In the previous post, we discuss books of prime entry, source documents, control accounts, and other topics. In this post, we will be covering remaining topics such as double entries for sales, double entries for sales tax, coding, accounting modules, and other topics.
Double Entries For Sales Tax
If a company sells products for $500 plus $100 in sales tax (for a total of $600), the sales ledger should just record the $600 minus sales tax. The following are the accounting entries for sale:
| Description | DR | CR |
| Cash or A/C receivable | 600 | |
| Sales tax | 100 | |
| Sales | 500 |
If the purchase tax is refundable or recoverable, the tax should be less than the purchase price. For example, if a company buys items on credit for $500 plus $100 in recoverable tax, the transaction is as follows.
Entry for recoverable tax
| Description | DR | CR |
| Purchase | 500 | |
| Purchase or input tax | 100 | |
| A/C payables | 600 |
Entry for unrecoverable tax
| Description | DR | CR |
| Purchase | 600 | |
| A/C payable | 600 |
Because tax is unrecoverable so it will be our expense and records full with purchase.
What Is Coding
Coding is very important in a business because it identifies the correct item and posts in ledgers.
Types of Coding
Some of the important coding types are the followings.
Sequential coding
Sequential coding, often known as serial coding, is a method of accounting that sequentially use numbers. A sequential code can run along the side of the display in an accounting ledger, with one on each new line. 00, 01, 02, 03, and so on are examples of consecutive codes.
Hierarchical codes
Hierarchical codes are ones that accountants might endlessly develop in an organized and logical way if required. For example, to build a primary section in her books of accounts, an accountant would assign a number to each sector, such as “801Assets” and “802 Liabilities.” Then, if she wanted to make sub-sections, she would use a decimal, such as “801.01 Financial Assets.” Each sub-section might have as many sub-sections as the accountant desired, such as “801.00.000 Financial Assets for 2000-2001.”
Block coding
Block coding is a word used in accounting to describe the numbers that an individual might give to generic accounting terms. For example, if a block code says “3000: Fixed Assets, 4000: Stocks,” the 5,000 blocks are reserved for fixed assets alone. Since these code blocks are separated by 1,000 numbers, a person might create up to 1,000 semi-block codes or sub-categories.
Mnemonic coding
accounting uses the short form of letters that stand for a full word. For example, “ACCT” could stand for “account,” “DT” for “date” or “GTL” for “total.” or “NCL” where N shows “non” and “CL” shows “current asset”.
Faceted coding
In accounting, a faceted code is a set of digits that are grouped to indicate various headings that an accountant might utilize. Facet 1, represents the many departments within the shop; Facet 2 represents the various types of charges the store might spend, and Facet 3 includes subdivisions of Facet 2.
Batch processing refers to the grouping of comparable transactions into batches or groups which are subsequently categorized and processed by a computer.
Control total: can be used to ensure that no errors occurred during the batch’s entry. A control total is being used to ensure that the full value of transactions entered matches that calculated earlier. It is very helpful in detecting fraud and scams.
What Is Accounting Modules
A module is a software program that targets a specific area of accounting software for a business.
Accounting software will have several different components. A single-module accounting package is referred to as a stand-alone module.
It’ll almost certainly be made up of several modules. A suite is the umbrella word for a collection of modules. As a reason, an accounting program may incorporate various taxes and accounting modules:
- Package of invoices
- Inventories
- Receivables ledgers or books
- Accounts Payables
- general ledger
- Payroll services
- a cash register
- Estimating the cost of a job
What Is An Integrated Accounting System
An integrated accounting system is a program that incorporates many financial accounting operations into a single APP. The necessity for distinct accounts or records for procurement, costing, and some other management accounting functions is eliminated when many individual systems or programs are replaced.
What Is Interlocking Accounting System
Interlocking accounting is a form of financial or monetary accounting system in which a company’s expense accounts and financial accounts are kept separate. In other terms, there’s no double entry between both the company’s cost and financial accounts in the interlocking accounting system.
Must read these notes as well and share them with your friends
Business transaction and documentation
Asset and liability (Accounting Equations)