Bdc 101 03

BDC 101
FINANCIAL ACCOUNTING 1
SCHOOL OF ACCOUNTING & FINANCE
FACULTY OF BUSINESS AND MANAGEMENT
PREPARED BY:
NORAL HIDAYAH ALWI
CHAPTER 3
DOCUMENTS USED IN
BUSINESS TRANSACTIONS
AND ACCOUNTING CYCLE

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TOPIC
CHAPTER 3: DOCUMENTS USED IN BUSINESS TRANS & ACCOUNTING CYCLE
LEARNING OUTCOMES
At the end of this chapter, students will be able to:
 Explain the relationship between business documents and the
accounting records
 Identify the types of business documents
 Classify the features of business documents.
 Explain the steps in the recording process
 Explain the definition and advantages of journal
 Illustrate and balance the Ledger Accounts
 Distinguish Credit and Debit Balance
 Define Charts of Accounts
 Build a Trial Balance that derive from ledger

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TOPIC
TOPIC OUTLINES
3.1 The relationship between business documents and the accounting
records
3.2 Steps in the recording process
3.3 Types and features of business documents
3.4 Journal
3.5 Ledger and balancing the ledger accounts
3.6 Chart of accounts
3.7 Trial balance
3.8 Classroom Activity
3.8.1 Question 1
3.8.2 Question 2

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TOPIC
3.1 RELATIONSHIP BETWEEN BUSINESS DOCUMENTS AND ACC RECORDS
Normally, business is dealing with many transactions.
It could be the same transactions or different.
Large number of pages needed for a lot of transactions that
could need big book to handle.
Therefore, business has to set more books. Similar types of
transactions will be put together and must have a book for
each type that differentiates each transactions.
TOPIC
To the next page

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TOPIC
3.1 RELATIONSHIP BETWEEN BUSINESS DOCUMENTS AND ACC RECORDS
Business documents can be differentiate in terms of:
 The date on which each transaction took place
 Details relating to the sale
 A folio column entry is made cross-referencing
 The monetary amounts
TOPIC

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TOPIC
3.2 STEPS IN RECORDING PROCESS
BUSINESS
DOCUMENTS
BOOK OF
ORIGINAL
ENTRY /
JOURNAL
DOUBLE ENTRY
/ LEDGERS
TRIAL
BALANCE
PROFIT OR
LOSS
BALANCE
SHEET

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TOPIC
3.3 TYPES AND FEATURES OF BUSINESS DOCUMENTS
Sales invoices
Purchase invoices
Payment Voucher
Cash receipts
Debit notes
Credit notes
Memo

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TOPIC
INVOICES
 Type of bill that is sent to customers or the buyers to whom goods
were sold on credit;
 The invoices states the name of buyer, the amount owed and date
of settlement
 Invoice than posted to buyer attached the amount that been owed.
 Normally, invoice will be made in 2 copies (ori & copy):
a) Original - keep by buyer to record transactions in Purchase
Day Book/ Purchase Journal
b) Copy- keep by seller to record transactions in Sales Day
Book/Sales Journal

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TOPIC
Payment Voucher
It records all types of payment by to sellers regardless
whether it is cash or cheque payments.
 Eg.salary or rent payments. Payment for goods purchased.

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TOPIC
Cash Receipt
When seller received the payment, he will issue a receipt as
the evidence of payment received.
Original receipt will be send to buyer while the copy keep by
seller

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TOPIC
Debit Notes
Seller send Debit Note to buyers to announce that
buyer’s acc is being debited due to:
a) If the original invoice missed any amounts; instead
of RM999 but recorded RM900
b) Charges being omitted; carriage in payments
being omitted
c) Extra charges or penalties.

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TOPIC
Credit Note
Seller send credit note to buyer to inform that the
buyer’s acc being credited. Due to:
a) Buyer returns defect items; wrong models or
brands
b) If item like tins are empty with no contains
c) If the charges charged in invoice is more due to
administrative error.

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TOPIC
Memo
 Is mainly use for the transaction that happens internally,
eg.:any transactions that involved the owner and the
business.
 Memo can be recorded as:
a) Drawings by owners
b) Capital addition
c) Reminder
 Info in memo will be recorded in General Day Book /
General Journal

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TOPIC
3.4 JOURNAL
 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
.

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TOPIC
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
3.4 JOURNAL

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TOPIC
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
3.4 JOURNAL

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TOPIC
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
3.4 JOURNAL

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TOPIC
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
3.4 JOURNAL

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TOPIC
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
3.4 JOURNAL

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TOPIC
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
3.4 JOURNAL

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TOPIC
 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)
3.4 JOURNAL

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TOPIC
3.5 LEDGER
 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

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TOPIC
 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
3.5 LEDGER

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TOPIC
3.6 CHARTS OF ACCOUNTS
Are the list of account codes used in computerized
accounting system.
Some of these packages are not written for specific
business and need to be ‘tailored’ to the one that is going
to use it.
Eg.: Fixed Assets 101000
Machines 101001
Building 101002

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TOPIC
3.7 TRIAL BALANCE
 Is a list of account titles and their balance in the ledgers, on specific
date, shown in debit and credit column
 Its function:
 To test the double entry system’s accuracy
 Assist in checking arithmetical accuracy of the transactions and
detect errors in financial statement
 Trace those items if the balance is not same for debit and credit.
Matahari Enterprise
Debit Credit
Bank 15,000
Cash 7,200
Sales 32,000
Salaries 12,000
Debtors
Rent revenue 2,200
34,200 34,200
Trial Balance as at 31 Dec 20X8

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TOPIC
In May 2010, Syarikat Hijau started off a business dealing with grass cutting
and house landscaping. The business will commence its operation in the
month of June. All preparations need to be done by end of May. The
following are transactions for May:
May 14 Deposited cash RM20,000 into bank as capital
16 Purchased a small lorry worth RM30,000, with a cash deposit of
RM 14,000, the balance will be paid by monthly installments. The
notes payable was issued for this purpose.
20 Purchase of grass cutting equipment from Syarikat Ala Bhd for
RM4,000 on credit
22 Purchase of fertilizer supplies RM1,000 on cash
28 Paid Syarikat Ala Bhd RM2,000 of the amount owed
REQUIRED:
1. Show the journal entries for the month of May
2. Post the entries to the relevant ledgers
3. Prepare the Trial Balance
QUESTION 1:
3.8 CLASSROOM ACTIVITY

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TOPIC
1. GENERAL JOURNAL
DATE DESCRIPTION DEBIT (RM) CREDIT(RM)
2010
May 14
Cash
Capital
(Cash investment by the owner)
20,000
20,000
16 Vehicle
Cash
Notes Payable
(Purchase of lorry: Payment made by cash and
notes payable)
30,000
14,000
16,000
20 Equipment
Account Payable
(Purchase of equipments on credit)
4,000
4,000
22 Purchase
Cash
(Purchase of fertilizer on cash)
1,000
1,000
28 Accounts Payable
Cash
(Partial settlement of the debts owed to
Syarikat Ala Bhd)
2,000
2,000

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TOPIC
CASH ACCOUNT
May 14 Capital 20,000 May 16 Vehicle 14,000
22 Purchase 1,000
28 Acc Payable 2,000
31 Bal c/d 3,000
20,000 20,000
June 1 Bal b/d 3,000
CAPITAL ACCOUNT
May 31 Bal c/d 20,000 May 14 Cash 20,000
20,000 20,000

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TOPIC
VEHICLE ACCOUNT
May 14 Cash 14,000 May 31 Bal c/d 30,000
Notes Payable 16,000
30,000 30,000
NOTES PAYABLE ACCOUNT
May 31 Bal c/d 16,000 May 16 Vehicle 16,000
16,000 16,000
PURCHASE ACCOUNT
May 22 Cash 1,000 May 31 Bal c/d 1,000
1,000 1,000

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TOPIC
EQUIPMENT ACCOUNT
May 14 A/c payable 4,000 May 31 Bal c/d 4,000
4,000 4,000
ACCOUNTS PAYABLE
May 28 Cash 2,000 May 20 Equipment 4,000
31 Bal c/d 2,000
4,000 4,000

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TOPIC
Syarikat Hijau
Trial Balance
31 May 2010
Description Debit (RM) Credit (RM)
Cash 3,000
Purchase 1,000
Equipment 4,000
Vehicle 30,000
Account Payable 2,000
Notes Payable 16,000
Capital 20,000
38,000 38,000

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TOPIC
Tick the correct place for each item below.
Items Debit (RM) Credit (RM)
Cash √
Commission Receive
Utility Payment
Premises
Stocks
Dividend Receive
Sales
Salary Paid
Fixtures and Fittings
Return Inward
Purchase of Assets
Rental Payment
Drawings
Return Sales
Insurance Payments
Account Payable
Van
Creditor
Account Receivable
Return Outward
Debtor
Purchases
Capital
Stationery
Bank
Trial Balance as at ….
QUESTION 2:

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TOPIC
SUMMARY
All entries will be posted from JOURNAL to the LEDGER at the
end of the day or week;
Every month, LEDGER ACCOUNTS would be balanced and the
balances will be used to prepare TRIAL BALANCE

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TOPIC
THE END

Bdc 101 03

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