Basic Accounting - Section 3: The Accounting System

Vocabulary flashcards covering the components of an accounting system and various books of prime entry based on lecture notes.

Accounting system

A system used to gather and record information needed to produce the Financial Statements (the Statement of Financial Position and the Statement of Profit or Loss).

Financial Statements

The final output of the accounting process, consisting of the Statement of Financial Position and the Statement of Profit or Loss.

Source document

The original or primary financial document (e.g., a purchase invoice) that serves as the source of information flowing through the accounting system.

Books of prime entry

The initial books where financial transactions are classified and recorded by category to prevent the accounting system from becoming cluttered and to avoid errors.

Journal book

A record of entries made that do not have a source document.

Discounts received day book

A book that records credit notes for the prompt payment discounts received from suppliers.

Cash book payments

A record of all payments out of the bank account, including Bankers' Automated Clearing System (BACS) payroll runs and cheques written to suppliers or for rent.

Purchases day book

A record of all purchase invoices made on credit terms from suppliers.

Purchases returns day book

A record of all purchase credit notes received from suppliers for goods returned outwards.

Petty cash book

A record of small cash transactions paid for out of the petty cash tin, such as the purchase of stamps.

Sales returns day book

A record of all sales credit notes issued to customers for goods returned inwards.

Sales day book

A record of all sales invoices raised on credit terms to customers.

Cash book receipts

A record of all receipts into the bank account, including cheque receipts from customers or the proceeds of selling assets.

Discounts allowed day book

A book that records credit notes for prompt payment discounts issued to customers.

Ledger accounts

The accounts where transactions are recorded using double entry bookkeeping after being entered into books of prime entry.

Trial Balance

A list extracted from the ledger accounts used in the process of creating Financial Statements.