Books of

BOOKS OF ORIGINAL ENTRY

INTRODUCTION
In many businesses today, some form of documentation usually supports business
transactions. These source documents, as they are called, are used to record information
in daily journals or books of original entries. These journals are the first form of official
records of any transaction. Generally, they are not part of the double entry
system. With the exception of the cash book and the general journal the terms debit
and credit do not appear in any other book of original entry. In this study guide, you will
be introduced to the documents that form the basis of accounting records as well as use
the documents to make records in these journals. You will also learn about journals that
are used to record changes in stock levels as well as cash and bank transactions. You
will learn to make records in these journals as well as post them to their specific ledgers.

GENERAL OBJECTIVES
At the end of this Study Guide, you should:
1.

understand the need for proper documentation of business transactions;

2.

appreciate the importance of keeping records of all business transactions.

SPECIFIC OBJECTIVES
You should be able to:
1.

explain the uses of the books of original entry;

2.

distinguish between cash and credit transactions;

3.

identify source documents related to books of original entry;

4.

distinguish between cash and trade discounts;

5.

use source documents to make entries into books of original entry;

6.

indicate treatment of totals from books of original entry.

CONTENT

Books of Original Entry

Cash and credit transactions

Source documents

Trade and cash discounts

Discounts allowed and received

Balancing the Cash Book

The imprest system and the Petty Cash Book

BOOKS OF ORIGINAL ENTRY

The use of Books of Original Entry promotes the division of the ledger which assists
management in data analysis. They make it easier to retrieve information on debtors
and creditors, saves time and eliminates many details from the ledger.
The following table shows a list of the books of original entry as well as the source
document (s) which form the basis of the recording in the books.

BOOK OF ORIGINAL
ENTRY

TRANSACTIONS RECORDED

SOURCE
USED

SALES DAY BOOK

CREDIT SALES
(STOCK)

SALES INVOICES

PURCHASES
BOOK

DAY

OF

INVENTORY

DOCUMENT

CREDIT PURCHASES OF INVENTORY

(STOCK)

PURCHASES INVOICES

ALL
CASH
AND
BANK
TRANSACTIONS, FOR EXAMPLE,
CASH SALES, RECEIPTS FROM
DEBTORS
(ACCOUNTS
RECEIVABLES),
PAYMENTS
TO
CREDITORS

BANK DEPOSIT AND

WITHDRAWAL SLIPS,
CHEQUES DEBIT AND
CREDIT CARD RECEIPTS

GOODS RETURNED BY CUSTOMERS

CREDIT NOTE SENT

GOODS RETURNED TO SUPPLIERS

CREDIT NOTE RECEIVED

PETTY CASH BOOK

CASH TRANSACTIONS OF SMALL

VALUE

PETTY CASH
CASH BILLS

VOUCHERS,

GENERAL JOURNAL

ALL
TRANSACTIONS
WHICH
CANNOT BE RECORDED IN ANY
OTHER BOOK OF ORIGINAL ENTRY

BILLS,
VOUCHERS,
CHEQUES.

RECEIPTS,
CANCELLED

CASH BOOK

RETURN
JOURNAL

INWARDS

RETURN
JOURNAL

OUTWARDS

CASH AND CREDIT TRANSACTIONS

Cash transactions occur when payment is received or made when the transaction takes
place. This includes the use of credit cards and debit cards. A credit transaction is one
where payment is to be made some time in the future, after the transaction. It is

important to distinguish between these two types of transactions since the accounting
treatment differs as well as the impact on the balance sheet.
(Activity 3.1)
Robert is the owner of an Auto Part shop located in Papine, Kingston. He purchases 500
carburetors from Massey Marketing at $35 each, together with 100 shock absorbers at $10
each and 75 disc pads at $25 each. The goods were delivered one week after the order
was placed. On checking the order Robert discovers that the disc pads were the wrong
brand and he returns them to Massey Marketing. On checking, Massey Marketing did not
have the correct brand in stock and so Robert was forced to purchase the disc pads for cash
at Car Tech Limited.
Answer the following questions which are based on the scenario above:
Identify the document Robert receives from Massey Marketing with his order.
Name the document Massey Marketing would issue to Robert after he returns the disc pads.
(Activity 3.1 contd)
What document would Robert receive from Car Tech Ltd when he purchases the correct
brand of disc pads?
Name the prime entry books in Roberts business where the above transactions would be
recorded.

Feedback
(a)
The document received would be a Sales Invoice
(b)
Credit Note
Cash Bill
Purchases Journal, Return Outwards Journal, Cash Book
Debit Cards
These are issued by commercial banks to customers allowing them to access their
accounts using automatic banking machines (ABMs). I am sure you have seen
commercials for debit cards. In Trinidad and Tobago they are referred to as LINXcards.
The customers account is immediately debited at the point of sale and the sellers
account is credited. This type of payment has become more popular to avoid a large
amount of cash on the premises. The receipts from debit cards are used to make records
in the cash book.
Credit Cards
Credit cards allow customers to charge their purchases of goods and services instead of
paying cash. When the credit card is presented to the seller, it must be verified to
ensure the sale does not exceed the approved amount. The use of computers allows the
sellers account to be credited with the amount. A percentage of the sale price is
charged by commercial banks for all credit card transactions. Popular credit card
companies include VISA, Master Card and American Express.

SOURCE DOCUMENTS

A source document records the essential elements of any transaction; the date, name
and address of the names of the parties involved and the value of the transaction. They
form the basis for the accounting records that are kept by the business. These
documents are retained for future verification. Let us now examine a very common
document that is used in most transactions, an Invoice.
Invoice
An invoice is a document sent to credit customers giving a detailed description of the
items, unit price and the terms and conditions of the transaction. The order number, as
well as the name and address of the customer, are also printed on the invoice.
Sometimes the invoice would also alert customers of interest charges when there are
overdue balances. An invoice is made in triplicate and the copies are used by different
departments to keep their own records. Sales invoices are used to record transactions in
the Sales Journal. The Purchases Invoice is sent by vendors and is used to make records
in the Purchases Journal. Both the buyer and the seller receive copies of the invoice and
use them to make records.

INVOICE
THE PLANT EMPORIUM
Orange Valley Road
San Juan
Customer Name

Address

Telephone

Fax:

Qty

Invoice No:
45678
Date
Order No.

Unit
Price

Description

Total

Total
Payment:
Terms and Conditions

E&OE

Credit Note
This is a document sent to a buyer when there is a reduction in the amount charged on
an invoice. This may occur when goods are returned or when there is an error in
pricing. Goods would normally be returned if they are faulty or damaged in some way.
Debit Note
If errors occur when an invoice is being prepared the document which is sent to
customers to change the amount charged on the original invoice is a debit note. It is
sometimes referred to as a supplementary invoice. Errors may occur if additional goods
were sent to the customer or there was an error on the original invoice.
Discounts
A discount is a reduction in the price of an item. In accounting there are two types of
discounts; cash discounts and trade discounts. Cash discounts are given as incentives
to customers to make payments on their account within a specified period of
time. Trade discounts reduce the catalogue price of an item and are intended to
encourage trade. Although they are shown on the sellers invoice, trade discounts are
not recorded in the ledger of the buyer or seller.

(Activity 3.2)
Grey Singh received an order from Jim Young, a credit customer with the following details on
September 30 2007:
6x20 inch planter @ $18.00 each
12kgs Fertilizer @12.50 per kg
20 bottles of Liquid Grow @ $18.50
The following terms and conditions applied:
Trade discount 10%
5% 7 days
2% 30 days
E&OE
You are required to prepare the invoice to be sent to Jim Young.
Explain the meaning of the terms and conditions outlined.
Feedback

INVOICE

GREY SINGH
Orange Valley Road
San Juan

Invoice No:
1245
DATE

Customer Name
Jim Young

Address
Railway Road
Sea View

Telephone: 640
8767

Fax:

Qty
12 kgs
6
20

Payment:

Terms &
Conditions

989

30/09/07
Order No.
005

200
7
Unit
Price
$12.50
$18.00
$18.50

Description
Fertilizer
20 Planters - green
Bottles Liquid Grow

$150.00
$108.00
$370.00
$628.00
$62.80
$565.2
0

Less 10% Trade discount

Total
5% 7 days
2% 30 days

Total

E&OE
Carriage Paid

The Terms of payment suggest a cash discount of 5% if the total of $565.20 is paid
within 7 days after receipt of the invoice. If the total due is paid within 30 days, Mr.
Young is entitled to a 2% discount. E&OE stands for errors and omissions excepted. It
allows the seller the right to alter the invoice even after it has been sent to the buyer if
any errors or omissions are discovered.

RECORDING TRANSACTIONS
Specialized Journals for Stock
As we discussed in an earlier Study Guide, a Journal is a daily record of business in
chronological order. The Sales, Purchases and Return Journals, also called books of
original entry or day books, record transactions dealing only with stock
(inventories). TheSales journal record only credit sales of stock and the Purchases
Journal records credit purchases of stock. The Returns Journals records goods previously
bought or sold on credit that have been returned to suppliers or by customers. Cash sales
and purchases of goods are not recorded here, neither the purchase nor sale of fixed
assets. These are recorded in the Cash book and the General Journal, respectively. The
layout of the journal is shown below.
Illustration: Format of Journal
Da
te

Details

Foli
o

Amount

Date on the

Invoice

Any business involved in a large amounts of credit transactions would find it

advantageous to use specialized journals. Managers can quickly get totals regarding
credit sales and purchases. The Purchases and Return Inwards Journal record increases
in stock whilst the Sales and Return Outwards Journals records decreases in stock.

Example
Demonstrating the recording of transactions in Books of Original Entry
J. Flowers is the sole owner of The Plant Emporium. Her records show the following
transactions for the month of June 2006.
June 01
June 05
June 10
June 13
June 18
discount
June 20

Sold goods on credit to Green Leaf $110, R. Fig $689 and S. Tato $725
Received Invoices from T. Tin $1 750 and S. Steel $1 105
Bought goods on credit from Planters Place $1875
S. Tato returned $125 worth of goods
Sold goods on credit to R. Fig with a list price of $1800, allowing a 2.5% Trade
Returned goods to T. Tin $250

Record the above transactions in the appropriate books of original entry.

Feedback to Example

JOURNAL
Date

Details

06/01/06

Green Leaf
R. Figg
S. Tato
R. Figg
1800
Less 2% trade discount
(45)
Total Credited to the Sales
A/C
PURCHASES JOURNAL

06/18/06

Foli
o
SL
SL
SL
SL

Amount
($)
110.00
689.00
725.00
1 755.00
3279.00

Date

Details

06/05

T. Tin
S. Steel
Planters Place
Total Debited to
Purchases A/C

06/10
06/30

Foli
o
PL
PL
PL
GL

Amoun
t

Amount
1 750.00
1 105.00
1 875.00
4 730.00

RETURN OUTWARDS JOURNAL

Date

Details

Folio

06/20

T. Tin

PL

Amount

Total Credited to Return

Outwards a/c

Amou
nt
250
250

RETURN INWARDS JOURNAL

Date

Details

06/13

S. Tato
Total Debited to Return Inward
a/c

Folio

Amoun
t

Amoun
t
125
125

(Activity 3.3)
Now that you are familiar with the recording procedures of the day books you are to
enter up the sales, purchases, and returns day books from the following details for the
month of May 2006.
May
May
May
May
May
May
May
May
May
May
May

1
3
4
8
9
10
15
18
24
28
30

Sold goods on credit to L. Long $800, S. Short $1250 and B. Stone $1 620
Bought goods on credit from S. Lewis $730, J. Makoy $950
S. Short returned goods to us $370
Bought goods on credit from A. Ladi $840, B. Ready $1750
Returned faulty goods to B. Ready $500
Sold goods on credit to Tovadis Limited $1 290 less 10% trade discount
Credit purchases from S. Lewis $510, J. Makoy $ 450
Returned goods to J. Makoy $190
Credit sales to L. Long $2 700, B. Stone $970
B. Stone returns some of the goods purchased on May 24, $180
Tovadis Limited returned goods with a list price of $200

Record the above transactions and determine the amount to be transferred to the Sales
a/c, Purchases a/c, Return Inwards and Return Outwards a/cs.
Feedback
Total
Total
Total
Total

credit sales
$8 501
credit purchases $5 230
return inwards
$730
return outwards
$690

The General Journal

We just learnt that the specialized journals are used to record transactions dealing with
credit sales and purchases of stock. Other transactions that are unable to fit into those
categories, such as the credit purchase or sale of fixed assets, are recorded in the
General Journal. Although the format is essentially the same as that of the specialized
journals, the general journal further analyses the transactions into debit and credit,
indicating which account is to be debited and which account is to be credited. The
format of the General Journal is shown below.
GENERAL JOURNAL
Date

Details

Folio

A/C
Debited

A/C
Credited

Journalising is the process of recording entries in the Journal. As with the specialized
journals, transactions are recorded in chronological order. The accounts involved are
identified and the account to be debited is written first. Indented on the second line is
the account to be credited. A special feature of the general journal is the narration,
which follows every journal entry. The narration briefly explains the transaction
recorded.

Example
Demonstrate the use of the General Journal in recording varying transactions.
May 16 2006 The Plant Emporium purchased, on credit, machinery costing $17 890, from
Mackal Limited.
May 20 2006, the Cashier received a voucher for $1150 to pay the insurance for the owners
personal car.
May 30th 2006, the owner invested a further $21000 into the business from her private
savings.
Before these are recorded in the journal, the accounts involved are identified. Then, using
double entry rules of entry they are recorded in the general journal.
Date
May 16
06

May 20
06

May 30
06

Details

Folio

Machinery

GL

Mackal Limited
Fixed asset purchases
on credit

GL

Drawings

GL

Cash
Cash paid for owners
personal insurance
Bank

GL

GL

A/C
Debited
17 800

A/C
Credited

17 800

1 150
1 150

21 000

Capital
Additional investment by
owner

21 000

The following transactions are usually recorded in the General Journal:

1.

Opening entries this is a list of assets and liabilities used to begin a new accounting
period. (See the example below).

2.

The purchase and sale of fixed assets on credit.

3.

Correction of errors.*

4.

Closing entries.*

5.
6.

Writing off uncollectible debts (bad debts).*

Depreciating fixed assets.*
*These topics are to be dealt with in a subsequent study guide.

The following shows the opening entries of R. Bull at February 01 2006

Date

Details (Account Titles)

02/0
1

Motor Vehicles
Furniture
Building
Cash in hand
Bank
Stock on hand
Debtor: R. Syms
Creditor: Beltronics Limited
Bank Loan
Capital

Folio

Debit
$
35 000
60 000
120 000
1 200
35 490
14 500
8 210

Credit
$

26 100
40 000
208 300

Being Assets, Liabilities and

Capital as at Feb. 01.06

274400

274400

You should note that the columns are totalled.

(Activity 3.4)
J. Hermanson began his second year of trading as a sole trader on June 01 2006 with the
following balances: Cash $1650; Bank $8200, Debtors: W. Wilde $750, Plant and
Machinery $97000; Office Equipment $34000; Stock $4370; Creditor: S. Sweete $1450.
Journalise the above opening entries.
Feedback

Date

Details (Account Titles)

Folio

Debit
$

Credit
$

1/6/06

Plant and Machinery

Office Equipment
Stock
Cash in hand
Bank
Debtor: W. Wilde
Creditor: S.Sweete
Capital
Being Assets, Liabilities and
Capital as at Feb. 01.06

97
34
4
1
8

000
000
370
650
200
750
1 450
144 520

145 970

145 970

The Cash Book

I am sure you will agree that cash is the lifeblood of any business. Therefore, care should
be taken when recording transactions relating to cash or bank. The Cash book is a
unique book of original entry. Although it is a journal, it also acts as an account for Cash
and Bank. This is the only book of original entry that is balanced and the double entry is
completed in the ledger. The cash book records the receipts and payments of cash and
bank. Discounts received and allowed are also recorded in the cashbook for
convenience. The format of the Cash book is also unique, in that the accounts for cash
and bank stand side by side along with the discount column. All receipts are debited and
payments credited.
The illustration below shows the basic format of a three-column cash book, (which
includes the discount columns). A two column cash book is one without the discount
column.
THE CASH BOOK
Dat
e

Details
(RECEIPTS)

Cas
h

Bank

DEBIT SIDE

Di
s
All

Dat
e

Details
(PAYMENTS)

Cas
h

Bank

CREDIT
SIDE

Recording Entries in the Cash Book

When a document is received, the first analysis is to determine where it should be
recorded. Any document relating to cash or bank, such as, cheque vouchers, cash bills
and receipts are used to make records in the cash book. Again it is done in chronological
order and the name of the account in the ledger is written in the details column. If the
transaction involves the bank then the amount is written in the bank column. If it is a
cash transaction, then the amount is written in the cash column. Any discount received
or allowed is placed in the discount column.
(Activity 3.5)
List at least five source documents that can be used to make entries in a three column
cash book.

Feedback
Your answer should include: Receipts, Cash bills, Payment vouchers, Deposit slips, Cash
register slips, cheque counterfoil.
Contra Entries
Since both cash and bank accounts are in the cash book, it is possible to complete the
double entry in the cash book if the transaction involves both accounts. When this
happens it is described as a contra entry. These occur when cash is deposited into the
bank or cash is withdrawn from the bank for use in the office.

Dis
Rec

BALANCING THE CASH BOOK

The Cash Book is balanced to determine the amount of cash in hand and bank. To
balance the Cash Book means making both sides equal. The columns for Cash and Bank
on both sides of the cash book are totaled. The difference (balance) is determined and
added to the side with the smaller amount. The cash column will always carry a debit
balance; this means that the debit side will always be greater than the credit side, since
it is not possible to overspend cash. A credit balance (also called an overdraft) on the
bank account signifies that the account has been overdrawn, that is, cheques were
written in excess of the amount in the bank. Sometimes this is done with the permission
of the bank. If no permission is given then any cheques presented for payment would
not be honored by the bank for payment.
Now that you have some idea about recording transactions in the cash book go through
the following example, which demonstrate recording of transactions in a three column
cash book.

Example
Record the following transactions of Seren Dippity, a retailer, in his three column cash
book for the month of April 2006.
$
April
01
Cash at bank
1 800
03
Cash sales
1 490
08
Paid cash for cleaning
124
10
Received a cheque from B. Calm
1 500
15
Purchases paid by cheque
1 380
17
Paid rent by cheque
750
19
Received a cheque from S. Leep to settle
his account of $700 less 5% discount
21
Paid cash into bank
1 200
24
Received $900 cash from P. Paine to settle his
account of $950
26
Paid D. Serene by cheque to settle an account of
$840 less 5% discount.
month.

Balance the cash book and bring down the balance at the end of the

Feedback to the example

THE CASH BOOK

Date
4/1
4/3
4/10
4/19
4/21
4/24

Details
(RECEIPTS
)
Balance
b/f
Sales
B. Calm
S. Leep
Cash
P. Paine

Cash

Balance
b/d

Dis
All

Dat
e

Details
(PAYMENTS)

1800

4/8

Cleaning

1500
665
1200

4/15
4/17
4/21
4/26
4/30

Purchases
Rent
Bank
S. Serene
Balance c/d

1490
sl
sl
C
900
2390

5/1

Bank

1066

35
50

5165
2237

85

Cash

Bank

Dis
Rec

124
1380
750
C

1200
1066
2390

798
2237
5165

42
42

(Activity 3.6)
Write up the three column cash book of S. Sui from the following details and balance the
cash book at the end of the month.
Aug. 01
Aug. 02
Aug. 03
Aug. 05
Aug. 07
discount
Aug. 09
Aug. 11
Aug. 15
discount
Aug. 18
Aug. 20
Aug. 25

Started business with $1800 cash in hand and $16 000 in the bank
Paid rent by cheque $300
Paid utilities by cheque $1 240
Cash sale $4 300
Received a cheque from debtor C. Lebrity $3400 after allowing $135
Cash sales paid directly into bank $2 980
Paid cash into bank $4 000
Paid account at Vendor Ltd the amount owing $2 900 received 5%
Mr. Sui withdrew $1500 from the bank for personal use
Paid for motor repairs by cash $850
Withdrew $500 from the bank for office use

Feedback

CASH BOOK
Date
1/8
5/8
7/8
9/8
11/8
25/8

Details
(RECEIPTS
)
Balance
b/f
Sales
C. Lebrity
Sales
Cash
Bank

Cash
1800

Bank

Dis
All

16000

4300

C
C

3400
2980
4000

135

500

Dat
e

Details
(PAYMENTS)

2/8

Rent

3/8
11/8
15/8
18/8
20/8

Utilities
Bank
Vendor Ltd
Drawings
Motor
repairs
Cash
Balance
c/d

25/8
31/8
6600
5/1

Balance

1750

2638
0
20085

135

Cash

Bank

Dis
Rec

300
1240
C

4000
2755
1500

145

850
C
1750
6600

500
20085
2638
0

145

b/d
The Petty Cash Book
Small cash payments and receipts can be omitted from the Cash Book to avoid
overcrowding. When this is done, a Petty Cash Book is used. The format of the PCB
facilitates the analysis of transactions so that certain types of transactions can be posted
in aggregate to the ledger. The debit side of the PCB represents receipts whilst the credit
side, which represents payments, is divided into several analysis columns. (See example
below).
PETTY CASH BOOK

Receip
ts

Dat
e

Particulars

Vouch
er No.

Tota
l

Travelin
g

Postag
e

Statione
ry

Office
Expens
es

The PCB operates with an Imprest System. This means that the Petty Cashier is given a
float (imprest) at the beginning of a period from which funds are disbursed. Requests for
payment are written on vouchers which briefly explain the purpose of the payment and
indicate the amount. At the end of the period (week or month) the total cash paid is then
reimbursed by the main cashier. This is referred to as restoring the imprest. This means
that the petty cashier is given the exact amount she has disbursed. The totals of the
analysis columns are then posted to the general ledger. Small sums received in the
office are also recorded in the petty cash book on the receipt side, although generally
there is no analysis. These small receipts would reduce the amount to be reimbursed.

Example: To determine the amount to restore the imprest

The imprest of a business is $1000 per week. At the end of a week the petty cashier
disbursed funds for the following: car wash $50, Stationery $145, received for telephone
calls $15, cleaning $175, Coffee and Tea $230.
Determine the amount to be reimbursed by the cashier
Solution:
Imprest at the start of the week
Total expenses *
Balance of cash remaining
Cash required to restore imprest
Cash at the start of the following week

1000

585
415
585

1000

*The total sum disbursed = 50+145+175+230=600 less 15 (received) =$585 to restore

imprest.

(Activity 3.7)

Enter the following transactions in a petty cash book, having analysis columns for
postages and stationery, traveling expenses, cleaning and miscellaneous.
June
June
June
June
June
June
June
June
June
June
June

1
3
5
9
10
12
14
17
20
23
30

Received imprest from the cashier

Bought postage stamps
Stationery
Taxi fare
Office Cleaning
Snacks for meeting
Paid for weekly newspaper
Office cleaning
Taxi fare
Copy paper
Bulbs for the office

V1
V2
V3
V4
V5
V6
V7
V8
V9
V10

600
100
80
40
72
100
20
40
20
30
16

Total the analysis columns and restore the imprest to the original amount. Voucher
numbers are consecutive.
Feedback

PETTY CASH BOOK

Receip
ts

Dat
e

$600

1/6
3/6
5/6
9/6
10/
6

Particulars

Voucher
No.

Total

Travelin
g

Postage&
Stationer
y

Restore
Imprest
Postage
stamps
Stationery
Taxi fare

100

100

2
3

80
40

80

Cleaning

72

Cleanin
g
Expens
es

40
72

Misc.
Expense
s

12/
6
14/
6
17/
6
20/
6
23/
6
30/
6
30/
6

Refreshment

100

100

Newspaper

20

20

Cleaning

40

Taxi fare

20

Copy paper

30

10

16

Bulbs

Balance c/d

600

40
20
30
16

518

60

210

112

136

82

GL

GL

GL

GL

600

82

1/7

518

1/7

Balance b/d
Cash
(restored
imprest)

KEY POINTS

Books of Original Entry are useful in eliminating bulky details from the ledger.

Credit transactions occur when payment is made some time in the future, whereas a
cash transaction is where payment is immediate.

Source documents record the essential elements of any transaction and are kept for
future reference.

Sales and Purchases Invoices, receipts, bills, debit notes and credit notes are examples
of source documents used to make records in books of original entries.

Trade discounts are reductions in the catalogue price of goods and are not recorded in
the books whereas cash discounts are given as incentive for prompt payment and
recorded in the cash book.

The Sales, Purchases, Return Inwards and Return Outwards journals are used to record
the credit stock transactions.

The General Journal records unusual and onetime transactions and is unique in the way
each transaction is analyzed and recorded.

All non-credit transactions involving cash or bank are recorded in the cash book. This
would include credit and debit card transactions.

The Petty Cash Book is an analysis book that records all small cash transactions such as
the purchase of postage stamps and gas for office car.

CONCLUSION

As a business grows, the number of transactions increases and it becomes necessary to

separate the transactions and record in different journals. The format of the journals,
with the exception of the cash book, is very similar and recording in all the journals is
done from original source documents.
This Study Guide would have enabled you to develop the skills needed to record
transactions in the books of original entries, total the books and determine total credit
sales and purchases. You should also be able to record transactions in the cash book and
balance the cash book. You should now be able to complete the end test and the tutor
marked assignment.

SUGGESTED FURTHER
READINGS

Holdip, G. and Lamorell,

C.

Principles of Accounts for Caribbean

Examinations,Oxford: Macmillan Educational, 2004.

Wood, F.

Principles of Accounts for the Caribbean, London:

Longman Publishing.

END TEST
1.

The purchases day book(journal) records all

(a)
(b)
(c)
(d)

purchases of assets on credit

credit purchases
goods for resale purchased on credit
purchases

2.

A business may offer trade discounts to customers in order to

(a)
(b)
(c)
(d)

save money
encourage trade
encourage early payment
discourage late payment

3.

The information needed to record transaction in the sales journal is taken from the

(a)
(b)
(c)
(d)

bank statement
credit note
debit note
sales invoice

4.

The total of the sales journal represents total

(a)
(b)
(c)
(d)

sales for the period

creditors for the period
debtors for the period
liability for the period

5.

When a customer returns goods, the seller will prepare

(a)
(b)
(c)
(d)

a debit note
a credit note
a statement
an invoice
Complete the following sentences with words or phrases taken from the following word
list:
Journalising
Cash Discount
Debit note

6.

Trade discounts
Credit note
Return outwards

A _____________ is sent by the seller to let the buyer know that the amount on the invoice
was overstated.

7.

A __________ is issued when too many goods have been supplied to the customer and he
agrees to keep them.

8.

As a means of encouraging trade a business may offer _______________ to customers.

9.

When a customer pays off the amount owing before the due date a ______________ is
allowed.

10.

The act of recording transactions in a book of original entry is referred to as

________________________.

FEEDBACK FOR THE END TEST

1.

2.

3.

4.

5.

6.

Credit note

7.

Debit note

8.

Trade discounts

9.

Cash discount

10.

Journalising

TUTOR MARKED ASSIGNMENT

The Sports Depot, a sole trading business, sells a wide variety of sporting equipment and
clothes. Goods are bought and sold for cash and on credit. The invoice is used to enter
information in the Sales and Purchases journals. On March 1st 2006 the business had
$2500 in cash and $8000 in the bank. The following transactions took place during the
month:

March
March
March
March

02
03
08
10

Purchased T Shirts for cash

Bought Stationery for cash
Sold basketball uniforms to Ball Boyz Club on credit
Purchased the following on credit from the Outlet:

$
500
400
1 390

50 Polo Shirts @ $45 each

20 Shorts @ $10 each
6
Warm up suits @ $100 each
100 Assorted pairs of football socks @ $5 per pair
A 10% trade discount was obtained.

March
March
March
March
March
March
March
March
March
March
March

12
15
15
18
20
21
24
24
25
29
30

March 31

Sold uniform to Sando Knicks on credit

Cash sales
Cash sales paid into bank
Paid wages by cheque
Paid utilities by cheque
Cash drawing by the owner
Cash paid into bank
Sando Knicks returned 3 uniforms
Purchased goods on credit from Gator Clothing
Returned 10 shorts @ $10 each to the Outlet
Received a cheque for $1 300 from Bal Boyz to settle
their account.
Paid Gator Clothing by cheque the amount owing
received a 5% discount

1 850
1 200
1670
2 590
1 700
850
1500
350
1 500

You are required to:

1.

Record these transactions in the specialized journals of the Sports Depot.

2.

Prepare the invoice from the Outlet with the information on March 10 th.

3.

Determine the following: Total net credit sales and total net credit purchases.

Posted by The Business Teacher at 9:56 AM 1 comment:

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