ACCA FA1 notes

Recording, summarizing and posting transaction

posting transaction

In this post you will learn, how to perform recording, summarizing and posting transaction. This is the third post in FA1 series and if you not read previous posts then read those as well. So here we go with our first topic.

Generally, transactions are recorded in source documents. The information on these records are recorded in prime entry books.
Basically there are seven books of prime entry.

Source Document: document which records all information of a business.

Source documents are very important in analyzing a business inflows and outflows. It has to keep track of source documents – events – in order to keep track of what’s happening on. Such records are kept in prime entry books.
A corporation receives and send a lot of primary sources in the course of doing business. The information contained in these primary documents must be recorded; otherwise, the company may forget to ask for demanding payment, give payment to others , or even pay things double.

Books of prime entry

  1. Sales day book: posting transaction about credit sales.
  2. Sales return day book: records returns from customer (credit sales return).
  3. Purchase day book: posting transaction for purchase that is on credit.
  4. Purchase return day book: records credit purchase return.
  5. Cash day book: records all those transactions which is done on cash.
  6. Petty cash book: records small amount of cash transactions
  7. Journal book: posting transaction only for adjustments

Proper and true record keeping, summarizing, and posting processes empower an entity or a company to keep access of their daily operations and help them find vital commercial information, such as sales of goods and services by volume and value, associated expenses, amounts due due from customers, amounts due to suppliers, cash balances, and profits and/or losses made over time.

Double entries for books of prime entry

Sales day book

Honey made a sale of car on credit at $50000 to Mumford.

DescriptionDRCR
Receivable (Mumford)$50000
Sales (car)$50000
Sales return day book

Mumford use the car two days and he felt that the car is not running well and he returns the car to honey back.

DescriptionDRCR
Sales return (car)$50000
Receivable (Mumford)$50000
Purchase day book

X purchase manufacturing material from y supplier on credit at a cost of $4000

DescriptionDRCR
Purchase$4000
Payable (Y)$4000
Purchase return day book

X uses some of the material and return rest of that material which costs $3000

DescriptionDRCR
Payable (Y)$3000
Purchase return$3000
Cash day book

Henry purchase some furniture for office use at a cost of $10000.

DescriptionDRCR
Furniture (office equipment)$10000
Cash$10000

Personal and impersonal account

A personal account is one that is used by a single person for their own needs. It’s a word used to distinguish them from accounts used for corporate or business purposes.
Clients, suppliers, wage and salary accounts, owner withdrawals and capital accounts are all examples of personal accounts.

We have several forms of costs for multiple purposes in the nominal book accounts, such as property, healthcare, telephones, and others. These expenses are characterized as impersonal accounts since they are not tied to the individual to whom the benefits are paid but rather to the reason for payment.
Asset Accounts, Monetary Records, Income and Expenditure Accounts are all examples of impersonal accounts.

Control Account

A control account is a account in general ledger that keeps track of the overall worth of a number of comparable but separate items.

Control accounts are mostly used to keep track of payables and receivables. They must comply with the sum of the particular balances and serve as a verification to confirm that all events in the individual ledger accounts have been recorded appropriately.

Receivable Control Account: The entire debtors or receivable account (also known as the receivables ledger control account) is a record in which records of transactions affecting all debtors are preserved. Amount from the sales day book and the cash book are posted. The overall amount owing to the organization at any one moment from its credit customers will be the balance on the total receivables account, which will agree with the total of the receivables ledger accounts.

Payable Control Account: The payables ledger control account is where records of an event involving total credit purchase or payables are recorded, and amount from cash book are posted. At any one time, the value on the total current liabilities or payable account will equal the sum amount owed by the company to its suppliers, and it will match with the amount of the payables ledger accounts.

We will cover rest part of this chapter in our next post along with practice questions. If you like the post then must share it with your friends.

Must read these notes:

Asset and liability (Accounting Equations)

Business transaction and documentation-FA1(ACCA)

ACCA-FA1 practice questions-chapter 1

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