CHAPTER 3

Recording, Summarizing
and Posting transactions
PREPARED BY : NUR QURATUN ‘AINI HARON
 Learning outcomes:
1. Able to record in book of prime entry

2. Able to posting transaction in ledger

3. Receivables & Payables ledger

4. Control Account

5. Accounting for Sales Tax

6. Computerised system

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 1. Books of Prime Entry
Book of Prime Entry Documents Recorded

1. Sales Day Book Credit Sales Invoices, Credit Notes Sent

2. Sales Returns Day Book Sales Return, Credit Notes

3. Purchase Day Book Credit Purchase Invoices, Credit Notes Received

4. Purchase Returns Day Book Purchase Returns / Credit Notes Received

5. Cash Book Cash Paid and Received

6. Petty Cash Book Notes and Coin Paid and Received

7. Journal or General Journal Adjustment and correction of errors

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 1. Books of Prime Entry-cont
1. Cash book - records receipts and payments into and out of the business bank
account. These would include receipts and payments made by bank transfer, standing
order, direct debit and bank interest and charges, directly by the bank.

2. Sales day book -lists all sales made on credit. It is used to keep a list of all invoices
sent out to customers each day.

3. Sales Returns Day Book - customers return goods for some reason, a credit note is
raised. All credit notes are recorded in the sales returns day book.

4. Purchase Day Book - lists all purchases made on credit.

5. Purchase Returns Day Book - records credit notes received in respect of goods
which the business sends back to its suppliers.

6. Petty Cash Book - Most businesses keep a small amount of cash on the premises to
make occasional small payments in cash, e.g. staff refreshments, postage stamps, to
pay the office cleaner, taxi fares, etc. Therefore, the petty cash book is a cash book
for small payments.

7. Journal or General Journal - Sales/purchases of NCA on credit, Correction of

errors, Opening
NUR QURATUN entries, Transfers, Withdrawals
'AINI HARON 5 of inventory for owner’s own use,
Adjustment.
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 The Day Books of Prime Entry
1. The Sales Day Book
Date Inv. No Customer Reference Total Amount Invoice

2. The Sales Return Book

Date Customer Reference Amount

3. The Purchase Day Book

Date Supplier Reference Total Amount Invoice

4. The Purchase Return Book

Date Supplier Reference Amount
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 5. Cash Book

RECEIPTS

Date Description Ref Discount Total Customer Cash Other

Allowed Sales

PAYMENTS

Date Description Ref Discount Total Supplier Expenses

Non-
Received Current
6. Petty Cash Book- Book of Prime Entry which keeps a Asset

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2. Source of Documents and Books of Prime Entry
SOURCE DOCUMENTS
Purchase Sales Receipts Receipts Invoices, Credit Credit
Invoice Invoice received issued to memo notes notes
(Original (Duplicate from customer received issued to
Copy) Copy) suppliers, (duplicate from customer
cheque copy) suppliers (duplicate
buds or (original copy)
counterfoi copy)
ls

Purchase Sales Day Cash Cash General Purchase Sales

Day Book Book Book or Book or Journal Returns Returns
Cash Cash Day Book Day Book
Payments Receipts
Journal Journal

BOOKS OF PRIME ENTRY

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 ACCOUNTING CYCLE / PROCESS

Transactions

Source
Documents
Journalizing

Book of prime entry

Posting

Ledgers

Trial balance

YES

Adjustments

NO

Financial
Statements
 ACCA SPECIMEN-Q44
44. Which of the following are books of prime entry?

(1)Sales day book

(2)Payables ledger

3)Journal

(4)Cash book

A. 1, 3 and 4

B. 1, 2 and 4

C. 1, 2 and 3

D. 2, 3 and 4
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 Exercise Cash Book
The following receipts and payment relate to AA Enterprise for the month
of January. At the beginning of January, the bank balance is $ 2,100,
receivables $6,980, payables $9,000

a)Cash Sales $ 220

b)Payment from credit customer Khir $3,100 less discount allowed $100
c)Payment from credit customer, Lily $1,480
d)Payment from credit customer Lee $2,400 less discount allowed $70
e)Cash Sales $190
f)Cash received for sale of machine $370
g)Payment to supplier Penny $1,350 less discounts received $100
h)Payment to supplier Burn $2,420
i)Payment for telephone bill $ 235
j)Payment for gas bill $640
k)Payment to Fauzi for a new machine $3,400
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Prepare a cash book to record the above transactions
3. The General (Nominal) Ledger

 General Ledger is the accounting record which summarizes

the financial affairs of a business.
 The format of a ledger Account
Advertising Expense

Date Description Ref $ Date Description Ref $

1/4/17 Cash Inv 0203 1,000

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 Posting From The Day Book
Ex: Sales Day Book to General Ledger
Date Inv No Details (Customer) Reference Total Amount Invoice ($)
20x9
Jan 3 139 Orked SL O 1,250
7 140 Anggerik Co SL A 1,000

9 141 Mawar Co SL MC 2,000

14 142 Hibiscus Co SL HC 3,000

15 143 Dahlia SL D 4,000

31 Total 11,250

Using the sales day book, posting to entries to general ledger account is shown below

Sales Receivables
Jan 31 Total 11,250 Jan 31 Sales 11,250
Receivables

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 General ledger and double
entry
 The cash book is a good starting point for understanding double entry.
 Memorandum accounts
 Whilst maintaining control accounts most businesses will
maintain what is referred to as a 'memorandum.'
 This is a separate list of individual receivable and payable
amounts due from each customer and to each supplier,
respectively.
 This simple 'list of balances' is used as a record so that
companies know how much each customer is due to pay and
how much they are due to pay each supplier.

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The main purpose of memorandum ledgers is to know how much is owed by each
particular customer or to a specific supplier at a point of time.
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Important

— Remember that these receivables and payables ledgers are kept purely for
reference and are therefore known as memorandum records. They do not
normally form part of the double entry system.
 The Receivables (Sales) and Payables (Purchase) ledgers

 The accounts in the general ledger are impersonal

accounts. There are also personal accounts for customers
and suppliers and these are contained in the receivables
ledger and payables ledger

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 Personal Account
Impersonal Account
(anything that relates with
individual & firm)

Premises
Receivable Ac Vehicles
Payable Acc Stock
Capital Acc Cash
Drawing Sales

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 Personal Accounts in the Receivables ledger

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 Personal Accounts in the Payables ledger

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 4. Control Account
Receivables control Account
• An account in which records are kept of transactions
involving all receivables in total.

Payables Control Account

• An account in which records are kept of transactions
involving all payables in total.

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 Lecture Example 1, page 69
 BPP (CN) 3.1-3,10

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 5. Accounting for sales Tax

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 Accounting for sales Tax-cont
Output tax
 Sales tax charged on goods and services sold by a business is
referred to as output tax.
 e.g. I sell a computer to you and you will pay me a price + output
tax

Input tax
 Sales tax paid on goods and services ‘bought in’ by a business is
referred to as input tax.
 e.g. If I buy a computer, I have to pay a price + input tax
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 Accounting for sales Tax-cont
Output Sales Tax
 A business does not keep the output sales tax it charges- it pay back
to the authority .
 It therefore follows that its records of sales should not include sales
tax
 Example: Refer page 68
 If a business sells good for $600 +$120 sales tax, ie $720 gross price
 Dt Cash Cash
Dt or trade accounts
or trade receivable
accounts $720
receivable $720
 Ct Sales $600
Ct Sales $600
Ct Sales Tax $120
 Ct Sales Tax $120
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 Accounting for sales Tax-cont
Input Sales Tax

Example: Gross Price : $480, Net Price: $400, Sales Tax : $80
 If input tax is recoverable, the cost of purchase should exclude the tax
Dt Purchases $400
Dt Sales tax account (input tax) $80
Ct Trade account payables $480

 If input tax is irrecoverable, the cost of purchase should include the tax

Dt Purchases $480
Ct Trade account payables
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$480
 Accounting for sales Tax-cont
 Some circumstances in which traders are not allowed to reclaim sales tax
paid on their inputs (Input tax) .
 For e.g. sales tax charged on motor cars, other than for resale, and on
certain business entertaining expenses is irrecoverable.
 In these cases, sales tax must be regarded as part of the cost of the items
purchased and included in the statement of profit or loss charge or in the
statement of financial position as appropriate.
 Therefore, the double entry for buying a motor vehicle, where sales tax is
irrecoverable, is: -

Dr Motor Vehicles A/c (cost + sales tax)

Cr Cash A/c (cost + sales tax)
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 Estimation of sales tax is calculated after deducting all discounts available

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During the month of March 20x4, a business made a sales on
credit $15,790 plus sales tax and purchases on credit of $12,455
inclusive of sales tax.

Also during this month $13,612 was received from receivables

in cash and cheque and cheque payment of $9,400 were made
to payables. Sales tax is at the rate of 20%.

Required: Double entry and post it to ledger

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 6. Methods of Coding Data
Each account in an accounting system has a unique code to
identify the correct account for posting.

Significant digit codes - incorporate some digits which

describe the items being coded.

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 EXAMPLES

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Computerised accounting

— The principles of a computerised system are exactly the same as for manual
accounting but the records or files are held in electronic formats.

— Computer activity is divided into input, processing and output.

— Batch processing is where similar transactions are gathered into batches, then
each batch is sorted and processed by computer.

— Control totals are used to make sure there have been no errors when the batch is
input.
Computerised accounting

— Computer programs are the instructions that tell the electronics how to
process data. The general term for these is software.

— Each account has a unique code for identification and posting.

— An accounting package consists of a number of module which perform all

the tasks needed and are usually integrated with each other.
 Ability to deal with a large
Advantages: volume of transactions and
process them quickly

Rapid analysis of data to

provide useful output which
may take a variety of forms,
eg invoices, trial balance,
aged receivables reports

Integration of systems, or
modules, prevents wasteful
repetition as one entry may
update several records

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 Advantages (continued):

— Improved accuracy

— Operators can be non-

specialists, as use of codes for
input means correct accounts
will be updated

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 Disadvantages
• Danger of unauthorised
access to files, security
checks need to be set up
• Danger of data/program
corruption
• Chance of
incorrect/omitted input –
system of checks required
• 'Invisibility' of data
• Time and cost of
installation, training and
developing a coding
system

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