W1003 Accounting Assignment of BBA

ContentsIntroduction to what is accounting………………………………………………………………………………………6

Books of original entry………………………………………………………………………………………………………….6

Purpose…………6 Advantage……..7

Sales Day

What is accounting?It is the process of recording the financial transactions, keeping track of a user's activity while accessing the resources of network including the amount of time spent. Accounting also entails providing a company's management with the information it needs to keep the business financially healthy. It is a profession consisting of singles having the formal education to carry out these tasks. It is the storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses which stays inside the company. Some of the information will originate from the recorded transactions but some of the information will be appraisals and projections based on different assumptions. Three examples of internal analyses and reports are budgets, standards for controlling operations, and reckoning selling prices for announcing new jobs. This area of accounting is known as management accounting. But the accounting which presents the information in the form of general-purpose financial statements (balance sheet, income statement, etc.) to people outside of the company are referred to as financial accounting and it is a specialized branch of accounting that keeps track of a company's financial transactions. Companies issue financial statements on a routine schedule. The statements are considered external because they are given to people outside of the company, with the primary recipients being stockholders. If a corporation's stock is publicly traded, nonetheless, its financial statements tend to be widely dispersed, and information will likely spread secondary recipients such as competitors, customers, employees, labor organizations, and investment analysts.

Books of original entry:-

They are the books where transactions are first recorded. The usability of books of original entry avails the division of the ledger which supports management in data analysis. They make it easier to recall information on debtors and creditors, saving time and eliminating countless details from the ledger. There are various types of books of original entry such as: Sales day book, Purchase day book, Sales return day book, Purchase return day book. Cash book, General journal.

Purpose of original entry books:-

The purpose of original entry books is to receive any required piece of information quickly and easily, to alter or to completely mark down fraud, scam etc, and to locate any flaws and errors in the trail balance and the main purpose is to record of what you did that day and to exercise control over each activity done. Preserving a original book entry is very essential because it's shows 2 things: Debit and credit. If any transaction is wrong from this point till to income statement profit not show a true profit because original entry is wrong if it is maintaining then you easily finds where you are wrong.

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Advantages of original entry books:-

The advantages of original entry books accounts can be found more easily with the help of the cross referencing nature of the books of original entry being kept. In case, if any of the records are lost then the ledgers and the books of original entry acts as a backup for each other. Nevertheless, it also acts as a 'listing device' for posting totals to different accounts, therefore saving time and labor.

Sales Day Book: It is the book in which non-cash sales are recorded with details of customer, invoices, amounts and date; these details are later posted to each customer's history in the sales ledger. In other words a sales day book is a useful book that lists all the invoices that were issued to customers in a singular day. The details of credit sales are made by a businessman. Total of sales book shows the total credit sales of goods during the period concerned. Commonly, the sales book is totalized every month and is written up daily from the copies of invoices sent out. Sales day book looks like this:

Sales Day BookDate Customer name Invoice no SR

Aug 2 Mohammad 20 120Aug 13 Ahmed 21 350Aug 21 Ali 22 250Aug 28 Ahmed 23 150

Total 870

A Sales day book is usually made up for a certain period, for a week or a month, at the end of the period the sales day book is summed up and the entries transferred to the accounts. A new sales day book will be started for the new period. The sales day book shown on the table above has been produced for the month August. A new one would be started for September invoices. At the end of the month the Day Book is summed, SR. 870 in the above example, this amount is posted as a single entry to the credit side of the sales account in the Nominal Ledger, whilst the individual invoice amounts are debited to the individual customer personal accounts in the Sales Ledger. These results are shown below.

Sales ledger –Mohammad [SL1]

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http://www.businessdictionary.com/definition/sales-ledger.html

http://www.businessdictionary.com/definition/customer.html

Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRAug 2 SDB20 120

Sales ledger –Ahmed [SL2]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRAug13 SDB21 350Aug28 SDB23 150

Sales ledger –Ali [SL3]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRAug21 SDB22 250

Nominal ledger –Sales Account [NL 1]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRAug 30 SDB total for

Aug870

Sales Return Day Book:- It is also called returns inwards book. It is used for recording goods returned to us by our customers. In other words it is where a customer returns goods to the business. When this happens the business will issue a Credit Note to the customer, imprints of these are kept and used to enter the details into a sales returns day book. The ruling of these books is exactly as for sales day book but as with it, sales return day book is used to record all credit notes issued by the business for the period and then the Day Book will be summed up at the end of the period and the details will be transferred to the accounts and the total amount is posted as a single entry to the Debit side of the sales returns account in the Nominal Ledger, whilst the individual credit note amounts are credited to the individual customers personal accounts in the sales ledger. The table for SRDB is shown below:

Sales Return Day Book

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Date Customer name Credit Note no SRAug 7 Mohammad C20 55Aug 15 Ahmed C21 45

Total 100

At the end of the month the entries will be:

Mohammad- Sales ledger [SL 1]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SR

Aug2

SDB20 120 Aug 7 SRDB C20 55

Ahmad- Sales ledger [SL 2]Debit side [Dr] Credit side [Cr]


Aug13 SDB21 350 Aug 15 SRDB C21 45Aug28 SDB23 150

Ali- Sales ledger [SL 3]Debit side [Dr] Credit side [Cr]


Aug21 SDB22 250

Nominal ledger –Sales Account [NL 1]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRSRDB Aug 870

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Nominal ledger –Sales Return Account [NL 2]Debit side [Dr] Credit side [Cr]

Date Details folio SR Date Details folio SRAug 30 SDB total for Aug 100

Purchase Day Book:- A purchase daybook is a book of original entry maintained to record only the credit purchases. All the purchases are totaled at the end of the month. The Purchase daybook is written up daily from all invoices received. Purchases book or purchases day book is a book of original entry maintained to record credit purchases. At the end of each month, the purchases book is totaled and the total shows the total amount of goods purchased on credit. The invoices are consecutively numbered and noted in the purchases book. The total of purchase book is debited to the purchase account and the accounts of the suppliers of goods are credited with the amount standing against their names. Ruling of purchase day book is different from a journal. Furthermore, Cash purchases do not find place in purchase day book as they are listed in Cash book.

There are five columns in a purchase day book: Date Name of the supplier/ Quantity supplied/ Rate of quantity supply/ Description. Invoice number Ledger Folio Total amount to the supplier in respected currency

As each different supplier will have their own method of numbering, the Purchases Day Book [PDB] invoice numbers will look different from each other as shown below on the table:

Purchase Day BookDate Name of Supplier Invoice number SRAug 2 Omar A1020 500Aug 15 Safi 528 220Aug 22 Bhatti 2145 290Aug 29 Bhatti 1321 450

Total 1,460

If we return goods to a Supplier, these will be shown in a Purchase Returns Day Book [PRDB] as represented below:

Purchase Returns Day Book

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Date Name of Supplier Credit note SRAug 13 Omar CR/A1020 500Aug 19 Safi CR/528 220

Total 720

The Credit Note numbers on the PRDB may also look quite different; this is also due to each Supplier having their own numbering system. As with the Sales and Sales Returns Day Books, the Purchase and Purchase Returns Day Books will be summed up at the end of the month. The Purchases total for the month from the Purchases Day Book will be posted as a single Debit entry on the Purchases Account in the Nominal Ledger and each invoice total will be posted as Credit entries to the Supplier Accounts in the Purchase Ledger. For the Purchases Returns total for the month from the Purchases Returns Day Book, it will be posted as a single Credit entry to the Purchases Returns Account in the Nominal Ledger and each individual Credit Note will be posted as Debit entries to the Supplier Accounts in the Purchase Ledger. Here is an example:

Omar- Purchases ledger [PL 1]Debit side [Dr] Credit side [Cr]


Aug13 PRDB CR/A1020 600 Aug 2 PDB A1020 500

Safi- Purchases ledger [PL 2]Debit side [Dr] Credit side [Cr]

Date Details folio

SR Date Details folio SR

Aug19 PRDB CR/ 528 420 Aug 15 PDB 528 500

Bhatti- Purchases ledger [PL 3]Debit side [Dr] Credit side [Cr]


Aug 22 PDB 2145 290Aug 29 PBD 1321 450

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Nominal ledger -Purchases Account [NL 3]-Debit side [Dr] Credit side [Cr]


Aug 30

PBD August

1460

Nominal ledger -Purchases Return Account [NL 4]Debit side [Dr] Credit side [Cr]


Aug 30 PRDB August 720

General Journal:-

Journal is the first successful step of the double entry system. Journal has the following features: Transactions are recorded chronologically. So, journal is called as a chronological book and as the transactions are recorded on the same day it happens so, journal is also called a day book. For each transaction the names of the two concerned accounts indicating which is debited and which is credited, are clearly written into consecutive lines. This makes ledger - posting easy. That is why journal is called "assistant to ledger" or "subsidiary book". Narration is written below each entry. The amount is written in the last two columns - debit amount in debit column and credit amount in credit column.

Advantages of Journal:

First of all, as soon as the transaction takes place it is recorded increasing less risk of data’s being deleted from the accounting books. Secondly, as the transactions are kept recorded in journal chronologically with narration, it can be easily ascertained when and why a transaction has taken place, thirdly, for each and every transaction which of the two concerned accounts will be debited and which account credited, are clearly written in journal. So, there is no chance of committing any mistake in writing the ledger, Since all the details of transactions are recorded in journal, it is not necessary to repeat them in a ledger. As a result ledger is kept tidy and brief. Last but not the least, a journal shows the complete story of a transaction in one entry. And any mistake in ledger can be easily detected with the help of journal.

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There are five columns in a Journal:

Date Amount of debit entry Amount of credit entry Ledger folio Description of transaction

Example of a Journal:

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Solution of a Journal:

Cash Book:

Cash book is a financial journal that contains all cash receipts and payments, including bank

deposits and withdrawals. Entries in the cash book are then posted into the general ledger. It

is periodically arranged with the bank observations as an internal style of auditing.

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Cash Book consists of: Single column Cash Book Double Column Cash Book Triple Column Cash Book Petty Cash

Example of Single column Cash Book-

Solution for Single column Cash Book-

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Example of Double column Cash Book

Solution for Double column Cash Book-

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Example of Triple column Cash Book-

May 1Balance brought down from April: Lm

Cash Balance 29Bank Balance 654

May2B.King pays us by cheque Lm117, after having deducted

Lm3 cash discount.

May 8The business pays R.Long account of Lm100 by cheque

less 5% cash discount.

May11Withdrew Lm100 cash from the bank for business use.

May16N. Campbell pays us Lm273 by cheque after deducting

Lm7 cash discount

May25Paid wages in cash Lm92.

May28D. Shand pays us in cash Lm38 after deducting Lm3

cash discount

May29The business pays U. Barrow his account of Lm60 by

cheque less 5% cash discount

May30The business pays A.Allen by cheque Lm429 after

deducting Lm11 cash discount.

Solution for Triple column Cash Book-

Dr Cash Book Cr Dr Disc Cash Bank Cr Disc. Cash Bank May-01 Balance b/d

29 654 May-08 R. Long

5 95

May-02 B. King 3 117 May-11 Cash ©

100

May-11 Bank © 100 May-25 Wages

92

May-16 N. Campbell

7 273 May-29 U. Borrow

3 57

May-28 D. Shand

2 38 May-30 A. Allen

11 429

May-31 Balance c/d

75 363

12 167 1,044 19 167 1,044Jun-01 Balance b/d 75 363

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Petty Cash- Businesses usually keep small amounts of cash to meet small payments such as stationery costs or entertainment expense. Such payments are handled by petty cash.

Example of Petty Cash

On 1st January, petty cash of $100 is introduced. Petty cash register shows the following payments in the month of January: Petty cash is reimbursed on 31st January.

3rd January Tea $10

15th January Stationery $50

27th January Plumber $20

Solution for Petty Cash

Reference-

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http://www.accountingcoach.com/financial-accounting/explanation

http://www.accounting4management.com/sales_day_book.htm

http://www.businessdictionary.com/definition/sales-day-

book.html#ixzz2thffq39x

http://www.ask.com/question/what-is-a-purchase-daybook

http://www.accounting4management.com/sales_returns_book.htm

http://www.accountingexplanation.com/journal.htm

http://www.wisegeek.com/what-is-a-general-journal.htm

https://www.ventureline.com/accounting-glossary/G/general-journal-definition/

http://www.investopedia.com/terms/c/cash-book.asp

http://www.kkhsou.in/main/management/cash_book.html

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http://www.investopedia.com/terms/c/cash-book.asp

https://www.ventureline.com/accounting-glossary/G/general-journal-definition/

http://www.wisegeek.com/what-is-a-general-journal.htm

http://www.accountingexplanation.com/journal.htm

http://www.accounting4management.com/sales_returns_book.htm

http://www.ask.com/question/what-is-a-purchase-daybook

http://www.businessdictionary.com/definition/sales-day-book.html#ixzz2thffq39x

http://www.businessdictionary.com/definition/sales-day-book.html#ixzz2thffq39x

http://www.accounting4management.com/sales_day_book.htm

http://www.accountingcoach.com/financial-accounting/explanation

W1003 Accounting Assignment of BBA

Business

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