Books_of_Original_Entry_and_Control_Accounts_lecture_PowerPoints_2024-25

ACFI101 Topic 7: Books of Original Entry and Control Accounts

Double Entry Rule ('DEADCLIC')
- Established rules for recording transactions in accounts.
- Ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced.
Trial Balance
- A list of balances that checks if total debits equal total credits.
Adjustment Entries
- Necessary for accurate financial reporting. Includes:
  - Depreciation
  - Accruals
  - Prepayments
  - Inventory adjustments
  - Bad debts
Financial Statements Preparation
- Includes Statement of Profit and Loss (SPL) and Statement of Financial Position (SFP).
Remaining Topics
- Only five more topics to cover, emphasizing the importance of each.

Introduction
- Transactions are recorded in various books before being posted to the nominal ledger.
- Avoids cluttering a single ledger and allows multiple bookkeepers access.
- Each book caters to specific transaction types.

Sales Daybook
Purchase Daybook
Returns Inwards Daybook
Returns Outwards Daybook
Cash Books (2 types)
Journals
- Physical books are often represented by modules in accounting software, maintaining key principles.

Functionality
- Records sales made on credit terms.
- Total sales are periodically posted to the nominal ledger with specific entry examples.
Posting to Ledger
- Example entry:
  - Dr Receivables Control £160
  - Cr Sales £160

Debtor Accounts
- Individual accounts for credit customers are maintained in the receivables ledger.
- Necessary to reflect amounts owed by customers based on entries from the sales daybook.

Functionality
- Records all purchases on credit terms.
- Periodical totals are posted to the nominal ledger.
Posting Example
- Dr Purchases £150
- Cr Payables Control Account £220

Creditor Accounts
- Separate accounts for each supplier to track amounts owed.
- Necessary to mirror the entries made in the purchase daybook.

Types
- Cash Book: Records bank transactions.
- Petty Cash Book: Records small cash payments.
Structure
- Contains two sides: Receipts and Payments.

Usage
- For transactions not recorded in other books.
- Example: Recording depreciation for a motor vehicle.

Receivables Control Account
- Summarizes total amounts owed by credit customers.
Payables Control Account
- Summarizes total amounts owed to suppliers.

Management Benefits
- Limits accounts in the nominal ledger.
- Quickly provides total payable and receivable balances.
- Facilitates regular reconciliation and error checking.

Why It Matters
- Maintain accuracy between control and individual account balances.
- Correct discrepancies due to errors in posting.