An introduction to bookkeeping final

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An introduction to bookkeeping final

  1. 1. A refreshers guide to bookkeeping Wesleigh O’Hagan, ACA, PGDE, BAAF
  2. 2. “We can't go over it. We can't go under it. Oh no! We've got to go through it!” (excerpt from We're Going on a Bear Hunt by Michael Rosen & Helen Oxenbury)
  3. 3. 4 out of 20 SQs on average are Books of First Entry
  4. 4. They also come up throughout the exam as Part c’s
  5. 5. 2013 2012 2011 2010 General Journal General Journal General Journal General Journal Control Account Control Account Control Account Control Account (Creditors) (Creditors ) (Debtors) (Creditors) Ledger Account Ledger Account Ledger Account Ledger Account (Sales) (Purchases) (Purchases) (Sales) Day Book Day Book Day Book Day Book (Purchases) (Sales) (Purchases) (Sales Returns) Patterns – on average 4 SQs
  6. 6. Lets take the first steps….
  7. 7. DEBIT CREDIT What goes on what side?
  8. 8. DEBIT CREDIT E R A L EARL sits in the T Account
  9. 9. DEBIT CREDIT EXPENSE REVENUE ASSET LIABILITY What does EARL mean?
  10. 10. DEBIT EXPENSE ASSET CREDIT REVENUE LIABILITY P&L B/S EARL is split between the P&L and the BALANCE SHEET
  11. 11. Revenue is income that a business earns usually from SALES It also includes other income items like rent received, commission received etc. Revenue?
  12. 12. Folios
  13. 13. Folios are like a MAP  They tell you were figures have come from, or where they are going to  Folios
  14. 14. CB = Cash Book  ACB = Analysed Cashbook  GL = General Ledger  DL = Debtors Ledger  CL = Creditors Ledger 
  15. 15. 2013 2012 2011 2010 General Journal General Journal General Journal General Journal Control Account Control Account Control Account Control Account (Creditors) (Creditors ) (Debtors) (Creditors) Ledger Account Ledger Account Ledger Account Ledger Account (Sales) (Purchases) (Purchases) (Sales) Day Book Day Book Day Book Day Book (Purchases) (Sales) (Purchases) (Sales Returns) General Journals
  16. 16. Applying EARL GJ deals with balance sheet items only
  17. 17. Applying EARL GJ deals with balance sheet items only
  18. 18. Premises An Asset DEBIT Creditors A Liability – and Creditors always have a CREDIT balance CREDIT OSC A Liability – as some day we will have to repay investors CREDIT
  19. 19. 600000
  20. 20. 600000 42,000
  21. 21. 600000 42,000 583,000
  22. 22. 600000 42,000 583,000 625,000 625,000 Remember… The GJ must balance.
  23. 23. 1.01.11 600000 42,000 583,000 625,000 625,000 Watch the date – GJ are normally prepared on the 1st day of the month
  24. 24. 600000 42,000 583,000 625,000 625,000 Being, Asset, Liabilities and Share Capital of Barr Ltd on this date
  25. 25. Key Sentence! 600000 42,000 583,000 625,000 625,000 Being, Asset, Liabilities and Share Capital of Barr Ltd on this date
  26. 26. General Journal Worksheet
  27. 27. 2013 2012 2011 2010 General Journal General Journal General Journal General Journal Control Account Control Account Control Account Control Account (Creditors) (Creditors ) (Debtors) (Creditors) Ledger Account Ledger Account Ledger Account Ledger Account (Sales) (Purchases) (Purchases) (Sales) Day Book Day Book Day Book Day Book (Purchases) (Sales) (Purchases) (Sales Returns) Control Accounts
  28. 28.  Debtor Mantra :  Debtors ALWAYS have a Debit Balance DEBIT DEBTOR Debtors CREDIT
  29. 29.  Creditor Mantra :  Creditors ALWAYS have a Credit Balance DEBIT CREDIT CREDITOR Creditors
  30. 30. What about the remaining items?
  31. 31.  Once you have identified what the opening balance is you can complete the control account by asking:  Will this item INCREASE or DECREASE the amount owed…?
  32. 32.  If the item INCREASES THE AMOUNT OWED place it on the same side as the balance  If the item DECREASES THE AMOUNT OWED place it on the opposite side
  33. 33. Debtors Always have a DEBIT Balance
  34. 34. 1.05.11 Balance 4900 Debtors Always have a DEBIT Balance
  35. 35. 1.05.11 Balance 4900 For the next two entries ask the question: Has this item INCREASED or DECREASED the amount owed?
  36. 36. 1.05.11 Balance 4900 Credit Sales INCREASE amount owed – so put it on same side as the balance
  37. 37. 1.05.11 Balance 31.05.11 Credit Sales 4900 5900 Credit Sales INCREASE amount owed – so put it on same side as the balance
  38. 38. 1.05.11 Balance 31.05.11 Credit Sales 4900 5900 Cash Received DECREASE the amount owed – so put it on opposite side of the balance
  39. 39. 1.05.11 Balance 31.05.11 Credit Sales 4900 31.5.11 Cash Received 6100 5900 Cash Received DECREASE the amount owed – so put it on opposite side of the balance
  40. 40. 1.05.11 Balance 31.05.11 Credit Sales 4900 5900 10800 1.06.11 Balance 31.5.11 Cash Received 6100 31.5.11 Balance 4700 10800 4700 Balance the Account – you know you are correct as Debtors have Debit balances
  41. 41. Same rules: different Mantra for Creditors:
  42. 42. 1.5.13 Balance 4400 Creditors always have a CREDIT Balance…
  43. 43. 1.5.13 Balance 4400 For the next two entries ask the question: Has this item INCREASED or DECREASED the amount owed?
  44. 44. 1.5.13 Balance 4400 31.5.13 Credit Purchases 9300 Credit Purchases INCREASE amount owed – so put it on same side as the balance
  45. 45. 31.5.13 Cash Paid 11900 1.5.13 Balance 4400 31.5.13 Credit Purchases 9300 Cash Paid DECREASES amount owed – so put it on opposite side of the balance
  46. 46. 31.5.13 Cash Paid Balance 4400 31.5.13 Credit Purchases 31.5.13 Balance 11900 1.5.13 9300 1800 13700 13700 1.6.13 Balance 1800 Balance the Account – you know you are correct as Creditors have Credit balances
  47. 47. Control Accounts Worksheet
  48. 48. 1.5.08 Balance 31.5.08Credit Sales 1400 31.5.08 Cash Rec’d 8500 31.5.08 Balance 9,900 1.6.08 Balance 3,600 6300 3,600 9,900
  49. 49. 31.5.12 Cash Paid 31.5.12 5400 1.5.12 Balance 31.5.12 Cre. Purch. Balance 23700 29100 1.6.12 Balance 9100 20000 29100 23700
  50. 50. 2013 2012 2011 2010 General Journal General Journal General Journal General Journal Control Account Control Account Control Account Control Account (Creditors) (Creditors ) (Debtors) (Creditors) Ledger Account Ledger Account Ledger Account Ledger Account (Sales) (Purchases) (Purchases) (Sales) Day Book Day Book Day Book Day Book (Purchases) (Sales) (Purchases) (Sales Returns) Ledger Accounts
  51. 51. In attempting the question you must firstly ask if you purchased or if you sold something
  52. 52. Purchases = Money Out or Creditors Sales = Money In or Debtors
  53. 53. Scenario 1 : Purchases
  54. 54. Did you buy something? • If yes then…. Did you pay with cash? • If no then….. Yes - BANK Do you owe money? Yes - Creditor Ask yourself
  55. 55.  Cash:  Then it comes out of our Bank Account  Debit Credit BANK ACCOUNT MONEY IN Credit  Then WE OWE a Creditor Debit Credit CREDITOR ACCOUNT MONEY OUT How did we pay …. Creditor has Credit Balance
  56. 56. The beauty of double entry, is that once we know one side of the entry, we can complete the question { Every Debit has a Credit, Every Credit has a Debit The second account is given the name of the item bought or sold
  57. 57. Go through the steps…
  58. 58. Money Out = Credit Side so item iii = Bank Account
  59. 59. Bank Account Money Out = Credit Side so item iii = Bank Account
  60. 60. Delivery Van A/c Bank Account Item i , the remaining account takes the name of the item bought
  61. 61. Delivery Van A/c Bank Bank Account Delivery Van The Details are the names of the opposite accounts
  62. 62. Scenario 2 : Sales
  63. 63. Did you sell something? • If yes then…. Did you receive payment? • If no then….. Yes - BANK Are you owed money? Yes - Debtor Ask yourself
  64. 64.  Cash:  Then it goes into our Bank Account  Debit Credit Credit  Then WE ARE OWED = a Debtor Debit BANK ACCOUNT MONEY IN MONEY OUT Credit Debtor Account Debtor has Debit Balance How were we paid….
  65. 65. Bank Account Money In = Debit Side so item i = Bank Account
  66. 66. Bank Account Sales Account Item iii , the remaining account takes the name of the item sold – in this instance the goods are unnamed = Sales Account (being sale of trading items)
  67. 67. Bank Account Sales Sales Account Bank )
  68. 68. Ledger Account Worksheet
  69. 69. Purchases Account J Foley J Foley Account Purchases
  70. 70. Watch here as the bookshop owner did not sell books He sold equipment which is not part of his normal trade therefore is NOT sales account
  71. 71. Bank Account Equipment Equipment Account Bank
  72. 72. 2013 2012 2011 2010 General Journal General Journal General Journal General Journal Control Account Control Account Control Account Control Account (Creditors) (Creditors ) (Debtors) (Creditors) Ledger Account Ledger Account Ledger Account Ledger Account (Sales) (Purchases) (Purchases) (Sales) Day Book Day Book Day Book Day Book (Purchases) (Sales) (Purchases) (Sales Returns) Day Books
  73. 73. 9.5.13 10 12500 Tips: Date, CN No. and Net is as per question
  74. 74. 9.5.13 Park Ltd 10 12500 Tips: Details is always the name that is not on the Day Book
  75. 75. 9.5.13 Park Ltd 10 12500 Tips: Calculate VAT (12500 / 100 * 23) 2875 15375
  76. 76. 9.5.13 Park Ltd 10 CL 12500 2875 Tips: Folio : Purchases / Purchase Returns = Creditors = Creditors Ledger (CL) 15375
  77. 77. 9.06.2012 5 5000 Tips: Date, Inv No. and Net is as per question
  78. 78. 9.06.2012 Lily Ltd 5 5000 Tips: Details is always the name that is not on the Day Book
  79. 79. 9.06.2012 Lily Ltd 5 5000 Tips: Calculate VAT (5,000 / 100 * 23) 1150 6150
  80. 80. 9.06.2012 Lily Ltd 5 DL 5000 1150 Tips: Folio : Sales / Sales Returns = Debtors = Debtors Ledger (DL) 6150
  81. 81. Day Books Worksheet
  82. 82. Thank you Any questions? wohagan@donabatecc.ie
  83. 83. Part c’s
  84. 84. Part c’s

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