2. This module is revision for students who are studying Junior Certificate
Business Studies and have an interest in studying Accounting for Leaving
Certificate as part of their Transition Year course.
The student is introduced to and understand:
•Purpose of accounting records
•Steps in Accounting
•Source documents and day books
•Double-entry bookkeeping and the trial balance
•Assets, Liabilities, Expenses and Revenue
•The function of each day book
•Interpret ledger entries and balances
3. If you owned a business, what areas do you need to keep track of?
Businesses must complete a number of documents before transferring the
information to accounts. Can you name some of these documents?
5. DR CR
Accounting Cycle
INVOICE
Credit
Note,
Cheques
TRIAL BALANCE
TRADING
ACCOUNT
PROFIT &
LOSS
ACCOUNT
BALANCE
SHEET
Transaction
occurs
Analysis of
transaction
Recording of
transactions
Posting to ledger
account
Preparation of trial
balance
Adjustment of
balances
Preparation of final
accounts
6. Source Documents Books of First Entry
Sales invoices Sales Book
Credit notes sent Sales Returns/
Returns Inwards Book
Purchases invoices Purchases Book
Credit notes received Purchases Returns/
Returns Outwards Book
Lodgement slips, cheques, receipts Cash Book
Petty cash vouchers Petty cash book
Financial correspondence General Journal
7. Accounting is recorded in the following sequence
1.Books of First Entry
2.Ledger Accounts
3.Trial Balance
4.Final Accounts
a. Trading Account
b. Profit and Loss Account
c. Balance Sheet
8. Books of First Entry
The Books of First Entry are the first stage of Accounting for all new
businesses.
These books are:
•General Journal
•Sales Day Book
• Sales Returns Day Book
• Purchases Day Book
• Purchases Returns Day Book
• Cash Book (Receipts and Payments)
• Petty Cash Book
All transactions are posted twice from the Books of First Entry
to the Ledger Accounts. There are 3 Ledgers:
• Debtors Ledger
• Creditors Ledger
• General/Nominal Ledger
11. General Journal
This Book is used to record entries that cannot be entered in any other Book
of First Entry for example opening entries of assets and liabilities at the start
of the year.
i.e. Purchase of a Fixed Asset
Worked Example
Martin’s Ltd had the following Assets and Liabilities on 1st
January 2012;
Premises €350,000, Land €120,000, Stock €50,000, Bank Overdraft €40,000,
Share Capital €480,000 Click to access General Journal questions
2012 General Journal
1Jan Premises GL €350,000
Land GL €120,000
Stock GL €50,000 €520,000
Bank Overdraft CB €40,000
Share Capital GL €480,000 €520,000
Assets, Liabilities
and capital as on
this date
12. Sales Day Book
•Goods that are sold on credit are entered in a Sales Day Book
•There are three money columns, main column is Gross Sales (including VAT)
•Analysis columns is divided into VAT and Net Sales
•Entries from the Sales Day Book is used to update the Nominal/General
Ledger and Debtors Ledger
Worked Example:
1 June Sold goods on credit to J Knox Invoice 1 €5,400
4 June Sold goods on credit to T Reilly Invoice 2 €6,500
Sales Day Book
Date Details F In. No. Net
Sales
VAT @
23%
Total
Sales
1 June J Knox DL1 1 €5,400 €1,242 €6,642
4 June T Reilly DL2 2 €6,500 €1,495 €7,995
€11,900 €2,737 €14,637
13. Sales Returns Day Book
Businesses will issue credit notes to customers when:
1. Goods previously sold are returned due to be faulty or damaged
2.Where prices charged on the original invoices were miscalculated and need to
be corrected
Worked Example:
5 June J Knox returned goods Credit note 1 €400
8 June T Reilly returned goods Credit note 2 €200
Sales Returns Day Book
Date Details F Cr. No. Net
Sales
VAT @
23%
Total
Sales
5 June J Knox DL1 1 €400 €92 €492
8 June T Reilly DL2 2 €200 €46 €246
€600 €138 €738
14. Sales Day Book/Sales Returns Day Book
The figures can be transferred to ledger accounts as follows:
Sales Day Book
Debit side Debtors A/C
Credit side VAT A/C
Credit Side Sales A/C
Sales Returns Day Book
Credit Side Debtors A/C
Debit Side VAT A/C
Debit Side Sales Returns A/C
NET VAT TOTAL
€ € €
15. Purchases Day Book
•This book records credit purchases
•Main column is Gross/Total purchases (including VAT)
•Analysis columns divided into VAT and Net Purchases
•Information from the Purchases Book is used to update both the
Nominal/General Ledger and Creditors Ledger on a monthly basis
Worked Example
1 July Purchased goods on credit Invoice No. 34 from J. Clarke €3,000
4 July Purchased goods on credit Invoice No. 35 from T. Jones €2,400
Date Details F In. No. Net
Purchases
VAT @
23%
Total
Purchases
1 July J. Clarke CL1 34 €3,000 €690 €3,690
4 July T. Jones CL2 35 €2,400 €552 €2,952
€5,400 €1,242 €6,642
16. Purchases Returns Day Book
Businesses receive credit notes from suppliers when:
1. You have returned goods to the supplier due to damage or faulty
2. When you have been overcharged on an invoice from a supplier
Worked Example:
6 July Returned goods to J. Clarke Credit Note No. 21 €200
9 July Returned goods to T. Jones Credit Note No. 22 €140
Purchases Returns Day Book
Click here to access Day Books questions
Date Details F Cr.
No.
Net
Purchases
VAT @
23%
Total
Purchases
6 July J. Clarke CL1 21 €200 €46 €246
9 July T. Jones CL2 22 €140 €32.20 €172.20
€340 €78.20 €418.20
17. Purchases Returns Day Book
Debit Side Creditors A/C
Credit Side VAT A/C
Credit Side Purchases Returns A/C
18. Cash Receipts Cheque Payments
Bank Statements
Copy of receipts
Lodgements
Cheque book
Bank Statements
Receipts received
19. Cash Receipts and Payments Book
Worked Example
Record the following transactions of Smith Ltd using the following
headings:
Debit Side: Debtors, Sales
Credit Side: Creditors, Purchases, Wages
1 April Cash at bank €3,500
1 April Purchased goods by cheque (No. 23) €1,450
3 April Paid wages by cheque (No. 24) €1,230
5 April Paid Clarke Ltd by cheque (No. 25) €1,330
6 April Cash Sales lodged €4,500
9 April Purchased good by cheque (No. 26) €550
10 April Received cheque from Holmes Ltd €800 lodged
Task: Complete the transactions on the next slide.
20. Cash Receipts and Payments Book
Debit Side
Credit Side
Date Details F Bank Debtors Sales
1 April Cash b/d €3,500
Date Details F Bank Creditors Purchas
es
Wages
Purchases PB €1,450 €1,450
Wages €1,230 €1,230
21. PETTY CASH BOOK
What is Petty Cash Book used for?
What is a float?
Name some items that belong in a Petty
Cash Book?
22. Petty Cash Book
•Petty cash book operates as an Imprest system, it has a float paid in at the
beginning of each month.
•Records small cash receipts and payments
•Main columns are bank/cash, receipts and payments
•Analysis columns are used to group similar payments such as stationery,
postage etc.
•Information from the petty cash book is used to update the Nominal/General
Ledger on a monthly basis
Worked example:
Record the following transactions in the Petty Cash book of Martin Ltd for April
2012, following are column headings:
Postage, Canteen, Sundries
1 April Cash on hand (imprest) €200
3 April Stamps Voucher No. 1 €3.00
5 April Coffee Voucher No. 2 €1.50
7 April Charity donation Voucher No. 3 €5.00
8 April Stamps Voucher No. 4 €1.80
Click here to access Petty Cash Book questions
23. Solution
Martin Ltd Petty Cash Book
Petty Cash Book Receipts – Dr Side
Petty Cash Book Payments – Cr Side
Date Details F Cash
1 April Balance b/d €200
Date Details Voucher
No.
Cash Postage Canteen Sundries
3 April Stamps 1 €3.00 €3.00
5 April Coffee 2 €1.50 €1.50
7 April Charity 3 €5.00 €5.00
8 April Stamps 4 €1.80 €1.80
Balance €184.20
€200.00 €4.80 €1.50 €5.00
24. Ledger Accounts
Sales Day Book, Sales Returns Day Book, Purchases Day Book and Purchases
Returns Day book entries are transferred to the Ledger accounts:
Debtors Ledger: these are the accounts of debtors or customer i.e. people
who owe the business money.
Creditors Ledger: these are the accounts of creditors or suppliers i.e. people
the business owe money to.
25. Double-entry Bookkeeping system
•In your study of double entry so far, every accounting entry is based on the
double-entry principle. There are two aspects to every transaction. The basic
rule is:
•DEBIT – Assets and Expenses
•CREDIT – Liabilities and Revenue
If a business wanted to reduce an asset or an expense – entry on the credit
side of asset or expense account.
If a business wanted to reduce a liability or revenue – entry on the debit side
of the liability or income account.
It follows that if all the debit and credits are entered correctly in the ledger
at the end of the accounting period the totals of the debits will equal the
totals of the credits.
These balances are listed in a Trial Balance.
26. A business will have ASSETS. These are something of value for example:
•Buildings
•Motor Vehicles
•Delivery Vans
•Equipment
•Cash
•Stock (items for resale)
Your business will also have LIABILITIES. These are something you owe
for example:
•Loan
•Bank Overdraft
If you sell on credit, you owe money to a Debtor.
If you buy on credit, a Creditor owes you money.
Is a Debtor an Asset or a Liability?
Is a Creditor an Asset or a Liability?
27. Discussion
When a business is starting up it requires Capital and this money is lodged
in the Bank.
Which of the underlined words is the ASSET and which is the LIABILITY?
Explain why?
28. All transactions can be recorded in 4 different types of
accounts:
ASSETS – resources owned by a business such as land,
buildings, machinery etc.
LIABILITIES – these are amounts owed by the business to
outsiders such as bank overdraft, long term loans, creditors,
capital and owners equity.
EXPENSES – these are costs suffered in generating the
revenue of a business such as wages, rent, light and heat etc.
REVENUE – these are earnings from selling goods and services
or other income earned such as bank interest, sales
29. An account is maintained for every Asset, Liability and every
category of expense and revenue.
Rules of Entry – Recording transactions affecting Assets,
Liabilities and Capital
Rule 1
To record an increase in an Asset – Debit the Account
To record a decrease in an Asset – Credit the account
Asset A/C
Rule 2
To record an increase in a Liability – Credit the Account
To record a decrease in a Liability – Debit the Account
Liability A/C
Dr Side Cr Side
Increase (+) Decreases (-)
Dr Side Cr Side
Decreases (-) Increases (+)
30. Rule 3
To record an increase in Expense – Debit the Account
To record a decrease in Expense – Credit the Account
Expense A/C
Rule 4
To record an increase in revenue – Credit the Account
To record a decrease in revenue – Debit the Account
Revenue A/C
For every Debit entry there must be a Credit entry of equal
amount and vice versa
Dr Side Cr Side
Increases (+) Decreases (-)
Dr Side Cr Side
Decreases (-) Increases (+)
31. Class Questions/Activities
Click to access the Double Entry Quiz
Day Books questions
Double Entry questions
Double Entry worksheet
Full questions, all accounts
General Journal questions
Petty Cash Book questions
Layout of Accounts
Accounting Worksheets
32. Each transaction is entered into an account
Account Name
Debit Side Credit Side
Date: Date of transaction
Details: Other account involved in the transaction
Folio: Reference to where the other account can be found
€: Amount of money involved
See additional notes on T Accounts and Balancing Accounts and Trial Balance.
Layout of Accounts.docx
Date Details F € Date Details F €
33. Double-entry Bookkeeping
With every transaction there is a debit and credit side entry
Rule: Debit Receiver
Credit Giver
Example:
1st
June: Paid insurance by cash €450
See Worksheet for additional Questions
Double entry questions.docx
Dr Insurance Account Cr
1/6 Cash €450
Dr Cash Account Cr
1/6 Insurance €450
34. After all transactions are completed in the ledger accounts, the accounts are
balanced off and the closing balances are transferred to a Trial Balance.
Trial Balance
From a Trial Balance the Final Accounts are prepared:
•Trading Account
•Profit and Loss Account
•Balance Sheet
Full questions all accounts.docx
Details F Debit Credit
Sales GL €230,000
Bank CB €230,000
€230,000 €230,000
The first question is just to get students talking about accounting in a very broad way.
Things like, profit, sales, light and heat costs, orders from customers, loans, machinery, buildings etc.