2nd Semester Accounting Dec2014

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Transcript of 2nd Semester Accounting Dec2014

Financial Accounting-II Page-27-

Figure 1Mashal University

Accounting-II

Source person: Kamran KhanM.Com, B.ComLecturer at Mashal University

Mashal University, Shar-e-new Park, KabulChapter No: 01 Special Journals

Special Journal or Sub-Division of JournalWhen the business is small or the number of transactions are less, all the transactions are recorded in one journal called General Journal but when the business becomes large or the number of transactions are more it is not possible to record all of them in one journal, so this situation several books are used for the recording of the business transactions, this division of journal is called as special journal or sub-division of journal. Here separate book is used for similar transactions.Purposes and Advantages of the special journalThe main purpose of the special journal is to divide the work load among various officials when it becomes impossible for one person to record all such transactions. This division gives the following advantages. Division of work is done Efficiency of the staff and skill of the staff is improved It is easy to check the record of similar nature Posting in ledger becomes easy Record of vouchers and documents can be easily maintainedSpecial JournalsSpecial journals are used by the business according to its size and needs. However, a business may use the following special journals.a. Special journals for purchase and sale of merchandise Purchases Journal Purchases Returns and Allowances Journal Sales Journal Sales Returns and Journal

b. Special journals for cash transactions Cash receipts Journal Cash payment Journal Petty cash book/ JournalNote: special journals for cash transactions will be discussed in a separate chapter.

1. Purchases Journal

In this book all the purchases of merchandise are recorded. It is also called as Invoice Inward Journal. From this journal entries are posted in Accounts Payable Ledger and General Ledger. It should be remembered that only credit purchases are recorded in purchases journal. Cash purchases are not recorded here; they are recorded in cash payment journal.Format and example of Purchases JournalExample:Brevet Company received the following invoices for the month of January, 2011.Jan 1st Merchandise purchased from Asad Company $30000 vide Invoice No.010Jan 10th Invoice No. 0034 received from 3-D computers company for $35000Jan 15thPurchased merchandise worth $15000 from Betalian Company Invoice No.0111Jan 25th Purchased merchandise from Ahmad Company $10000 for cash.

Brevet CompanyPurchases JournalDateAccounts CreditedInv.No.Ref.Amount

Jan 011015Accounts Payable-Asad CompanyAccounts Payable-3-D CompanyAccounts Payable-Betalian Company

01000340111300003500015000

Note: Transaction of 25th January is not recorded in the purchases Journal because it is cash transaction. It is recorded in the cash payments journal.2. Sales Journal

In this book all the sales of merchandise are recorded. It is also called as Invoice Outward Journal. From this journal entries are posted in Accounts Receivable Ledger and General Ledger. It should be remembered that only credit sales are recorded in sales journal. Cash sales are not recorded here; they are recorded in cash Receipt journal.Format and example of Sales JournalExample:Comsat Company had the following transactions for the month of January, 2011.Jan 1st Merchandise sold to Akram Company $20000 vide Invoice No.A-10Jan 10th sold merchandise to Baram Company Invoice No. B-012 for $25000Jan 24th Sold merchandise to Ramz Company $10000 for cash.Jan 30th sold merchandise for $350 on Maliam Company on account invoice No M-123.

Comsat CompanySales JournalDateAccounts DebitedInv.No.Ref.Amount

Jan 011030Accounts Receivable-Akram CompanyAccounts Receivable -Baram CompanyAccounts Receivable -Maliam Company

A-10B-012 M-12320000250003500

Note: Transaction of 24th January is not recorded in the sales Journal because it is cash transaction. It is recorded in the cash receipts journal.3. Purchases Return & Allowances JournalWhen merchandise is purchased is recorded in the purchases journal, but when the merchandise is defective or not according to the buyers requirement, they are returned to the seller called purchase return. Such purchases returns are recorded in a book called purchases return & Allowances Journal. Sometimes the seller may grant an allowance and the merchandise are not returned to the seller. This allowance is also recorded in the purchases return & allowances journal. Format and example of Purchases Return & Allowances JournalExample:February 1st Merchandise value $250 returned to Asad Company Inv.No.011.5th Returned merchandise worth $300 returned to 3-D Company Inv.No.0035.10th Betalian Company gave an allowance of $500 as the merchandise purchased was defective.

Brevet CompanyPurchases Return & Allowances Journal

DateAccounts DebitedInv.No.Ref.Amount

Feb. 01510Accounts Payable-Asad CompanyAccounts Payable-3-D CompanyAccounts Payable-Betalian Company

0110035 _250300500

4. Sales Return & Allowances JournalWhen merchandise is sold is recorded in the sales journal, but when the merchandise is defective or not according to the buyers requirement, they are returned to the seller called sales return. Such sales returns are recorded in a book called sales return & Allowances Journal. Sometimes the seller may grant an allowance and the merchandise are not returned to the seller. This allowance is also recorded in the sales return & allowances journal. Format and example of Sales Return & Allowances JournalExample:February 1st Merchandise value $700 returned by Akram Company Inv.No. A-115th Returned merchandise worth $630 returned by Baram Company Inv.No. B-01310th Maliam Company gave an allowance of $150 for the defective merchandise M-124Comsat CompanySales Return & Allowances Journal

DateAccounts CreditedInv.No.Ref.Amount

Feb. 01510Accounts Receivable-Akram CompanyAccounts Receivable -Baram CompanyAccounts Receivable -Maliam Company

A-11B-013 M-124700630150

Chapter No: 01 Special JournalChapter End Exercises

Exerciser No. 01

The following transactions were completed by 3- Stars Company during January 2011.1st Purchased merchandise from Khan Company for $900invoice no KC-12nd Purchased merchandise from Bren Bore Company $2400. Invoice No. BBC-13rd Sold merchandise to X-Smith $1500 invoice no. XS-14th Purchased goods from Y-John & John for $4500 invoice no YJ-15th Sold merchandise to X-Smith $3400 invoice no. XS-26th Sales return by X-Smith $500 credit note no. XS-17th Returned merchandise to Bren Bore Company $300 being defective debit note no BB-18th Merchandise were sold on Amjad $ 19000 on account invoice no Am-1-20119th Amjad received an allowance for $200 for damaged merchandise credit note no Am-1-2011 10th Merchandise returned to Y-John & John for $500 debit note no YJ-1

Required: Record the above transactions into a. Purchases Journal b. Purchases Return and Allowances Journal c. Sales Journal d. Sales Return and Allowances Journal

Exerciser No. 021. Purchased merchandise from Jan for $1300 invoice no-12. Sold merchandise to Karim $2100 invoice no 013. Purchased merchandise from Naseem for cash $ 289994. Purchased merchandise from Naseem for $3500 invoice no 0015. Sold merchandise to Kamal for $3590 invoice no 00016. Sold merchandise to Qamar for $56792 invoice no 00127. Returned merchandise to Jan $300 debit note no 18. Returned merchandise by Naseem $300 credit note no 19. Allowance given to Qamar for defective merchandise $92 credit note no 2Required: Record the above transactions into a. Purchases Journal b. Purchases Return and Allowances Journal c. Sales Journal d. Sales Return and Allowances Journal

Exerciser No. 031. Sold merchandise on account to Mr. Tariq for $2000 invoice no-12. Purchased merchandise from Rizvi for $7000 subject to 10 trade discount invoice no-13. Sold merchandise to Akmal $4000 invoice no-014. Purchased merchandise from Idrees $12500 invoice no-ID15. Mr. Tariq returned merchandise $500 credit note no 16. Returned defective merchandise to Rizvi $1300 debit note no 17. Purchased merchandise from Naseem $9000 invoice no-N18. Sold merchandise to Mr. Barakatt for $15500 invoice no-B0019. Returned inferior merchandise to Naseem $4500 debit note no 210. Granted an allowance of $50 to Mr. Akmal credit note no 2Required: Record the above transactions into a. Purchases Journal b. Purchases Return and Allowances Journal c. Sales Journal d. Sales Return and Allowances Journal

Chapter No: 02Cash book

Introduction In this chapter we shall learn how to record cash receipts and cash payments transactio