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FINANCIAL ACCOUNTING
Posted by Chester Morton / Monday 2 May 2016 / No comments
Daybooks
Journals or daybooks are used to
record transactions on a daily basis and usually before those transactions are
posted into the ledger accounts. The main advantage is to summarize
transactions before they are entered into the ledger accounts. They are also
called daybooks, subsidiary books, books of original entry, prime books, etc.
They are seven in all as follows:
1.
Purchases
Journal: This is a journal that is used to record all credit purchases. The
source document for recording transactions in this journal is the invoice
received from credit suppliers. The format may be as follows:
PURCHASES
JOURNAL
Date
|
Narrative /
Details
|
Ledger Reference
|
Invoice
Details
|
Amount
|
Note that the journals
can also be prepared on columnar basis to analyze the various transaction by
column.
|
$
|
Note: There are
several formats for presenting the journals. The format used depends on the
volume of details the business wants to show.
2.
Sales Journal:
This is a journal that is used to record all credit sales. The source document
for recording transactions in this journal is the invoice issued to credit
customers. The format may be as follows:
SALES
JOURNAL
Date
|
Narrative /
Details
|
Ledger Reference
|
Invoice
Details
|
Amount
|
|
$
|
3.
Returns Inwards
Journal: This is a journal that is used to record all credit sales that are returned by customers. It is also called Sales Returns journal. The source
document for recording transactions in this journal is credit note issued to
the customer. The format may be as follows:
RETURNS
INWARDS JOURNAL
Date
|
Narrative /
Details
|
Ledger Reference
|
Invoice
Details
|
Amount
|
Note that the journals
can also be prepared on columnar basis to analyze the various transaction by
column.
|
$
|
4.
Returns Outwards
Journal: This is a journal that is used to record all credit purchases that are returned to suppliers. It is also called Purchases Returns journal. The source
document for recording transactions in this journal is debit note issued to the
supplier. The format may be as follows:
RETURNS OUTWARDS JOURNAL
Date
|
Narrative / Details
|
Ledger Reference
|
Invoice
Details
|
Amount
|
Note that the journals
can also be prepared on columnar basis to analyze the various transaction by
column.
|
$
|
5.
Cash Book: This
is used to record all cash transactions of the business. Cash means cash in hand and cash at bank. The cash book can be a
single column type, double column type or three column type. Note that the cash
book is both a journal and ledger. The various formats or the cash book are as
follows:
SINGLE COLUMN CASH BOOK
Date
|
Narrative /
Details
|
Ref
|
Amount
|
Date
|
Narrative/ Details
|
Ref
|
Amount
|
Jan 1
Jan 3
|
Balance
Sales
|
$
600
950
|
Jan 11
|
Salaries
|
GL 2
|
$
500
|
DOUBLE COLUMN CASH BOOK
Date
|
Narrative
|
Ref
|
Cash
|
Bank
|
Date
|
Narrative
|
Ref
|
Cash
|
Bank
|
Jan 1
Jan 3
Jan 10
|
Balance
Sales
T. Bow
|
b/f
GL 3
SL 11
|
$
10
|
600
420
590
|
Jan 11
Jan 20
|
Salaries
Gecko Ltd.
|
GL2 GL5
|
$
40
|
390
990
|
THREE COLUMN CASH BOOK
Date
|
Narrative
|
Ref
|
Discount
|
Cash
|
Bank
|
Date
|
Narrative
|
Ref
|
Discount
|
Cash
|
Bank
|
Jan 1
Jan 3
Jan 10
|
Balance
Sales
T. Bow
|
b/f
GL 3
SL 11
|
$
12
10
|
420
|
600
590
|
Jan 11
Jan 20
|
Salaries
Gecko Ltd.
|
GL2 GL5
|
$
40
|
390
|
990
|
6.
Petty Cash Book:
This is used to record all minor (petty) cash transactions of a business.
It may take several formats. One of these may be as follows: The initial amount
given to the petty cashier is called cash float. The IMPREST system where the
petty cashier is given an initial amount called cash float to be used on small
expenses so that reimbursement is made where necessary.
PETTY CASH BOOK
Receipt
|
Date
|
Narrative
|
Voucher No.
|
Total
|
Analysis
|
||||
Electricity
|
Water
|
Stationery
|
Transport
|
Others
|
|||||
$
1,000
|
Jan 1
Jan 3
Jan 10
|
Balance
Grow Ltd,
T. Bow
|
10
11
|
$
420
590
|
$
20
|
$
400
|
$
|
$
590
|
$
|
7.
General Journal:
This is used to record all other transactions that cannot be recorded in the
other journals. Example of such transactions are;
·
Sale and Purchases of fixed assets on credit;
·
Correction of errors;
·
Transfers from one ledger account into another;
·
Recording of opening and closing entries of
assets and liabilities; etc.
·
Sales and
Purchases of a business
All transactions entered in the journal
are narrated.
The format is as follows:
General Journal
Date
|
Narrative
|
Reference
|
Debit
|
Credit
|
Jan 14
|
Motor Vehicle
GL Motors
Motor vehicle
bought on credit
|
$
2,500
|
$
2,500
|
NB: The type of discount recorded in the cash
book is cash discount but not trade discount. The difference between the two is
that, cash discount is given on prompt payment or on settlement of account
while trade discount or quantity discount is given on bulk purchases.
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