Scribd
Upload
8K views

Chapter 1 - Business Transactions and Documentation

The document provides an overview of the ACCA Certified Accounting Technician (CAT) Paper 1 syllabus on recording financial transactions. It covers introduction to transaction accounting, recording and accounting for cash and credit transactions, and payroll recording transactions. Key topics include business transactions and documentation, the accounting equation, financial statements, ledger accounts, receipts and payments, sales and purchase records, control accounts, and payroll.

Uploaded by

shemida
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
8K views

Chapter 1 - Business Transactions and Documentation

The document provides an overview of the ACCA Certified Accounting Technician (CAT) Paper 1 syllabus on recording financial transactions. It covers introduction to transaction accounting, recording and accounting for cash and credit transactions, and payroll recording transactions. Key topics include business transactions and documentation, the accounting equation, financial statements, ledger accounts, receipts and payments, sales and purchase records, control accounts, and payroll.

Uploaded by

shemida
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 40

ACCA

Certified Accounting Technician


(CAT)
Paper 1 - Recording Financial

Lecturer: Tran Viet


Thang
Syllabus overview
Part A Introduction to transaction
accounting
1 Business transactions and documentation
2 Assets, liabilities and the accounting
equation
3 Statement of financial position and income
statement
4 Recording, summarising and posting
transactions
5 Completing ledger accounts
Syllabus overview
Part B Recording and accounting
for cash transactions
6 Receiving and checking money
7 Banking monies received
8 Recording monies received
9 Authorising and making payments
10 Recording payments
11 Maintaining petty cash records
12 Bank reconciliations
Syllabus overview

Part C Recording and accounting


for credit transactions
13 Sales and sales returns day books
14 The receivables ledger
15 Purchase and purchase returns day
books
16 The payables ledger
17 Control accounts
Part D Payroll
18 Recording payroll transactions
CHAPTER 1
Business transactions and
Contents overview
 Types of business transaction
 Documenting business transactions
 Invoices and credit notes
 Discounts, rebates and allowances
 Sales tax
 Contract law
 Storage of information
 Data protection
Types of business
transaction
 What is a business?
 Uses economic resources to create goods or
services which customers will buy
 Provides jobs for people to work in
 Invests money in resources in order to make
even more money for its owners
 Business transactions?
 Propertychanges hands
 Two main types: sales and purchases
By cash or on credit
 Sales
 By cash: goods or services given in
exchange for immediate payment (in notes,
coins, cheques)
 On credit: cash received later

 Purchases:
 Forcash: payment made immediately
 On credit: cash paid later
Other business transactions
 Payment of wages
 Borrowing money
 Lending money
 Offering a discount
 Receiving a discount
Documenting business
transactions

 Binding point b/w seller and buyer?


Discussion
 Documentation to expect
1 You buy a CD from a shop, paying cash
(1) A receipt
3 You have air-conditioning system installed
(1) A letter of enquiry
(2) A quotation
(3) An order
(4) An order acknowledgement
(5) A delivery note
(6) An invoice
(7) A credit note
More documents
 Inventory lists: check availability of all the
parts
 Supplier lists: where to buy parts

 Staff schedules: plan for human resource

 Timesheet: record the actual hours staff

spent
 Goods received notes

 Expense claims: Employees may incur

expenses which need to be reimbursed


Accounting system: records, summarizes
and presents the information contained in
Purchase order vs. sales
order
Pu
rc
h
as
e
or

S
al
es
or
d
er
Invoice vs. credit note vs.
debit note
 Invoice  Credit note
A demand for  Negative invoice:
payment cancel part or all of
 Settled immediately previously issued
in cash: receipt invoice
 Paid on receipt of  Amount payable:
goods: cash on unpaid invoice’s
delivery (COD) value minus the
invoice credit note’s
 Paid later: credit  Debit note
invoice  Customer to supplier
 Invoice illustration requesting a credit
 How many copies note
needed?  Supplier to customer
to adjust upwards
Illustration
H
o
w
m
u
c
h
is
th
e
p
a
y
a
bl
Discounts, rebates and
allowances
Trade discount Cash discount
 $1 per unit, but 95p  10% 0 days, 5% 7
for 100 units or more days, net 30 days
 Given on invoice  Financing matter
 Permanent
Rebate Allowance

 A reduction in the  Buy 1 get 1 free


bills for the following
year
 A cheque for the
calculated rebate
Example
Trent Marcus has three major suppliers.
(a) Parker is in the same business as Trent and offers 5%
trade discount
(b) Scott offers a trade discount of 6% on amounts in
excess of $200 (ie the trade discount does not apply to
the first $200)
(c) Alan offers a 10% cash discount for immediate
payment or a 5% cash discount for all items paid for
within 30 days of purchase
Purchase transactions in Jan 20X8 worth the following
amounts before discounts have been deducted.
 From Parker: $600

 From Scott: $850

 From Alan: $280 cash and $920 to be paid on 14.1.X8


for goods purchased on 3.1.X8
Calculate how much Trent has received as discounts in
Answer
Example
 Product A is quoted at $10 per each. A lower
price of 95% per unit for buying 100 units or
more at a time. One company purchased
150 units.
 What is accounting treatment?

Trade discount
 The value of those goods recorded in

accounting book should be the net amount


after discount i.e, $1,425
 ($1,425 = 150*$10*95%)
Question
Champer purchases goods with a list price of
$30,000. The supplier offers a 10% trade
discount, and a 2½% cash discount for
payment within 10 days.
Required
Note. Ignore sales tax.
(a) Calculate the amount Champer will
have to pay if it delays longer than 10 days
before paying.

(b) Calculate the amount the company will


pay if it pays within 10 days.
Answer
List price 30,000
Less 10% trade discount 3,000
27,000
Less 2½ cash discount
27,000 x 2½% 675
26,325

 Note: Trade discount first, cash discount


second
Example
Credit period allow: 60 days
Invoice price of the goods: $10,000
3% discount for immediate payment
Questions:
1. Should the customer take this option when
he has no money and has to ask money
from bank with interest rate 2% per month?
2. Should the supplier offer this option if he
can deposit the early payment in bank with
interest rate 1.8% per month?
Answer
The discount worth = $10,000*3%
= $300
The interest paid to bank
= 2%*2*$10,000*97%
= $388
 Customer should refuse this option

The interest income received from bank


= 1.8%*2*$10,000*97%
= $349.2
 Supplier should refuse this option
Sales tax
Net price = $120
Sales tax rate = 17½%
Sales tax = 17½% * $120 = $21
Gross price = $141
 Note:

 Purchaser pays gross price 141


 Government takes the sales tax (21)
 Seller keeps net price 120
 Input tax vs. output tax?
 Sales tax return?
Illustration
The gross price of product A is $705 and
the net price of product B is $480. What is
the sales tax charged on each product if
the sales tax rate is 17½%?

Solution
(a) Sales tax for product A = 17.5/117.5 ×
$705 = $105. (So net price was $705 –
$105 = $600.)
(b) Sales tax for product B = 0.175 × $480
Question
A company sells goods for $127,350
including sales tax at 17 ½% in a quarter.
It buys goods for $101,290 including sales
tax. What amount will it pay to or receive
from the tax authorities for the quarter
(round to the nearest $)?
Solution
Example: Discounts and
sales tax
A company buys goods for sale costing
$6,000. A cash discount of 5% is offered
for payment within 10 days. If the sales
tax rate is 17½%, what is the sales tax
due? Is your answer different if the
company pays after 10 days?
Answer

 Sales tax is calculated on the discounted


price regardless of whether the discount
is actually taken.
Contract law - Discussion

Contract law - Discussion

Home Reading
Situation 1
 You pick up something in a department store
which is priced at $24. When the assistant
scans it, the price appears as $26.
 You tell her that, as it was marked at $24,
the store is legally obliged to sell it to you at
that price. Are you correct?
 No, you are not correct. The price label in the
store is an 'invitation to treat' (invitation to
make an offer). Your proposal to pay $24 is
the offer. There is no acceptance from the
store, so no contract has been made.
Situation 2
 R bought a car from D, which D had
unknowingly bought from a thief. When
this was discovered, the car was returned
to the true owner. R sued D for the return
of the full purchase price (as damages).
 The court decided that, although R had
used the car for several months, he had
not had ownership of it, which is what he
had paid for. D therefore had to repay the
full amount.
Situation 3
 A sells goods to B, who sells them on to C. B
then fails to pay A for the goods and disappears
without trace. Then how A and C should go on?
 If A can demonstrate that he was genuinely
mistaken as to the identity of B and would not
have dealt with him had he known who B really
was, then A can recover the goods which were
subject to the original contract from C.
 This is because the law takes the view in such a
situation that the original contract between A
and B was no contract at all. Therefore C, who
was an innocent third party acting in good faith,
has to return the goods to A and either bear the
Situation 4
 A seller advertised a second-hand reaping
machine, describing it as new the
previous year. The buyer bought it
without seeing it. When it arrived he
found that it was much more than a year
old and rejected it. The seller sued for the
price.
 It was held that this was a sale by
description, the goods had not
corresponded to the description, and the
buyer was therefore entitled to reject the
Situation 5
 Peter buys an electronic keyboard from his local
catalogue store. He pays $199 for it. He returns to the
store the next day complaining that, although the main
keys work, none of the pre-set rhythm buttons seem to
function. He demands an immediate refund. The sales
assistant refuses to given him a refund or take back the
goods, and instead gives him a card with the name and
address of the manufacturer, suggesting that Peter
contacts them to obtain a refund or a replacement.
Questions:
 (a) Was the sales assistant legally justified in refusing
to give a refund?
NO
 (b) Give briefly a reason for your answer.

Contracts of sale are between the buyer and the


seller
Information and data

Information and data

Home Reading
Retention policy
 Sets down how long different kinds of
information are retained
 Master files and reference files: charter
agreement, legal documents
 Temporary or transitory files
 Active files: invoices, GRNs files
 Non-active file: purchase invoices of
previous years
No long needed info and
data
 Will you throw it away???
 Ways to deal:
 Microfilmed or microfiched
 Stored elsewhere (archiving)
 Securely destroyed
QB 1

Answer: A
QB 2

Answer: B

You might also like