This document discusses accounting concepts and principles including invoices, books of prime entry, the cash book, VAT, financial statements, discounts, the trial balance, and payroll. It provides details on purchase invoices, sales invoices, books of prime entry like sales day books and purchase day books, how the cash book records receipts and payments, double-entry for VAT transactions, components of the statement of financial position, trade and cash discounts, the trial balance, and payroll accounting including wages, salaries, taxes, and benefits.

1. Vuk Bogdanovic 9.7
Accounting Exam 2022/23
As a business,when we purchase goods on credit,the supplier will send us
a PURCHASE/SUPPLIER'S Invoice that shows all the details relating to the
goods being bought.
When we sell goods on credit a SALES INVOICE is prepared by our business
which shows all the details of the goods being sold.
In the case where a sale is made and paid for immediately an invoice need
to be prepared unless specifically requested and a simple CASH RECEIPT
may be issued.
ALL THE TRANSACTIONS ARE RECORDED FIRST IN BOOK OF PRIME
ENTRY OR FIRST ENTRY BEFORE BEING ENTERED INTO THE LEDGER
ACCOUNTS.
SALES DAY BOOK
PURCHASES DAY BOOK
SALES RETURNS DAY BOOK
PURCHASES RETURNS DAY BOOK
CASH BOOK
The Cash book contains the cash and bank accounts.It forms part of the
double-entry system.It is used to record receipts and payments in cash and
bank.All payments of money will be entered on the credit side.As money is
received it will be entered on the debit side.
VAT stands for Value Added Tax.This is tax charged on the cost of goods or
services.
DOUBLE-ENTRY FOR VAT
Credit sales with VAT Sales Returns with VAT
Credit: Sales Debit: Sales Returns
Credit: VAT Credit: Debtor's
Debit: Debtor's Debit:VAT

2. Credit Purchases with VAT Purchases Returns with VAT
Credit: Creditor's Credit: Purchases Returns
Debit: Purchases Credit: VAT
Debit: VAT Debit: Creditor's
Credit Sales transcations are first inserted in a book of prime-entry called
''The Sales Day Book''.
Credit Purchases transactions are first inserted in a book of prime-entry
called ''The Purchases Day book''.
Sales Returns transaction are first inserted in a book of prime-entry called
''The Sales Returns Day Book''
Purchases Returns transcations are first inserted in a book of prime-entry
called ''The Purchases Returns Day Book''.
THE STATEMENT OF FINANCIAL POSITION OF A BUSINESS
The Statement of Financial Position of a Bussiness is of equal importance
to a business as the income statement.

3. NON-CURRENT ASSETS CURRENT ASSETS
1. Premises 1. Closing Stock
2. Machinery 2. Trade Receivables
3. Equipment 3. Cash At Bank
4. Motor-Vehicles 4. Cash In Hand
CAPITAL
The Capital belongs to the owner and so does the Net Profit made by the
business.On the other hand ,any drawings made reflect a deduction in the
owner's capital.
THE FINANCIAL STATEMENTS
Accounts related to the stock of a business
Sales,Purchases,Returns in,Returns out A/c Income Statement
Income Accounts,Commision received A/c Income Statement
Expenses accounts,Water & Electricity A/c Income Statement
Accounts of Assets,such as: Machinery A/c Statement of the Financial Position of a business
Accounts of Liabilities,such as: Creditors A/c Statement of the Financial Position of a business
Capital Accounts Statement of the Financial Position of a business
Drawings Accounts Statement of the Financial Position of a business
TRADE DISCOUNTS AND CASH DISCOUNTS
Where goods are bought and sold on credit we very often have to deal with
Trade Discounts.Trade Discounts wiil be shown as a deduction on invoices
but are not shown anywhere elsse in the accounting records.
In the course of a business a customer is often allowed a discount when
paying the amount due.On the other hand,the supplier may give us a discount
on the amount we are due to pay.These Discounts are known as Cash
Discounts or Settlement Discounts.

4. Discount Allowed is given by our business to credit customers(debtors).
Discount Received is to our business by our suppliers(creditors).
Discount Allowed is an expense for the business,however Discount Received
is considered as a revenue.
DOUBLE-ENTRY
DISCOUNT ALLOWED DISCOUNT RECEIVED
Debit: Discount Allowed Debit: Creditor's Accounts
Credit: Debtor's Account Credit: Discount Received
THE TRIAL BALANCE
A Trial Balance can be described as a list of balances.
DEBIT CREDIT
Asset Account Liability Accounts
Expence Accounts Capital Accounts
Drawings Accounts Income Accounts
Purchases Accounts Returns out Accounts
Returns in Accounts Sales Accounts
CARRIAGE INWARDS & CARRIAGE OUTWARDS
Carriage inwards refert to the cost of transporting goods into the business.
It is an expense realted to purchases of stock made by a bussiness.
Carriage outwards refers to the cost in curred by a business.Carriage
outwards is an expense related to the sales made by a business.

5. CAPITAL ACCOUNT
The Capital belongs to the owner and so does the Net Profit made by the
business.On the other hand,any drawings made reflect a deduction in the
owners capital.
GLOSSARY OF TERMS
Wage: Remuneration paid by a business for work done on a weekly basis.
Salary: Remuneration paid by a business for work calculated on an annual
basis but paid in equally monthly instalments.
Payroll: The preparation and calculation of wages and salaries.
Direct Taxation: The tax deducted from wage or salary due to an employee.
Gross Wage/Pay: The wage or salary due to an employee excluding any tax
deductions.
Income Tax: Income Tax is an example of direct tax.The rate of income tax
will depend on how high the income of the individual is.
National Insurance(N.I): It is another example of a direct tax deducted from
the earnings which go towards a government fund(reserve).The N.I rate
depends as well on the income of the employee.
Payslip: A document provided to an employee with every wage or salary
showing the calculations of the Net Pay.
Minimum Wage: The lowest wage that a worker may be paid,as mandated
by the Maltese law.
Benefits(rewards): In some jobs employees are also given benefits.These
benefits(rewards) can include bonuses,allowances,subsidised staff
canteen,private health care provision and more.

6. DOUBLE-ENTRY FOR PAYROLL
Gross Pay: National Insurance:
Debit: Wages Debit: Wages
Credit: Bank Credit: N.I
Income tax:
Debit: Wages
Credit: Income Tax