an introduction to bookkeeping final

A refreshers guide to bookkeeping

Wesleigh O’Hagan, ACA, PGDE, BAAF

“We can't go over it.We can't go under it.

Oh no!We've got to go through it!”

(excerpt from We're Going on a Bear Hunt by Michael Rosen & Helen Oxenbury)

http://www.amazon.com/Were-Going-Bear-Michael-Rosen/dp/0689853491/ref=sr_1_1?ie=UTF8&s=books&qid=1259981076&sr=8-1

4 out of 20 SQs on average are

Books of First Entry

They also come up throughout the exam as

Part c’s

Patterns – on average 4 SQs

2013 2012 2011 2010General Journal

General Journal

General Journal

General Journal

Control Account

(Creditors)

Control Account

(Creditors )

Control Account

(Debtors)

Control Account

(Creditors)

Ledger Account

(Sales)

Ledger Account

(Purchases)

Ledger Account

(Purchases)

Ledger Account

(Sales)

Day Book

(Purchases)

Day Book

(Sales)

Day Book

(Purchases)

Day Book

(Sales Returns)

Lets take the first steps….

What goes on what side?

DEBIT CREDIT

EARL sits in the T Account

DEBIT CREDIT

E R

A L

What does EARL mean?

DEBIT CREDIT

EXPENSE REVENUE

ASSET LIABILITY

EARL is split between the P&L and the BALANCE SHEET

DEBIT CREDIT

EXPENSE REVENUE P&L

ASSET LIABILITY B/S

Revenue is income that a business earns usually from SALESIt also includes other income items like rent received, commission received etc.

Revenue?

Folios

Folios are like a MAP

They tell you were figures have come from,

or where they are going to

Folios

CB = Cash Book

ACB = Analysed Cashbook

GL = General Ledger

DL = Debtors Ledger

CL = Creditors Ledger

General Journals


General Journal

General Journal

General Journal

Control Account

(Creditors)

Control Account

(Creditors )

Control Account

(Debtors)

Control Account

(Creditors)

Ledger Account

(Sales)

Ledger Account

(Purchases)

Ledger Account

(Purchases)

Ledger Account

(Sales)

Day Book

(Purchases)

Day Book

(Sales)

Day Book

(Purchases)

Day Book

(Sales Returns)

Applying EARL GJ deals with balance sheet items only

Premises An Asset DEBIT

Creditors A Liability – and Creditors always have a CREDIT balance

CREDIT

OSC A Liability – as some day we will have to repay investors

CREDIT

600000

600000 42,0

00

600000 42,0

00583,000

600000 42,0

00583,000625,000

625,000Remember… The GJ must balance.

600000 42,0

00583,000625,000

625,000Watch the date – GJ are normally prepared on the 1st day of the month

1.01.11

600000 42,0

00583,000625,000

625,000Being, Asset, Liabilities and Share Capital of Barr Ltd on this date

600000 42,0

00583,000625,000

625,000Being, Asset, Liabilities and Share Capital of Barr Ltd on this date

Key Sentenc

e!

General Journal Worksheet

Control Accounts


General Journal

General Journal

General Journal

Control Account

(Creditors)

Control Account

(Creditors )

Control Account

(Debtors)

Control Account

(Creditors)

Ledger Account

(Sales)

Ledger Account

(Purchases)

Ledger Account

(Purchases)

Ledger Account

(Sales)

Day Book

(Purchases)

Day Book

(Sales)

Day Book

(Purchases)

Day Book

(Sales Returns)

Debtor Mantra :

Debtors ALWAYS have a Debit Balance

Debtors

DEBIT CREDIT

DEBTOR

Creditor Mantra :

Creditors ALWAYS have a Credit Balance

Creditors

DEBIT CREDIT

CREDITOR

What about the remaining items?

Once you have identified what the opening balance is you can complete the control account by asking:

Will this item INCREASE or DECREASE the amount owed…?

If the item INCREASES THE AMOUNT OWED place it on the same side as the balance

If the item DECREASES THE AMOUNT OWED place it on the opposite side

Debtors Always have a DEBIT Balance

Debtors Always have a DEBIT Balance

1.05.11 Balance 4900

For the next two entries ask the question:

Has this item INCREASED or DECREASED the amount owed?

1.05.11 Balance 4900

Credit Sales INCREASE amount owed – so put it on same side as

the balance

1.05.11 Balance 4900

Credit Sales INCREASE amount owed – so put it on same side as

the balance

1.05.11 Balance 490031.05.11 Credit Sales 5900

Cash Received DECREASE the amount owed – so put it on opposite

side of the balance


Cash Received DECREASE the amount owed – so put it on opposite

side of the balance


31.5.11 Cash Received 6100

Balance the Account – you know you are correct as Debtors have Debit

balances


31.5.11 Cash Received 6100

10800 10800

31.5.11 Balance 4700

1.06.11 Balance 4700

Same rules: different Mantra for Creditors:

Creditors always have a CREDIT Balance…

1.5.13 Balance 4400

For the next two entries ask the question:Has this item INCREASED or DECREASED

the amount owed?

1.5.13 Balance 4400

Credit Purchases INCREASE amount owed – so put it on same side as the

balance

1.5.13 Balance 440031.5.13 Credit Purchases 9300

Cash Paid DECREASES amount owed – so put it on opposite side of the balance


31.5.13 Cash Paid 11900

Balance the Account – you know you are correct as Creditors have Credit

balances


31.5.13 Cash Paid 11900

1370013700

31.5.13 Balance 1800

1.6.13 Balance 1800

Control AccountsWorksheet

1.5.08 Balance 1400 31.5.08 Cash Rec’d 630031.5.08Credit Sales 8500

9,900

9,900

3,60031.5.08 Balance

3,600

1.6.08 Balance

1.5.12 Balance 910031.5.12 Cre. Purch. 20000

31.5.12 Cash Paid 5400

29100

29100

23700

31.5.12 Balance

1.6.12 Balance 23700

Ledger Accounts


General Journal

General Journal

General Journal

Control Account

(Creditors)

Control Account

(Creditors )

Control Account

(Debtors)

Control Account

(Creditors)

Ledger Account

(Sales)

Ledger Account

(Purchases)

Ledger Account

(Purchases)

Ledger Account

(Sales)

Day Book

(Purchases)

Day Book

(Sales)

Day Book

(Purchases)

Day Book

(Sales Returns)

In attempting the question you must firstly ask if you purchased or if you sold something

Purchases = Money Out or Creditors

Sales = Money In or Debtors

Scenario 1 : Purchases

Ask yourself

Did you buy something?

•If yes then….

Did you pay with cash?Yes - BANK

•If no then…..

Do you owe money?

Yes - Creditor

How did we pay ….

Cash:

Then it comes out of our Bank Account

Credit

Then WE OWE a Creditor

Debit CreditBANK ACCOUNT

MONEY IN MONEY OUT

Debit CreditCREDITOR ACCOUNT

Creditor has Credit Balance

{Every Debit has a Credit, Every Credit has a Debit

The beauty of double entry, is that once we know one side of the entry, we can complete the question

The second account is given the name of the item bought or sold

Go through the steps…

Money Out = Credit Side so item iii = Bank Account

Money Out = Credit Side so item iii = Bank Account

Bank Account

Item i , the remaining account takes the name of the item bought

Bank Account

Delivery Van A/c

The Details are the names of the opposite accounts

Bank Account

Delivery Van A/c

Bank

Delivery Van

Scenario 2 : Sales

Ask yourself

Did you sell something?

•If yes then….

Did you receive

payment?Yes - BANK

•If no then…..

Are you owed money?

Yes - Debtor

How were we paid….

Cash:

Then it goes into our Bank Account

Credit

Then WE ARE OWED = a Debtor

Debit CreditDebtor Account

Debtor has Debit Balance

Debit CreditBANK ACCOUNT

MONEY IN MONEY OUT

Bank Account

Money In = Debit Side so item i = Bank

Account

Bank Account

Item iii , the remaining account takes the name of the item sold – in this instance the goods are unnamed = Sales Account (being sale of trading items)

Sales Account

Bank Account

)

Sales Account

Sales

Bank

Ledger AccountWorksheet

J Foley Account

Purchases Account

J Foley

Purchases

Watch here as the bookshop owner did not

sell books

He sold equipment which is not part of his normal trade therefore is NOT

sales account

Bank Account

Equipment

Equipment Account

Bank

Day Books


General Journal

General Journal

General Journal

Control Account

(Creditors)

Control Account

(Creditors )

Control Account

(Debtors)

Control Account

(Creditors)

Ledger Account

(Sales)

Ledger Account

(Purchases)

Ledger Account

(Purchases)

Ledger Account

(Sales)

Day Book

(Purchases)

Day Book

(Sales)

Day Book

(Purchases)

Day Book

(Sales Returns)

9.5.13 10 12500

Tips:Date, CN No. and Net is as per question

Tips:Details is always the name that is not on the Day Book

9.5.13 Park Ltd 10 12500

Tips:Calculate VAT (12500 / 100 * 23)

9.5.13 Park Ltd 10 12500 2875 15375

Tips:Folio : Purchases / Purchase Returns = Creditors = Creditors Ledger (CL)

9.5.13 Park Ltd 10 CL 12500 2875 15375

Tips:Date, Inv No. and Net is as per question

9.06.2012 5 5000

Tips:Details is always the name that is not on the Day Book

9.06.2012 Lily Ltd 5 5000

Tips:Calculate VAT (5,000 / 100 * 23)

9.06.2012 Lily Ltd 5 5000 1150 6150

Tips:Folio : Sales / Sales Returns =

Debtors = Debtors Ledger (DL)

9.06.2012 Lily Ltd 5 DL 5000 1150 6150

Day Books Worksheet

Thank you

Any questions?

[email protected]

Part c’s

an introduction to bookkeeping final

Economy & Finance

opening balance

balance sheet items

credit balances

credit sales1400

credit sales490031

credit purchases9300cash

owed place

cash bookacb