Fundamentals of Accounting

ACCT001

Chat Session – June 18, 2018

Double Entry – The asset of Stock

Sales Account – used when stock of goods is purchased (always credited)

Purchases Account – used when stock is bought (always debited)

Returns inwards Account – used when customers returned stock of goods to business (always debited)

Returns Outwards Account – used when business returns stock of goods to suppliers (always credited)

Account to be Account to be
Debited Credited
June 1, Bought goods on credit from T. Williams $5000 Purchases T. Williams

June 5 Sold stock of goods on credit to S. Smith $1000 S. Smith Sales

June 15 Goods returned by T. Williams $350 Return Inwards T. Williams

June 20 Goods returned by S. Smith $200 Returns Inwards S. Smith

June 25 Goods returned to T. Williams T. Williams Returns

Outwards
June 25 Bought motor vehicle on credit $3000 from T. White Motor vehicle T. white

June 30 Furniture returned by J. Jolly $450 Furniture J. Jolly

Double Entry for Expenses & Revenue

Transactions Account to Account to

  be Debited be Credited
Paid rent in cash Rent Cash
Paid salaries by cheque Salaries Bank
Rent received in cash Cash Rent Received
Paid rates by cheque Rates bank
Commission received in cash Cash Com Received
Received by cheque, a refund of rates paid Bank Rate
Paid insurance by cheque Insurance bank
Insurance paid in cash Insurance Cash
 Sold old furniture, receiving proceeds in cash cash Furniture
Paid wages by cheque Wages Bank
Sublet premises, receiving rent by cheque Bank Rent received
Cash drawings by proprietor Drawings Cash
interest received in error refunded by cheque Interest Received bank
Electricity paid by cheque Electricity Bank
Electricity rebate received in cash Cash Electricity
Motor van bought by cheque Motor van Bank
Motor expenses paid in cash Motor expenses cash
General expenses paid in cash General expenses Cash
Received a refund of insurance by cheque Bank Insurance
Proprietor takes stock for personal use Drawings Purchases

Example – Worked in Session (Check Excel Doc.)

R. Smith, a sole trader commenced business on June 1, 2000 with $15000 cash as capital. During the
month the following transactions took place:

June 5 Paid cash for equipment 4000

June 9 Paid rent by cash 1000

June 11 E. Grant sold him goods on credit 3500

June 15 Paid for painting by cash 800

June 17 Sold L. Smart goods on credit 300

June 19 Received cash from L Smart 200

June 21 Paid E. Grant cash 800

June 30 Sold L. Smart goods for cash 600

Required:

(a) Write up the relevant accounts and balance them (16 marks)
(b) Extract a trial balance (6 marks)