6 Accounting: Books of Orginal Entry and Ledgers

By Jose Thompson,2014-05-05 12:21
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6 Accounting: Books of Orginal Entry and Ledgers

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6 Books of Original Entry and Ledgers

I. What is Ledger?

    Ledger is an account book to record all the accounts.

However, transactions are rarely recorded directly in one ledger (book of accounts) because:

    ? Many transactions happen each day for medium-size or large firm

    ? Internal control of separate duties is essential.

Therefore, several ledgers should be kept by different accounts clerks for better control and handling.

II. Type of Ledgers

    Type Types of accounts kept Examples Purchases Ledger To keep all trade creditor accounts Chan Ltd.

     Wong’s Co. Sales Ledger To keep all trade debtor accounts Cheung’s Co.

    Lee’s Co. Cash Book To keep Cash

    1. Bank account Bank

    2. Cash account Petty cash

    3. Petty cash book

    General Ledger To keep all other accounts: Premises

    1. Real accounts (all assets’ accounts) Machinery

     Motor van

    2. Nominal accounts Rent

    ? all revenue and expense accounts Wages

    Rental income ? purchases and sales

    Sales ? returns inwards and outwards accounts

    Purchases ? all liabilities accounts

    Capital ? capital and drawings accounts


    Loan from HK Bank

    Returns inwards

III. What are books of original entry?

    Before recording any transaction in double entry accounts in various ledgers, transactions are first recorded

    in the books of original entry. For different transactions, different types of books of original entry are used.

IV. Types of Books of Original Entry

    Type Record

    Purchases Journal Credit purchases

    Sales Journal Credit sales

    Returns Outwards Journal Returns outwards

    Returns Inwards Journal Returns inwards

    Cash or bank received and paid Cash Book *

    General Journal Other item not entered

    * Except the cash book, the above journals are not part of double entry system.

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V. Diagram of a Simple Accounting System

    The diagram below shows the sequence of book-keeping procedures under the double entry system.


     Classify the business transactions in following types

    Credit Credit Returns Returns Cash Others

    receipts & Sales Purchases inwards outwards


    Sales Purchases Returns Returns Cash The

    inwards outwards Journal Journal Book Journal

    Journal Journal

    Subsidiary books


    Enter in double entry accounts in

    the various ledgers:

    ? General ledger

    ? Purchases ledger

    ? Sales ledger

    Balancing off

    Trial balance

    Year-end adjustments for final accounts Final accounts Trading, Profit & loss Balance Sheet


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