UNIT 12

BOOKS OF PRIME ENTRY: THE JOURNAL

Question 1

JOURNAL
Date Details Dr Cr
$ $
July 3 Equipment 3 600
J Rajah Ltd 3 600
Purchase of new equipment on credit, invoice
number 7361
14 TM Williams 780
T Williams Ltd 780
Correction of misposted entry
19 J Rajah Ltd 520
Equipment 520
return of equipment damaged in transit
31 Income statement 156 000
Purchases 156 000
transfer of purchases to financial statements
31 Discounts received 943
Income statement 943
transfer of discounts received to financial statements

SALES LEDGER
Dr TM Williams account Cr
July 14 T Williams Ltd 780

Dr T Williams Ltd account Cr

TM Williams 780

GENERAL LEDGER
Dr J Rajah Ltd account Cr
July 19 Equipment 520 July 3 Equipment 3 600

Dr Equipment account Cr
July 3 J Rajah Ltd J8 3 600 July 19 J Rajah Ltd J8 520

Dr Discounts received account Cr

July 31 Income statement 943

Dr Purchases account Cr
July 31 Income statement 156 000

Dr Income statement for the year ended 31 July 2011 Cr

Purchases 156 000

Dr Income statement for the year ended 31 July 2011 Cr

Discounts received 943
Question 2

JOURNAL
Date Details Dr Cr
$ $
May 1 Bank 5 000
Fixtures and fittings 23 000
Bank loan 8 000
Capital 20 000
entries to open books of account
12 Administration expenses 105
Purchases 105
correction of misposting of purchase of stationery
15 Fixtures 1 050
Falmouth Shelving Ltd 1 050
purchase of fixtures on credit, invoice number 3088
31 Sales 28 700
Income statement 28 700
transfer of sales to financial statements
31 Income statement 750
Rent 750
transfer of rent to financial statements

Dr CASH BOOK (Bank columns) Cr

Bank Bank
$ $
May 1 Balance 5 000

GENERAL LEDGER
Dr Falmouth Shelving Ltd account Cr
May 15 Fixtures 1 050

Dr Fixtures and fittings account Cr

May 1 Balance 23 000
15 Falmouth
Shelving Ltd 1 050

Dr Bank loan account Cr

May 1 Balance 8 000

Dr Capital account Cr
May 1 Balance 20 000

Dr Administration expenses account Cr

May 12 Purchases 105

Dr Purchases account Cr
May 1 Admin expenses 105

Dr Rent account Cr
May 31 Income statement 750
Dr Sales account Cr
May 31 Income statement 28 700

Dr Income statement for the month ended 31 May 2011 Cr

Sales 28 700

Dr Income statement for the month ended 31 May 2011 Cr

Rent 750

Question 3

Feb 4 Received an invoice for goods for resale Purchases journal

7 Paid a trade payable by cheque Cash book
11 A voucher showed the payment of travel expenses in cash Petty cash book
15 Received a credit note from a trade payable for goods Purchases returns
damaged in transit journal
18 A cheque was drawn for the payment of wages Cash book
22 Received an invoice for a new vehicle for business use Journal
24 Issued a credit note to a trade receivable for goods Sales returns
returned as unsuitable journal
28 Corrected a mistake in the accounts where the wrong Journal
amount had been debited and credited in the ledger
accounts

Question 4

Sept 3 Received an invoice for some new equipment for business Journal
use
6 Cheque stub showed the payment of rent for the month Cash book
11 Entries were made to correct a mistake made by the Journal
bookkeeper
14 Invoice was issued for the sale of goods on credit Sales journal
15 Credit note was issued for the return of goods by a Sales returns
customer journal
20 A voucher showed the purchase of postage stamps Petty cash book
23 Invoice was received for goods for resale Purchases journal
25 Some of the new equipment was found to be faulty and Journal
was returned to the supplier
30 Expense accounts were closed and their balances Journal
transferred to the profit and loss section of the income
statement for the year ended on this date
 Question 5

JOURNAL
Date Details Dr Cr
$ $
Jan 1 Bank 3 500
Vehicle 36 000
Equipment 19 000
Capital 58 500
entries to open books of account
15 Equipment 880
Bridge Products 880
purchase of equipment for business use on credit,
invoice number 478
19 Bridge Products 90
Equipment 90
return of equipment purchased on credit

Dr CASH BOOK Cr
Discounts Cash Bank Discounts Cash Bank
Allowed Received
$ $ $ $ $ $
Jan 1 Balance 3 500 Jan 10 Operating exp 280
7 Sales 1 240 11 Bank 800
11 Cash 800 24 MJT Ltd 93 4 557
29 Geeta Stores 24 911 31 Balances c/d 160 654
24 1 240 5 211 93 1 240 5 211
Feb 1 Balance b/d 160 654

Purchases Journal
Invoice
Date Details No $
Jan 4 MJT Ltd 302 4 800
Total purchases 4 800

Sales Journal
Invoice
Date Details No $
Jan 16 Geeta Stores 001 1 020
Total sales 1 020

Purchases Returns Journal

Credit
Date Details Note No $
Jan 14 MJT Ltd 073 150
Total purchases returns 150

Sales Returns Journal

Credit
Date Details Note No $
Jan 22 Geeta Stores 001 85
Total sales returns 85
 PURCHASES LEDGER
Dr MJT Ltd account Cr
Jan 14 Purchases returns 150 Jan 4 Purchases 4 800
24 Bank 4 557
24 Disc received 93

SALES LEDGER
Dr Geeta Stores account Cr
Jan 16 Sales 1 020 Jan 22 Sales returns 85
29 Bank 911
29 Disc allowed 24

GENERAL LEDGER
Dr Bridge Products account Cr
Jan 19 Equipment 90 Jan 15 Equipment J1 880

Dr Vehicle account Cr
Jan 1 Balance 36 000

Dr Equipment Cr
Jan 1 Balance 19 000 Jan 19 Bridge Products 90
15 Bridge Products 880

Dr Capital account Cr
Jan 1 Balance 58 500

Dr Discounts allowed account Cr

Jan 31 Cash book 24

Dr Discounts received account Cr

Jan 31 Cash book 93

Dr Operating expenses account Cr

Jan 10 Cash 280

Dr Purchases account Cr
Jan 31 Purchases
journal 4 800

Dr Sales returns account Cr

Jan 31 Sales returns
journal 85

Dr Purchases returns account Cr

Jan 31 Purchases returns
journal 150

Dr Sales Cr
Jan 7 Cash 1 240
31 Sales journal 1 020
 Trial Balance at 31 January 2012
Dr Cr
$ $
Cash 160
Bank 654
Bridge Products 790
Vehicle 36 000
Equipment 19 790
Capital 58 500
Discounts allowed 24
Discounts received 93
Operating expenses 280
Purchases 4 800
Sales returns 85
Purchases returns 150
Sales 2 260
61 793 61 793

Question 6

JOURNAL
Date Details Dr Cr
$ $
Nov 20 Furniture and equipment 1 460
Deva Office Supplies 1 460
purchase of equipment for business use on credit,
invoice number 2789

Dr CASH BOOK Cr
Discounts Cash Bank Discounts Cash Bank
Allowed Received
$ $ $ $ $ $
Nov 1 Balance b/d 440 Nov 1 Balance b/d 1 480
7 Oldbridge 1 Operating exp 380
Retail Unit 140 2 660 13 Drawings 720
12 Sales 2 460 18 Bank 1 800
18 Cash 1 800 20 M Chin Ltd 160 3 040
29 Peterson Stores 110 3 430 30 Balances c/d 720 2 650
250 2 900 7 890 160 2 900 7 890
Dec 1 Balances b/d 720 2 650

PURCHASES JOURNAL
Invoice
Date Details No $
Nov 3 LDZ Ltd 891 3 000
Total purchases 3 000

SALES JOURNAL
Invoice
Date Details No $
Nov 17 Peterson Stores 407 1 960
Total sales 1 960
 PURCHASES RETURNS JOURNAL
Credit
Date Details Note No $
Nov 8 LDZ Ltd 223 220
Total purchases returns 220

SALES RETURNS JOURNAL

Credit
Date Details Note No $
Nov 22 Peterson Stores 082 120
Total sales returns 120

PURCHASES LEDGER
Dr LDZ Ltd account Cr
Nov 8 Purchases returns 220 Nov 1 Balance b/d 4 500
3 Purchases 3 000

Dr M Chin Ltd account Cr

Nov 25 Bank 3 040 Nov 1 Balance b/d 3 200
25 Disc received 160

SALES LEDGER
Dr Oldbridge Retail Unit account Cr
Nov 1 Balance b/d 2 800 Nov 7 Bank 2 660
7 Disc allowed 140

Dr Peterson Stores account Cr

Nov 1 Balance b/d 1 700 Nov 22 Sales returns 120
17 Sales 1 960 29 Bank 3 430
29 Disc allowed 110

GENERAL LEDGER
Dr Deva Office Supplies account Cr
Nov 20 Furniture
and equipment 1 460

Dr Capital account Cr
Nov 1 Balance b/d 103 560

Dr Discounts allowed account Cr

Nov 1 Balance b/d 1 320
30 Cash book 250

Dr Discounts received account Cr

Nov 1 Balance b/d 1 890
30 Cash book 160

Dr Drawings account Cr
Nov 1 Balance b/d 37 320
13 Bank 720
Dr Furniture and equipment account Cr
Nov 1 Balance b/d 180 000
20 Deva Office
Supplies J 1 460

Dr Operating expenses account Cr

Nov 1 Balance b/d 45 360
1 Cash 380

Dr Purchases account Cr
Nov 1 Balance b/d 578 270
30 Purchases
journal 3 000

Dr Sales returns account Cr

Nov 1 Balance b/d 4 890
30 Sales returns
journal 120

Dr Purchases returns account Cr

Nov 1 Balance b/d 5 130
30 Purchases returns
journal 220

Dr Sales account Cr
732
Nov 1 Balance b/d 340
12 Cash 2 460
30 Sales
journal 1 960

Trial Balance at 30 November 2012

Dr Cr
$ $
Cash 720
Bank 2 650
Capital 103 560
Discounts allowed 1 570
Discounts received 2 050
Drawings 38 040
Furniture and equipment 181 460
Operating expenses 45 740
Purchases 581 270
Sales returns 5 010
Purchases returns 5 350
Sales 736 760
Trade payable: LDZ Ltd 7 280
Deva Office Supplies 1 460
856 460 856 460
PREPARING FOR THE EXAMINATION

Q Ans Q Ans Q Ans Q Ans Q Ans

7 C 8 B 9 C 10 A 11 A
12 B 13 B 14 B 15 B 16 B
17 C 18 C

Question 19

(a) (i) cheque counterfoil

(ii) till rolls
(iii) cash receipt
(iv) paying-in slip counterfoil
(v) bank statement

(b) The balance of the cash column shows that the business has cash in hand of
$165;
the balance of the bank column shows that the business has an overdraft of
$140.

Question 20

No. K488
INVOICE
Unit
Quantity Description price Total
$ $
6 Excel surfboards 320 (i) 1 920
(ii) 5 Supa surfboards 380 1 900
TOTAL (iii) 3 280
Less 20% (iv) trade discount (v) 656
NET AMOUNT DUE (vi) 2 614
Terms: payments within 30 days
Term: 5% (vii) cash discount for settlement within 20 days

(b) Sales journal

(c) Credit note
Question 21

Transaction Book of original Account to be Account to be

entry debited credited
i A cheque counterfoil Cash book Rent Bank
showed the payment of
rent
ii Bank statement showed
the deduction of bank Cash book Bank charges Bank
charges
iii A paying-in slip counterfoil
showed a cheque from a
customer, AZX & Co, was Cash book Bank AZX & Co
paid into the bank
iv A credit note was received Purchases BTX Ltd Purchases
from a supplier, BTX Ltd returns returns
v A petty cash voucher
showed a payment for Petty cash book Stationery Petty cash
stationery
vi An invoice showed the
purchase of a new till for Journal Equipment Supplier
shop use

Question 22

(a) Source documents are important because they provide information for making
entries in the accounting system. They are evidence for each transaction.
(b)
Transaction Source document
i Some new office furniture was Invoice
purchased on credit
ii Some goods were returned to a supplier Credit note (received)

iii Cash sales were paid into the bank Paying-in slip counterfoil

iv An employee was repaid the amount he

had spent on travel on behalf of the Petty cash voucher
business
v Goods were sold on credit Sales invoice

Question 23

(a) Imprest
(b) $170
(c) Expenses of $140 will be charged to the income statement.
(d) Balance of petty cash in hand $10 will be recorded as a current asset.
Question 24

(a) The journal is used to make the first record of transactions which are not
recorded in the other books of prime entry (i.e. not recorded in cash books
or purchases, sales and returns journals).
(b)

JOURNAL
Date Details Dr Cr
$ $
Tom Cheung 230
Office furniture 230
Sales of office equipment on credit
Delivery vehicle 15 400
Bestride Motors Ltd 15 400
Purchase of new vehicle on credit
Discounts received 40
Trade payable: MTD Electrics Ltd 40
Cancellation of cash discount received
Income statement 3 910
General expenses 3 910
Transfer of general expenses to financial statements

Question 25

(a) The cash in hand will be shown as a current asset; the bank overdraft will be
shown as a current liability.
(b) Discounts columns are totalled in the cash book because the columns do not
form an account within the cash book, instead they show a note of any cash
discounts allowed and received (they are ‘memorandum columns’).
(c) Credit customers are allowed a cash discount to encourage them to pay
promptly. Prompt payment will improve Paloma’s cash flow.
(d) Discounts allowed will be debited to the discounts allowed account; discounts
received will be credited to the discounts received account. At the end of the
financial year the accounts will closed and the balances transferred to the
income statement (discounts allowed as an expense; discounts received as
income).