How accounting is recorded

How is accounting information recorded?

Slide 2

• An invoice/bill - List of goods/services provided with a statement of the sum due amount.
• A receipt - Is the action of receiving something or the fact of it being received.
• An invoice and receipt are both used to record sales transactions. An invoice is a request for payment whereas a receipt is a documentation that the payment has been finalized.

Process used to record financial transactions?

Slide 4

• Source entry - invoice/credit note
• Book of prime entry - where all documents go
• Sales day book/ sales return day book - any sales made/returns made
• Purchase day book/ purchase return day book - any purchases made/returns made
• cash book/ petty cash book - big cash transaction/ small cash transactions
• ledger accounts (t accounts) -debit/credit transactions
• Trail balance
• Financial statement

Definitons of book of prime entry and ledger book

Slide 6

• The word ledger means book.
• There are 3 different categories ....
• General/normal - records wages/sales/purchases/in shop expenses
• Creditors ledger/payable ledgers - money that is owed is normally written in brief detail in general but exact detail are written in payable ledgers
• Debtors ledgers/receivable ledger - money owed by customers are normally in general ledgers, but exact details are written in receivable ledgers
• Book of prime entry is used to capture transaction quickly so they are not lost or forgotten.

The purpose of content of the books of prime entry

Contents of book of prime entry

• The cash book - this records amounts paid into and out the bank account
• Petty cash book - records small amounts of cash paid day to day
• sales day book - sales invoices issued to credit customers
• purchases day book - invoices from suppliers
• Journal - where adjustments/correcting errors are recorded.