BKTN Extra Revision Notes

Balancing Accounts

Trial Balance

Petty Cash Book

Cash Book

Daybooks

Accounting Equation

Main topics

The equation must always balance Assets plus Liabilities equals Capital (plus Profit minus Drawings) Profit = Income - Expenses Alternative variations of the equation A=L-C (+P-D)

Accounting equation

balancing accounts

• Sales Day Book
• Sales Returns Day Book
• Purchase Day Book
• Purchase Returns Day Book
• Discounts Allowed Day Book
• Discounts Received Day Book

Types of Daybooks

Daybooks

Example

• Records credit sales
• Recorded in invoice order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Totals are transferred to general ledger
• Dr SLCA - Gross
• Cr Sales Account - Net
• Cr VAT

Sales day books

Example

• Records credit notes
• Recorded in credit note order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Totals are transferred to general ledger
• Cr SLCA - Gross
• Dr Sales Returns Account - Net
• Dr VAT

sales returns day book

Example

• Records credit invoices from suppliers
• Recorded in date order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Totals are transferred to general ledger
• Cr PLCA - Gross
• Dr Purchase Account - Net
• Dr VAT

purchase day book

Example

• Records credit invoice from suppliers
• Recorded in credit note order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Totals are transferred to general ledger
• Dr PLCA - Gross
• Cr Purchase Returns Account - Net
• Cr VAT

purchase returns day books

Example

• Records discounts allowed - given to customers for paying early
• Recorded in discount order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Recorded in the cashbook to show how much the customer has had discounted
• Totals are transferred to general ledger
• Cr SLCA - Gross
• Dr Discounts Allowed Account - Net
• Dr VAT

discounts allowed day book

Example

• Records discounts received - given by suppliers for paying early
• Recorded in discount order
• Records the Gross, VAT and Net
• Shows the totals for the month
• Recorded in the cashbook to show how much the supplier has discounted the invoice
• Totals are transferred to general ledger
• Dr PLCA - Gross
• Cr Discounts Allowed Account - Net
• Cr VAT

discounts received day book

Dr in General Ledger

Cr in General Ledger

Cr in Cashbook

Dr in Cashbook

Credit Entries

• Money being paid out of the business - amount actually paid
• Includes VAT but excludes Discounts
• Recorded in the cashbook on the date paid

Debit Entries

• The amount must match the cashbook
• All general ledger accounts are NET
• All VAT goes to the VAT account

Credit Entries

• The amount must match the cashbook
• All general ledger accounts are NET
• All VAT goes to the VAT account

Debit Entries

• Money being received by the business - amount actually recieved
• Includes VAT but excludes Discounts
• Recorded in the cashbook on the date received

Transactions in the Cash Book and General Ledger

Cashbook OR bank account

Dr in General Ledger

Cr in General Ledger

Cr in PCB

Dr in PCB

Credit Entries

• Money being paid out of the PCB - amount actually paid
• It is analysed to show the VAT and NET
• Net is further analysed into the General Ledger Accounts used

Debit Entries

• The total amount in the analysed columns are the debit entries in the GL
• All VAT goes to the VAT account

Credit Entries

• The amount is from the bank restores any money paid out of the PCB

Debit Entries

• Money being received in the PCB is paid from the Cash Book
• This is exactly the same amount that has been paid out of the PCB
• It restores the imprest amount

Transactions in the Petty Cash Book and General Ledger

Petty Cash book or PCB

What to do if your trial balance does not balance

Example of a Trial Balance

Debit Entries

• Money being received in the PCB is paid from the Cash Book
• This is exactly the same amount that has been paid out of the PCB
• It restores the imprest amount

Preparing a Trial Balance

trial balance