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1. BAAF 202
CHAPTER 5
INTRODUCTION TO FINANCIAL
ACCOUNTING
ACCOUNTS RECEIVABLES AND
ACCOUNTS PAYABLE
SCHOOL OF ACCOUNTING AND FINANCE
FACULTY OF BUSINESS AND MANAGEMENT
PREPARED BY:
DZULKARNAIN DAHALAN

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
LEARNING OUTCOMES
At the end of this chapter, students will be able to understand :
 Cash Sales,Credit Sales and Credit Cards payments
 Making Entries in the Sales Day Book and Posting Credit Sales to the
Sales Ledger
 Trade Discounts
 Making Entries in the Purchases Day book and Posting Credit Purchases
to the Purchases Ledger
 Return Inwards and Credit Notes
 Return Inwards Day Book
 Return Outwards and Debit Notes
 Return Outwards Day Book
 Preparing and balancing Individual Creditors’ and Debtor’s Accounts as
well as Respective Control Accounts
 Value Added Tax

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
 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
.
JOURNAL

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
PURCHASE JOURNAL
It record all the credit purchases
Eg.: In 20X2,
Jan 1 – Bought goods from Suzie RM600 credit
Jan 4 – Received invoice from Razali for RM800
Jan 9 – Bought goods from Suzie RM200 credit
Date Details Total
20X2 RM
1-Jan Suzie 600
4 Razali 800
9 Suzie 200
31 Purchase Account 1600
Purchase Journal

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Slide 5 of 17
TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
SALES JOURNAL
 It records all the credit sales
Eg.: In 20X2,
Feb 2 – Sold items to Dora RM720credit
Feb 6 – Sent invoice to Juliana for RM500
Feb 12 – Sold goods to Dora RM120 credit
Date Details Total
20X2 RM
2-Feb Dora 720
6 Juliana 500
12 Dora 120
28 Sales Account 1340
Sales Journal

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
RETURN OUTWARDS JOURNAL
It records:
Goods returns to creditors
Allowance to debtors
Eg.: .: In 20X2,
Jan 8 – Credit Note received from Razali for good returns RM100
Feb 6 – return goods to Suzie RM60
Date Details Total
20X2 RM
8-Jan Razali 100
12 Suzie 60
31 Return Outwards Acc 160
Return Outwards Journal

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Slide 7 of 17
TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
RETURN INWARDS JOURNAL
It records:
Goods received from debtors
Allowance from creditor
Eg.: .: In 20X2,
Feb 10 – Credit Note mailed to Juliana RM80
Feb 16 – Dora returned goods RM30
Date Details Total
20X2 RM
10-Feb Juliana 80
16 Dora 30
28 Return Inwards Acc 110
Return Inwards Journal

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Slide 8 of 17
TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
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
 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 - Liability = RM23,200-RM7,800 = RM15,400

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CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
Cont…
 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
SyarikatZi Wei 600
(boughtcabineton credit)
9-Jan UsahaJonathan 15,000
Van Account 15,000
(sold van on credit)

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Slide 10 of 17
TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
 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
LEDGER

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
LEDGER..cont..
 5 steps of Balancing Ledger:
i. Add up both sides to find out their totals
i. 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 RM
3-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

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
 Value Added Tax (VAT) is a tax charged on the supply of most goods
and services in the United Kingdom.Value Added Tax is administered in
the UK by HM Revenue and Custom.
 The concept underlying VAT is that tax paid by ultimate consumer of the
goods or services but that everyone in the supply chain must account for
and settle up the net amount of VAT they have received in the VAT tax
period ,usually 3 months.
E.g: Trader A sells goods to Jones for £100 + VAT of 20%:
£
The sales invoice is for : Price 100
+VAT 20% 20
= Total price 120
Trader A will then pay £ 20 they have collected to the Revenue & Customs
Value Added Tax

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
 A person who owes the business money is known as debtor and
described in the statement of financial position as an account
receivable
 A person to whom money is owned for goods is known as creditor
and described in the statement of financial position as account payable
Account Receivables and Account Payable Definition

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TOPIC
CHAPTER 5: ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLES
Account Receivables and Account Payable Definition
B.Blake
Statement of financial position as at 10 May 2011
£
Assets
Shop 32,000.00
Inventory 6,400.00
Account Receivable 600.00
Cash at bank 28,000.00
67,000.00
Less: Account payable (7,000.00)
60,000.00
Capital 60,000.00