Bdc 101 03

BDC 101FINANCIAL ACCOUNTING 1

SCHOOL OF ACCOUNTING & FINANCEFACULTY OF BUSINESS AND MANAGEMENT

PREPARED BY:NORAL HIDAYAH ALWI

CHAPTER 3DOCUMENTS USED IN

BUSINESS TRANSACTIONS AND ACCOUNTING CYCLE

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLELEARNING OUTCOMES

At the end of this chapter, students will be able to:

Explain the relationship between business documents and the

accounting records

Identify the types of business documents

Classify the features of business documents.

Explain the steps in the recording process

Explain the definition and advantages of journal

Illustrate and balance the Ledger Accounts

Distinguish Credit and Debit Balance

Define Charts of Accounts

Build a Trial Balance that derive from ledger

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLETOPIC OUTLINES

3.1 The relationship between business documents and the accounting records

3.2 Steps in the recording process

3.3 Types and features of business documents

3.4 Journal

3.5 Ledger and balancing the ledger accounts

3.6 Chart of accounts

3.7 Trial balance

3.8Classroom Activity3.8.1 Question 13.8.2 Question 2

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.1 RELATIONSHIP BETWEEN BUSINESS DOCUMENTS AND ACC RECORDS

Normally, business is dealing with many transactions. It could be the same transactions or different. Large number of pages needed for a lot of transactions that

could need big book to handle. Therefore, business has to set more books. Similar types of

transactions will be put together and must have a book for each type that differentiates each transactions.

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To the next page

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.1 RELATIONSHIP BETWEEN BUSINESS DOCUMENTS AND ACC RECORDS

Business documents can be differentiate in terms of:

The date on which each transaction took place Details relating to the sale A folio column entry is made cross-referencing The monetary amounts

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.2 STEPS IN RECORDING PROCESS

BUSINESS DOCUMENTS

BOOK OF ORIGINAL ENTRY /

JOURNAL

DOUBLE ENTRY /

LEDGERS

TRIAL BALANCE

PROFIT OR LOSS

BALANCE SHEET

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.3 TYPES AND FEATURES OF BUSINESS DOCUMENTS

Sales invoicesPurchase invoicesPayment VoucherCash receiptsDebit notesCredit notesMemo

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INVOICES

Type of bill that is sent to customers or the buyers to whom goods were sold on credit;

The invoices states the name of buyer, the amount owed and date of settlement

Invoice than posted to buyer attached the amount that been owed.

Normally, invoice will be made in 2 copies (ori & copy):

a) Original - keep by buyer to record transactions in Purchase Day Book/ Purchase Journal

b) Copy- keep by seller to record transactions in Sales Day Book/Sales Journal

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Payment VoucherIt records all types of payment by to sellers regardless

whether it is cash or cheque payments. Eg.salary or rent payments. Payment for goods purchased.

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Cash ReceiptWhen seller received the payment, he will issue a receipt as

the evidence of payment received.Original receipt will be send to buyer while the copy keep by

seller

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Debit Notes Seller send Debit Note to buyers to announce that

buyer’s acc is being debited due to:

a) If the original invoice missed any amounts; instead of RM999 but recorded RM900

b) Charges being omitted; carriage in payments being omitted

c) Extra charges or penalties.

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Credit NoteSeller send credit note to buyer to inform that the

buyer’s acc being credited. Due to:

a) Buyer returns defect items; wrong models or brands

b) If item like tins are empty with no contains

c) If the charges charged in invoice is more due to administrative error.

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE

Memo

Is mainly use for the transaction that happens internally, eg.:any transactions that involved the owner and the business.

Memo can be recorded as:

a) Drawings by owners

b) Capital addition

c) Reminder Info in memo will be recorded in General Day Book /

General Journal

3.3 TYPES AND FEATURES OF BUSINESS DOCUMENTS

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.4 JOURNAL

Journal is the memorandum or the first entry in recording process of business transactions of an accounting financial year.

Journal also known as a book of original entry Used as a basis for recording and to be analyzed before any

transactions is recorded in the ledger It traces the incomplete recordings Books of Original Entry can be classified as Daily Books that consists

of:i. Cash Book – only for cash transaction entries

ii. Day Book / Journal – for credit transactions entries. It can be classified into 2:

a) Special Journals – Sales Journal, Purchase Journal, Return Outwards Journal, Return Inward Journal

b) General Journals - Opening Capital, Sales/Purchase of fix assets, Bad Debts, Drawing by Owner,

Adjustment on Ledgers, capital addition.

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PURCHASE JOURNAL

It record all the credit purchasesEg.: In 20X2,

Jan 1 – Bought goods from Suzie RM600 creditJan 4 – Received invoice from Razali for RM800Jan 9 – Bought goods from Suzie RM200 credit

Date Details Total20X2 RM1-Jan Suzie 600

4 Razali 8009 Suzie 200

31 Purchase Account 1600

Purchase Journal

3.4 JOURNAL

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SALES JOURNAL It records all the credit sales

Eg.: In 20X2,Feb 2 – Sold items to Dora RM720creditFeb 6 – Sent invoice to Juliana for RM500Feb 12 – Sold goods to Dora RM120 credit

Date Details Total20X2 RM2-Feb Dora 720

6 Juliana 50012 Dora 12028 Sales Account 1340

Sales Journal

3.4 JOURNAL

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RETURN OUTWARDS JOURNAL

It records:Goods returns to creditorsAllowance to debtors

Eg.: .: In 20X2,Jan 8 – Credit Note received from Razali for good returns

RM100Feb 6 – return goods to Suzie RM60

Date Details Total20X2 RM8-Jan Razali 100

12 Suzie 60

31 Return Outwards Acc 160

Return Outwards Journal

3.4 JOURNAL

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RETURN INWARDS JOURNAL

It records:Goods received from debtors Allowance from creditor

Eg.: .: In 20X2,Feb 10 – Credit Note mailed to Juliana RM80Feb 16 – Dora returned goods RM30

Date Details Total20X2 RM

10-Feb Juliana 8016 Dora 3028 Return Inwards Acc 110

Return Inwards Journal

3.4 JOURNAL

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GENERAL DAY BOOKS/ GENERAL JOURNAL

When there is a transaction that cannot be categorized into Cash Book & Special Journal, then it will fall into General Journal.

General Journal must have: Date, Amount of Transactions and Explanations

3.4 JOURNAL

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Example 1: Opening Capital 1 July 20X2, Lily has assets and liabilities of:

Furniture RM18,000 Debtor: Reza RM3,200

Cash RM500 Creditor: Syarikat Lim RM2,800

Stock RM1,500 Bank Loan RM5,000

Date Details Folio Debit (RM) Credit (RM)1-Jul-02 Furniture 18,000

Cash 500 Stock 1,500 Debtor: Reza 3,200 Bank Loan 5,000

Creditor: Sykt Lim 2,800 Capital *15,400

23,200 23,200 * Capital = Asset - Liabil ity = RM23,200-RM7,800 = RM15,400

3.4 JOURNAL

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Example 2 : Buy or Sales Fixed Assets on Credit Jan 3 – Bought cabinet RM600 from Sykt Zi Wei on credit Jan 9 – Sold van RM15,000 on credit to Usaha Jonathan

Date Details Debit (RM) Credit (RM)3-Jan Furniture Account 600

Syarikat Zi Wei 600 (bought cabinet on credit)

9-Jan Usaha Jonathan 15,000 Van Account 15,000 (sold van on credit)


3.4 JOURNAL

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.5 LEDGER

The entries made from the books of original entry is then summarized and the summary info is entered, using double entry, to accounts kept in the various ledgers of the business.

Types of ledgers: Sales Ledger – for customers’ personal acc Purchase Ledger – for suppliers’ personal acc General ledger – for the remaining double entry accts that related

to expenses, fixed assets and capital. Balancing Ledger Accounts: End of each accounting period the figures in each acc are

examined to summarize the situation they present. To find out how much our customers owe us for goods we have

sold to them

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5 steps of Balancing Ledger:

i. Add up both sides to find out their totalsi. Debit (RM2,400 + RM1,000) = 3,400

ii. Credit RM500

ii. Deduct the smaller total from the larger total to find the balance

-Diff (RM3,400 – 500)=RM2,900

iii. Now enter the balance on the side with the smallest total

iv. Enter total level with each other

v. Now enter the balance on the line below the total or the opposite side to the balance shown above the total.

20X9 RM 20X9 RM3-Oct Sales 2,400 8-Oct Return Inwards 500

15 Sales 1,000 31 Balance c/d 2,900 3,400 3,400

1-Nov Balance b/d 2,900

Jenny Account (Debtor)

iii

iviv

v

3.5 LEDGER

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.6 CHARTS OF ACCOUNTS

Are the list of account codes used in computerized accounting system.

Some of these packages are not written for specific

business and need to be ‘tailored’ to the one that is going to use it.

Eg.: Fixed Assets 101000

Machines 101001

Building 101002

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE3.7 TRIAL BALANCE

Is a list of account titles and their balance in the ledgers, on specific date, shown in debit and credit column

Its function: To test the double entry system’s accuracy Assist in checking arithmetical accuracy of the transactions and

detect errors in financial statement Trace those items if the balance is not same for debit and credit.

Matahari Enterprise

Debit CreditBank 15,000 Cash 7,200 Sales 32,000 Salaries 12,000 DebtorsRent revenue 2,200

34,200 34,200

Trial Balance as at 31 Dec 20X8

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In May 2010, Syarikat Hijau started off a business dealing with grass cutting and house landscaping. The business will commence its operation in the month of June. All preparations need to be done by end of May. The following are transactions for May:

May 14 Deposited cash RM20,000 into bank as capital

16 Purchased a small lorry worth RM30,000, with a cash deposit of RM 14,000, the balance will be paid by monthly installments. The notes payable was issued for this purpose.

20 Purchase of grass cutting equipment from Syarikat Ala Bhd for RM4,000 on credit

22 Purchase of fertilizer supplies RM1,000 on cash

28 Paid Syarikat Ala Bhd RM2,000 of the amount owed

REQUIRED:

1. Show the journal entries for the month of May

2. Post the entries to the relevant ledgers

3. Prepare the Trial Balance

QUESTION 1:

3.8 CLASSROOM ACTIVITY

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1. GENERAL JOURNAL

DATE DESCRIPTION DEBIT (RM) CREDIT(RM)

2010May 14

Cash Capital(Cash investment by the owner)

20,00020,000

16 Vehicle Cash Notes Payable(Purchase of lorry: Payment made by cash and notes payable)

30,00014,00016,000

20 Equipment Account Payable(Purchase of equipments on credit)

4,0004,000

22 Purchase Cash(Purchase of fertilizer on cash)

1,0001,000

28 Accounts Payable Cash(Partial settlement of the debts owed to Syarikat Ala Bhd)

2,0002,000


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CASH ACCOUNT

May 14 Capital 20,000 May 16 Vehicle 14,000

22 Purchase 1,000

28 Acc Payable 2,000

31 Bal c/d 3,000

20,000 20,000

June 1 Bal b/d 3,000

CAPITAL ACCOUNT

May 31 Bal c/d 20,000 May 14 Cash 20,000

20,000 20,000



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VEHICLE ACCOUNT

May 14 Cash 14,000 May 31 Bal c/d 30,000

Notes Payable 16,000

30,000 30,000


NOTES PAYABLE ACCOUNT

May 31 Bal c/d 16,000 May 16 Vehicle 16,000

16,000 16,000


PURCHASE ACCOUNT

May 22 Cash 1,000 May 31 Bal c/d 1,000

1,000 1,000



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EQUIPMENT ACCOUNT

May 14 A/c payable 4,000 May 31 Bal c/d 4,000

4,000 4,000


ACCOUNTS PAYABLE

May 28 Cash 2,000 May 20 Equipment 4,000

31 Bal c/d 2,000

4,000 4,000



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Syarikat Hijau

Trial Balance

31 May 2010

Description Debit (RM) Credit (RM)

Cash 3,000

Purchase 1,000

Equipment 4,000

Vehicle 30,000

Account Payable 2,000

Notes Payable 16,000

Capital 20,000

38,000 38,000


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Tick the correct place for each item below.

Items Debit (RM) Credit (RM)Cash √Commission ReceiveUtility PaymentPremisesStocksDividend ReceiveSalesSalary PaidFixtures and FittingsReturn InwardPurchase of AssetsRental PaymentDrawingsReturn SalesInsurance PaymentsAccount PayableVanCreditorAccount ReceivableReturn OutwardDebtorPurchasesCapitalStationeryBank

Trial Balance as at ….


QUESTION 2:

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CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLESUMMARY

All entries will be posted from JOURNAL to the LEDGER at the end of the day or week;

Every month, LEDGER ACCOUNTS would be balanced and the balances will be used to prepare TRIAL BALANCE

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THE END

Bdc 101 03

Economy & Finance

Transcript of Bdc 101 03