2. LEARNING OBJECTIVES
To explain the accounting cycle
To explain various types & functions
of each journal & ledger
To determine the need for an
analytical petty cash book
To explain an analytical petty cash
imprest system
3. INTRODUCTION
Systematic bookkeeping procedures must be followed to
record transactions in the books of accounts.
The recording system consists of the whole accounting
cycle starting with the identification of source
documents & the recording of the information contained
in the source documents.
Source documents of each transaction are different
depend on the type of the transaction.
i.e. invoices (sales), receipts ( cash/bank) , cash bills
(expenses), credit note / debit note (return inwards /
return outwards) & etc.
The source documents will be classified accordingly &
then recorded in the appropriate journals & later posted
to various accounts in the ledger.
4. JOURNALS/BOOKS OF PRIME ENTRY
Once the source documents are analyzed, the
information are transferred first to journals that also
known as books of prime entry.
The journal is just like a diary whereby information such
as the date, details & amounts regarding transactions are
recorded.
The books of prime entry consists of a petty cash &
7 types of journals which are as follows:
General journal
Purchases journal
Sales journal
Return inwards journal
Return outwards journal
Cash receipts journal
Cash payments journal
5. GENERAL JOURNAL
General journal is use to record:
1. Sales/purchases of fixed assets on
credit
2. Correction of errors
3. Opening entries
4. Transfers
5. Withdrawals of goods for owner’s
personal use
6. adjustments
6. GENERAL JOURNAL (cont’d)
Example 1
Jan 1 Purchase office equipment on credit from Streamyx
Sdn. Bhd. RM5,000.
General Journal
Date Details Folio Debit Credit
(RM) (RM)
Jan 1 Office furniture GL 5,000
Creditor – Streamyx 5,000
Sdn. Bhd.
7. GENERAL JOURNAL (cont’d)
Example 2
Jan 5 sold unused computer to Ahmad RM1,000 on credit.
General Journal
Date Details Folio Debit Credit
(RM) (RM)
Jan 5 Debtor - Ahmad 1,000
Computer GL 1,000
8. GENERAL JOURNAL (cont’d)
Example 3
Jan 1 En. Jamal has the following assets & liabilities at the
beginning of the accounting period:
RM
Assets: Office Equipment 8,000
Office Furniture 3,500
Cash 900
Stock 5,300
Liabilities: Loan from BBMB 6,000
Creditors 2,000
9. GENERAL JOURNAL (cont’d)
General Journal
Date Details Folio Debit Credit
(RM) (RM)
Jan 1 Office Equipment GL 8,000
Office Furniture GL 3,500
Cash GL 900
Stock GL 5,300
Loan from BBMB 6,000
Creditors 2,000
Capital GL 9,700
10. GENERAL JOURNAL (cont’d)
Example 4
Jan 7 Mr. Wong owes the business RM9,000. He failed to
settle his account & wishes to pay his debt by giving
his own car worth RM9,000.
General Journal
Date Details Folio Debit Credit
(RM) (RM)
Jan 7 Car GL 9,000
Mr. Wong 9,000
11. GENERAL JOURNAL (cont’d)
Example 5
Jan 10 Adit is a watch & took a watch worth RM1,000 as
present to his wife.
General Journal
Date Details Folio Debit Credit
(RM) (RM)
Jan 10 Drawings GL 1,000
Purchases 1,000
12. PURCHASES JOURNAL
It is used to record purchase of goods on credit. Source document
involved is invoice received from the supplier.
Example
Mac.10: Bought goods on credit from Ali RM500, invoice no.213
Mac.20: Bought goods on credit from Kasim RM400, invoice no.223
Mac.28: Bought goods on credit from Baba RM700, invoice no.233
Purchases Journal
Date Particular Invoice no. Folio Amount
(RM)
Mac 10 Ali 213 PL1 500
20 Kasim 223 PL2 400
28 Baba 233 PL3 700
Transferred to GL5 1,600
Purchases a/c
13. SALES JOURNAL
It is used to record credit sales. Source document involved is
invoice sent to debtor. Invoices are serially numbered.
Example
Mac.11: Sold goods on credit to Tom RM900, invoice no.345
Mac.21: Sold goods on credit to Tam RM800, invoice no.360
Mac.29: Sold goods on credit to Tim RM500, invoice no.380
Sales Journal
Date Particular Invoice no. Folio Amount
(RM)
Mac 11 Tom 345 SL1 900
21 Tam 360 SL2 800
29 Tim 380 SL3 500
Transferred to GL6 2,200
Sales a/c
14. RETURN OUTWARDS JOURNAL
It is used to record transaction involving goods returned to
supplier. Source document involved is the credit note sent by the
supplier (not serially numbered) @ the business sent a debit note
to the suppliers (therefore the notes are serially numbered)
Example
Mac.19: Goods returned to Ali RM10, credit note no. 007
Mac.24: Goods returned to Kasim RM18, credit note no. 010
Return Outwards Journal
Date Particular Credit Folio Amount
note no. (RM)
Mac 19 Ali 007 PL1 10
24 Kasim 010 PL2 18
Transferred to GL7 28
Returns Outwards a/c
15. RETURN INWARDS JOURNAL
It is used to record transaction involving goods returned by
customer. A Credit note will be issued to customer (the notes sent
out are serially numbered), or the business received debit notes
from customer.
Example
Mac.14: Goods returned by Tom RM15, debit note no. 211
Mac.23: Goods returned by Tam RM20, debit note no. 213
Return Inwards Journal
Date Particular Credit Folio Amount
note no. (RM)
Mac 14 Tom 211 SL1 15
23 Tam 213 SL2 20
Transferred to GL8 35
Returns Inwards a/c
16. CASH RECEIPTS JOURNAL
It is used to record all cash received from any sources. The most
common is the receipt & the cash register summary.
Example
Mac.23: Received RM500 from Tom
Mac.25: Received RM400 from Tam
Mac.27: Received RM250 from Tim
Cash Receipts Journal
Date Receipts Details Folio Sales Service Other Debtor Bank
No. Fees receipts
Mac 001 Tom SL1 500 500
23
25 002 Tam SL2 400 400
30 003 Tim 250 250
GL9 1,150
17. CASH PAYMENTS JOURNAL
It is used to record all outflow of cash from the business for any purpose.
The documents involved include payment vouchers & cheque butt, if
payments are made by cheque
Example
Mac.22: Paid RM 490 to Ali, cheque no.132444
Mac.28: Paid RM 240 to Kasim, cheque no.132445
Mac.29: Paid RM 300 to Baba, cheque no.132446
Cash Payments Journal
Date Cheque Details Folio Purchases Supplies Other Creditor Bank
No. Payments
Mac 132444 Ali PL1 490 490
22
28 132445 Kasim PL2 240 240
29 132446 Baba PL3 300 300
GL10 1,030
18. Ledgers
A ledger is a book, set of a loose cards or file that
contains accounts.
i.e. purchases ledger, sales ledger & general ledger.
Purchases or Creditors’ ledger
This is a ledger to record suppliers’ personal accounts.
Total credit purchase from the purchases journal are
debited to purchases account in the general ledger &
credited to various creditor’s account in the purchases
ledger.
Total return outwards from the return outwards journal
are credited to return outwards account in the general
ledger & debited to various creditors account in the
purchases ledger.
Total payments made to various creditors in the cash
payment journal will be credited to the bank account in
the general ledger & debited to various creditors account
in the purchases ledger.
19. Purchases or Creditors’ ledger
Purchases Ledger
Ali PL1
19 Mac R/Outwards ROJ1 10 10 Mac. Purchases PJ1 500
22 Mac Bank CPJ1 490
500 500
Kasim PL2
24 Mac. R/Outwards ROJ2 18 20 Mac. Purchases PJ2
400
28 Mac. Bank CPJ2 240
30 Mac Bal c/d 142
400 400
Baba PL3
29 Mac Bank 300 28 Mac Purchases PJ3 700
30 Mac Bal c/d 400
700 700
20. Ledgers (cont’d)
Sales or Debtors’ ledger
This is a ledger to record debtors’ personal accounts.
Posting for credit sales are from the various debtors’
accounts in the sales journal, & the total sales are
credited to sales account in the general ledger.
Postings for return inwards are from the various debtors’
accounts in the return inwards journal, & the total returns
are debited to return inwards account in the general
ledger.
Postings for payments received are from the various
debtors’ accounts in the cash receipts journal, & the total
amount received is debited to the bank account in the
general ledger
21. Sales or Debtors’ ledger
Sales Ledger
Tom SL1
11 Mac Sales SJ1 900 14 Mac. R/Inwards RIJ1 15
23 Mac. Bank CRJ1 500
31 Mac. Bal c/d
385
900 900
Tam SL2
21 Mac. Sales SJ2 800 23 Mac. R/Inwards RIJ2 20
25 Mac. Bank CRJ2 400
31 Mac Bal c/d 380
800 800
Tim SL3
29 Mac Sales SJ3 500 30 Mac Bank CRJ3 250
31 Mac Bal c/d 250
500 500
22. Ledgers (cont’d)
General ledger
This is a ledger to record all other accounts.
Total credit purchase from the purchases journal are
debited to purchases account in the general ledger
Total return outwards from the return outwards journal
are credited to return outwards account in the general
ledger
Total payments made to various creditors in the cash
payment journal will be credited to the bank account in
the general ledger
Total sales are credited to sales account in the general
ledger.
Total returns are debited to return inwards account in the
general ledger.
Total amount received is debited to the bank account in
the general ledger
23. Ledgers (cont’d)
General Ledger
Purchases GL5
31 Mac. Total Credit PJ1 1600
Purchases
Sales GL6
31 Mac. Total Credit SJ1 2,200
Sales
Return Outwards GL7
31 Mac. Total return ROJ1 28
outwards
Return Inwards GL8
31 Mac. Total return RIJ1 35
inwards
Bank GL9
31 Mac. Total CRJ1 1,150 31 Mac. Total CPJ1
1,030
Receipts Payments
24. PETTY CASH
It involved payments of amounts that are relatively small
A fund called “petty cash” is normally set up to facilitate
the payments.
The recording of the items paid through the petty cash
fund & the initial amount of ‘float’ depends on the
organization’s purchasing or payment or payment policy.
The use of the petty cash book relieves the senior
accounting staff in the handling of cash payments since
the work can be delegated to a junior staff.
25. PETTY CASH (cont’d)
Petty Cash Imprest System – this system is created to
enable the proper control of petty cash fund.
There are 3 distinct steps within the system:
i. Establishment of a petty cash fund or float
• A petty cashier is given a certain amount of money to start the
fund. The amount would depends on the company’s policy as to the
type of expenditures that can be paid through the use of the
fund or sometimes on the frequency of the fund being
reimbursed.
i. Recording of expenditures paid through the petty cash fund
• Any proof of payments made through the petty cash, i.e. bills,
tickets as well as the petty cash voucher must be available first
before the expenditures can be recorded in petty cash book.
i. Getting the reimbursements for expenditures made
• At the end of the period or at any time when the petty cash fund
runs low the petty cashier has to send the record on the spending
together with the compilation of all bills, tickets & vouchers
before the reimbursements can be obtained.
26. PETTY CASH (cont’d)
Analytical Petty Cash Book
• Various types of expenditures can be paid through the use
of petty cash fund.
• At the end of the month these expenditures are grouped
according to the major expense accounts related to the
expenditures.
• The major groupings can be Postage,Stationery,Traveling,
Motor Expenses,etc.
• The totals of major expense groups are then posted to
the ledger accounts.
• Thus the petty cash book saves the ledger accounts from
containing a lot of trivial details.
27. PETTY CASH (cont’d)
Example
2005 Particular RM
1 Oct Receives a cheque from the cashier 300
Cash paid for the following expenditures:
2 Oct Taxi fares 40
4 Oct Stationery 20
10 Oct Postage 20
14 Oct Stationery 10
25 Oct Stamps 60
30 Oct Receive a cheque for reimbursement 150