDebtors withDebitbalances
xxxx Last Periods
Balance
Balances b/d
of totalDebtors withcreditbalances
xxxx
Sales Journal Total CreditSales
xxxx ReturnsInwardJournal
Total ReturnsInward
xxxx
Cash book TotalDishonouredCheques
xxxx Cash book Receipts fromdebtors
xxxx
Cash book Total Refundsto debtors
xxxx Cash book TotalDiscountsAllowed
xxxx
GeneralJournal
Total BadDebts
xxxx
Balance c/d xxxx Balance c/d xxxx
xxxx xxxx
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Creditors Ledger Control AccountSource of
InformationType of
Information$ Source of
InformationType of
Information$
Last PeriodsBalance
Balances b/dof totalCreditors withDebitbalances
xxxx Last PeriodsBalance
Balances b/dof totalCreditors withcreditbalances
xxxx
ReturnsOutwardsJournal
Total ReturnsOutward
xxxx PurchasesJournal
Total CreditPurchases
xxxx
Cash book Payment toCreditors
xxxx Cash book orNotices
Charges forlate payments
xxxx
Cash book TotalDiscountsReceived
xxxx
Cash Book Total Refunds xxxx
Balance c/d xxxx Balance c/d xxxx
xxxx xxxx
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End of Revision This guide seeks to highlight all the key areas that you
need to review during your Vacation.
It will also aid you in the completion of the first crucialpart of your SBA
Any questions or queries can be forwarded to yourteachers e-mails addresses. Please contact them fortheir information.
REMEMBER: SBAs are due on the first day of thestart of the new school term
Study hard, Good Luck and do enjoy your Holidays