Transcript Accounting & Financial Analysis 1

Accounting & Financial
Analysis 1
Lecture 2
Specialised journals
General journal
Journals
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All information relating to the
transactions of a company are
processed through journals into
the general ledger.
There are two types of journals :
Specialist journals (Subsidiary
books, day books)
General journal
What is a specialist journal?
Limited function nowadays, due to
modern computer accounting
systems
 A chronological summary of similar
transactions that occur regularly,
recorded in a day book with the
column totals summarised and
posted to the general ledger at the
end of a specified period usually 1
month.
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7 Specialist Journals
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There are seven specialist journal books:
Sales journal (Day book which records all the credit sales)
Sales returns journal (Day book which records credit sale
returns)
Purchases journal (Day book which records credit
purchases of stock)
Purchase returns journal (Day book which records the
returns of stock purchased on credit)
Cash receipts journal (Day book which records all cash
receipts)
Cash payments journal (Day book which records all cash
payments)
Petty cash journal (Day book which records all petty cash
payments and the receipt of replenishment)
General Journal
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The general journal is the subsidiary
book in which we record the details
of any transaction that cannot be
recorded in any other subsidiary
book. (Specialist journals)
General Journal - 2
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It has the following characteristics:
Provides a record of details in date
order
Indicates the general ledger
accounts to be debited or credited.
Indicates the $ amount to be
processed to each general ledger
account.
Gives the reason for the
transaction being processed.
General Journal - 3
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The general journal is generally
used to process
transactions/activities that are not
recorded in any of the specialised
journals.
General Journal - 4
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These transactions generally relate to the
following activities:
Start-up business entries
Correction of posting errors
End of month entries: depreciation charge,
bank interest & charges, provision for bad
debts, bad debts write-off etc.
Accrual of expenses
Adjustments for prepayments
Purchase of fixed assets on credit
Adjustment entries on sale of assets
Contra entries, inter-account transfers
JOURNALS ARE BOOKS
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Each journal is a separate ledger
book with analysis columns (up to
25 columns, each column for a
separate account with the last
column for any uncommonly used
accounts). The first column is for
the total $ value of the transaction.
JOURNAL EXAMPLES
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Sales (Credit Sales/Trade Debtors)
Sales returns (Credit Sales returns)
Purchases (Credit Purchases/Trade
Creditors
Purchases returns (Credit Purchase
returns)
Cash receipts
Cash payments
Petty cash
General journal.
Credit terms
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Credit terms is the agreement made with the
customers which specifies the time in which the
account has to be paid, and sometimes
the discount allowed if the account is paid
earlier.
Every business tries to collect the money owing
as quickly as possible as this will help the
business cash flow.
In order to get the trade debtors (accounts
receivable) to pay their account quicker a
discount may be offered for quick settlement.
The discount could be 3% if paid within 10 days,
if not, the full amount within 30 days.
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The discount will be documented as follows: Terms
3/10, net 30.
Credit terms - 2
For accounting purposes
 Discount allowed = Debit entry
 Discount received = Credit entry
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The sales returns journal –
see attachment 1
The sales returns journal is the
subsidiary day book which records
all the RETURNED CREDIT SALES
(of trading stock) that have taken
place during the month.
 At the end of the month the columns
are totalled (added up) and ONLY
the total of each column is posted to
the General Ledger.
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Example: Sales returns
journal
Date
Description
Credit.Note
Value
GST
Total
5/7/07
Goods sold on
credit returned
by Tuan
15
$40
$4
$44
12/7/07
Goods sold on
credit returned
by Barath
16
$30
$3
$33
$70
$7
$77
TOTAL
Purchase journal – see
attachment 1
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The purchase journal is the subsidiary
day book which records all the CREDIT
PURCHASES (of trading stock) that have
taken place each day during the month.
At the end of the month the columns are
totalled (added up) and ONLY the total of
each column is posted to the General
Ledger.
Purchases of other items such as office
computer is not recorded in the
purchases journal only trading stock (for
resale) purchased on credit is recorded in
the purchases journal.
Example: Purchases journal
Date
Description
Inv.No. Value
GST Total
4/2/07
Purchased goods on credit from
Supplies Ltd
Purchased goods on credit from
Co-Op Ltd
Purchased goods on credit from
Easton Ltd
Purchased goods on credit from
Uncle Toby
Total
2356
$1,420
$142
$1,562
4257
$2,420
$242
$2,662
1258
$860
$86
$946
687
$440
$44
$484
$5,140
$514
$5,654
10/2/07
12/2/07
18/2/07
The purchases returns journal
– see attachment 1
The purchases returns journal is the
subsidiary day book which records
all the RETURNED CREDIT
PURCHASES (of trading stock) that
have taken place during the month.
 At the end of the month the columns
are totalled (added up) and ONLY
the total of each column is posted to
the General Ledger.
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Example: Purchases returns
journal
Date
Description
Credit. Value
Note
GST Total
14/2/07
Purchases returned to Co-Op
Ltd
Purchases returned to Easton
Ltd
246
$180
$18
$198
316
$80
$8
$88
$260
$26
$286
20/2/07
Total
The Cash Payments and receipts
journals – see attachment 2
The cash journals (payments and
receipts) are the journals into which
we record all the cash transactions
that take place during the month.
 All cash receipts are recorded in the
CASH RECEIPTS JOURNAL and
 All cash payments are recorded in
the CASH PAYMENTS JOURNAL.
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The cash payments journal
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A business will have various cash payments to
record during the month, some of which will be
the payment of wages, rent, telephone,
electricity, purchase of goods for cash,
payments to trade creditors, GST payments etc.
etc.
Each one of these payments will be recorded in
the cash payments journal and
at the end of each month the columns will be
totalled (added up) and ONLY the total of each
expense account will be posted to the General
Ledger.
The sundry column will be used to record all the
payments for which there is no specific column.
Example: Cash Payments
Journal
Debit
Date
Details
Chq. Dis.
No.
Rec.
4/2
6/2
Wages
Trade Creditors Co-Op Ltd
Cash purchase
Rent
Wages
Trade Creditors
– Easton Ltd
Cash purchase
Insurance – M.V.
46
47
8/2
10/2
12/2
16/2
18/2
20/2
Total
48
49
50
51
Credit Cash
ors
Purch
ases
Inp
Tax
Cr
Credit
Wages Sundry
Bank
$1,800
$1,800
$1,500
$1,500
$1,200
$120
$90
$900
$1,880
$600
52
$860
$2,100
$2,060
$86
$40
$336
$3,680
$1,320
$990
$1,880
$600
$400
$946
$440
$1300
$9,476
Use of Cash Payments
Journal
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Therefore if we want to confirm that
an expense has been paid by the
business we would have to refer to
the Cash Payments Journal for
detail of all payments.
The cash receipts journal
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A business will have various cash receipts to
record during the month, most of which will be
receipts from
trade debtors (accounts receivable), and
cash sales,
GST payments etc.
Each one of these receipts will be recorded in
the cash receipts journal and at the end of each
month the columns will be totalled and ONLY the
total of each receipt will be transferred to the
General Ledger. The sundry column will be used
to record all the receipts for which there is no
specific column.
The cash receipts journal
Each one of these receipts will be
recorded in the cash receipts
journal and at the end of each
month the columns will be totalled
and ONLY the total of each receipt
will be transferred to the General
Ledger.
 The sundry column will be used to
record all the receipts for which
there is no specific column.
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Example: Cash Receipts
Journal
Credit
Date
Details
4/2
6/2
Cash sale
Trade Debtor –
John Smith
Cash sale
Rent
Trade Debtor –
Monica Borg
Cash sale
Commission
8/2
10/2
12/2
16/2
18/2
20/2
Total
Inv.
No.
GST
Adj
Dis.
Exp.
Debtors
Debit
Rent
Sundry
Cash
Sales
GST
Pay
$250
$25
$275
$583
$90
$9
$60
$99
$660
$715
$583
$600
$715
$760
$1,298
$1,100
$76
$6
$176
$600
Bank
$60
$836
$66
$60
$3,234
Cash Receipts Journal -2
Therefore if we want to confirm
receipt of income we would have to
refer to the Cash Receipts Journal
for detail of all receipts.
 Example: If a debtor (credit sales)
claims to have paid an account we
would have to check the Cash
Receipts Journal to see if the
payment is recorded.
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Have a go!
CLASS EXERCISE 2
 At the back of your handouts
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