Books of Prime Entry: Outcomes

CHAPTER 5
BOOKS OF PRIME ENTRY

5.1 Introduction
In chapter 2 we learnt that there are two main types of transactions, namely cash
and credit transactions. There are, however, transactions that are neither cash nor
credit, for example the recording of depreciation on fixed assets.
We have reached the stage in the accounting cycle where information is collected
from the source documents to be recorded in the applicable subsidiary journals.
Therefore it is important to identify the relevant transaction types, as similar
transactions are grouped together and recorded into a specific subsidiary journal.
Outcomes
You should be able to:
 Identify the relevant transaction types and source documents to be recorded in
the applicable subsidiary journal
 Record transactions in the following subsidiary journals:
– General journal
– Cash receipts journal
– Cash payments journal
– Accounts receivable journal
– Accounts payable journal
– Accounts receivable allowance journal
– Accounts payable allowance journal
– Petty cash journal
 Post subsidiary journals to general ledger, subsidiary ledger
 Prepare a trial balance (including correction of errors)
 Reconcile subsidiary ledgers with control accounts.
5.2 Cash receipts and cash payments journal

Copyright © 2018. Juta & Company, Limited. All rights reserved.
Cash in a business, like oil in an engine, keeps a business running smoothly. But
it is not practical to keep a lot of cash on business premises, so cash is kept in a
bank account. All cash received is deposited into the account. Cheques are used to
make payments.
In this section you will learn how a business keeps a record of all the money
deposited into and paid out of its bank account, as well as electronic funds
transfers (EFTs).
This is the function of the cash journal (cash book). This section explains how to
record cash receipts and payments in the cash journal.
Schutte, Madri. Accounting for All, Juta & Company, Limited, 2018. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/ujlink-ebooks/detail.action?docID=6483479.
Created from ujlink-ebooks on 2023-02-28 02:25:55.
Chapter 5 Books of prime entry
At the end of this section you will be able to:

 Receive and check money
 Check payments
 Record cash receipts and payments in a cash journal
 Calculate cash discounts
 Record settlement discount granted and received in the cash journal
 Record VAT in the cash journal
 Transfer cash journal entries to the correct general ledger accounts
 Identify discrepancies in cash receipts and payments.
5.2.1 What is a cash receipts/payments journal (cash book)?
A cash journal is a record of all the money that a business deposits into and pays
out of its bank account. It is a record of the cash transactions of a business.
The term ‘cash’ includes any transactions that can take place through a bank
account. This means that payments received and made by cheque, even debit
orders and electronic transfers, are recorded in the cash journal.
While you will often find one book for both cash receipts and cash payments
(cash book), it is common practice to use separate books for them. In this section
we will refer to these books as the cash receipts journal and cash payments
journal.
5.2.2 Source documents for cash journal entries
We have said that a cash book is divided into two sections – cash receipts journal
and cash payments journal.
Entries in both journals are recorded from source documents. If you have studied
chapter 2, you will have learnt about these documents, but you may be familiar
with them already.
The following source documents are applicable to cash journals:
 Receipt duplicates
A receipt is issued when cash is received for payment of an account. The
customer keeps the original and a copy is kept by the business. An entry is made
on the receipts side of the cash journal (debit entry) (or CRJ).
 Deposit slips
When cheques and cash are deposited in the bank account, the duplicate deposit
slip (stamped by the bank) is used to record receipts into the cash journal (debit
entry) (or CRJ).
When a customer pays by cheque, the paid cheque acts as evidence of payment.
When the cheque is deposited, the deposit slip is the source document for an entry
on the receipts side of the cash journal (debit entry) (or CRJ).
93
Accounting for All
 Cash slip or cash sale invoice

When goods are sold for cash, a cash sale slip is prepared, either automatically as
with a cash register roll (CRR) or manually written out. Copies act as source
documents for the cash receipts journal (debit entry) (or CRJ).
 Cheque counterfoils
Completed cheque counterfoils (stubs) are source documents for payments made
by cheque (credit entry) (or CPJ).
 Bank statements
Bank statements can act as source documents for funds received and paid
electronically via electronic fund transfers (EFTs).
 Cash slip or cash purchase invoice
Goods bought for cash from a supplier are recorded on a purchase invoice, issued
by the supplier. We will receive the original invoice. This acts as a source
document for payments recorded in the cash payments journal, with the cheque
counterfoil (credit entry) (or CPJ).
5.2.3 Inventory systems
As explained in chapter 2, there are two different inventory systems a business
can use to keep record of their inventory.
We need to consider which inventory system is being used when we do the
subsidiary journals. The columns in almost all of the subsidiary journals will
differ, depending on which inventory system is used.
To re-cap:
 Perpetual inventory system
Buy inventory → debit inventory
→ credit bank/accounts payable
Sell inventory → debit bank/accounts receivable

→ credit sales
and
→ debit COS
→ credit inventory
Sales returns → debit sales/sales returns

→ credit accounts receivable
and
→ debit inventory
→ credit COS
If the business uses the perpetual inventory system then the COS columns will be
added in the cash receipts journal, accounts receivable journal and accounts
receivable allowance journal (next to sales column).
94
 Periodic inventory system

Buy inventory → debit purchases
→ credit bank/accounts payable
Sell inventory → debit bank/accounts receivable

→ credit sales
Purchases returns → debit sales/sales returns

→ credit accounts receivable
If the business uses the periodic inventory system, then there is no COS column in
the cash receipts journal, accounts receivable journal and accounts receivable
allowance journal.
For explanation of all the subsidiary journals, the periodic inventory system is
used.
Example 5.18 shows the subsidiary journals if the periodic inventory system is
used and example 5.19 if the perpetual inventory system is used.
5.2.4 Recording transactions in the cash journal
Examples of typical pages from a cash receipts journal and a cash payments
journal are summarised below.
Read through the explanation of the various columns so that you can follow how
to enter transactions into these journals.
Cash receipts journal

Doc Date Details Fol Cash Accounts Settlement Sundry Details of Analysis Bank
sales receivable discount sundry
allowed
Explanation of columns
Doc the source document and number
Date record the date when the cash receipt takes place
Details record details of transactions and say whether it is a cash sale or
cash received as payment of an account
Folio use to indicate where the item has been posted to the ledger
Cash sales column to record cash received from cash sales
Accounts record payment of accounts by customers who have bought on
receivable credit before
Sundry column to record items for which there is no column 
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Accounting for All
Details of names of the different accounts of amounts entered into sundry

sundries column (there is no column for these items)
Analysis use to summarise all monies received until it is banked with a
deposit slip
Total bank record all money (cash and cheques) paid into the bank (only the
totals of deposit slips will appear in this column)
There could be various accounts given in the journal, depending on the nature of
the business (ie the most used items). Items that do not fit into these columns are
specified in the ‘sundry’ column.
Cash payments journal

Doc Date Details Fol Cash Accounts Sundries Details of Bank
purchases payable sundries
Explanation of columns
Doc record the cheque number/bank statement
Date record the date the payment is made
Details record details of transactions and say whether it is a cash
purchase or cash paid as payment of an account
Folio reference number indicates where the item has been
posted to in the ledger
Cash purchases goods bought for resale and paid for in cash
Accounts payable payments made to suppliers for goods previously bought
on credit
Sundry payments payments to record items for which there is no column
Details of sundries name of the separate accounts of entries into the sundry
column (there is no column for these items)

Total bank record all money drawn from the bank account; every
cheque and EFT amount will appear in this column
So far we have seen which source documents are used to record cash transactions
in the cash journals. We have also seen what a typical cash receipts journal and
cash payments journal looks like.
Next we need to understand how receipts and payments are recorded in the cash
journals. We will first look at the cash receipts journal and then the cash payments
journal.
96
5.2.5 Cash receipts journal

All cash receipts transactions are entered into the cash receipts journal.
Receipts of money should be checked before they are recorded in the cash
journals.
Some businesses divide the tasks of receiving money and recording it in the cash
journal between different people in the organisation.
There could be various accounts given in the journal, depending on the nature of
the business (ie the most used items). Items that do not fit into these columns are
specified in the ‘sundry’ column.
 Cash sales are entered in the cash sales column.
 Payments from accounts receivable are entered in the accounts receivable
column.
 The analysis column is used to summarise all receipts for the day. Only the
total deposited for the day is entered in the bank column. (The total of the
deposit slip.)
Direct deposits into our bank account are not recorded in the ‘analysis’ column.
The monies received are kept in the analysis column until they are deposited.
Source documents for cash receipts include: cash receipts, cash invoices and till
slips. The total of the day’s receipts is banked at the end of the day and the deposit
slip is the source document. The amount on the deposit slip is made up of the cash
receipts, cash invoices and till slip.
ANALYSIS COLUMN = TOTAL BANK COLUMN
Cash receipts + Cash sales = Total on deposit slip
invoices + Till slips
5.2.6 Posting from the cash receipts journal to the general ledger
accounts
At the end of the period, all columns are added up. Only the totals of all the
columns are then posted to the relevant general ledger accounts. The individual
accounts under the sundry column must be posted to the relevant accounts,
because more than one different account can be entered into the sundry column.
97
Example 5.1
Follow how the receipts listed below are recorded in the cash receipts journal. (Periodic inventory system, ignore VAT.)
Date Transaction Amount Rec no

Accounting for All
June

7 Cash sales R 220 41
10 J Smith (receivable) R 330 42
14 Cash sales R 440 43
20 Interest on investments R 150 44
25 E Swart (receivable) R1 100 45
98

Date Details Folio Sales Accounts Sundries Details of Bank
receivable sundries
19XX
Jun 7 Cash sales 220.00 220.00
10 J Smith – payment on account S13 330.00 330.00

14 Cash sales 440.00 440.00
20 Interest on investment 801 150.00 Interest 150.00
received
25 E Swart S17 1 100.00 1 100.00
R660.00 R1 430.00 R150.00 R2 240.00
99
Individual amounts in the particulars column are Individual amounts in the sundries The totals of these
credited to accounts receivable’s accounts in the column are credited to the appropriate summary columns are
general ledger accounts in the general ledger posted to the general
R330 (credit) (in this example interest received) ledger
R1 100 (credit) R150 (credit) R660 to sales (credit)
R2 240 to bank (debit)
All columns added together must equal the bank column.

(R660 + R1 430 + R150 = R2 240)
Accounting for All
Posting of cash receipts journal to general ledger accounts

Dr Sales Cr
Apr 30 Bank CRJ 660.00
J Smith
E Swart
Apr 21 Bank CRJ 1 100.00
Interest received
Bank
April 30 Cash receipts CRJ 2 240.00
100
5.2.7 Posting from the cash payments journal to the general ledger
accounts
Totals of all columns and the individual accounts of the sundry column are posted
at the end of the period to the specific general ledger account.
Example 5.2
Follow how the payments listed below are recorded in the cash payments journal
(periodic inventory system, ignore VAT).
Date Transaction Amount Chq

no
Aug 1 Payment of supplier: BB Boots R200.00 11
Cash purchase: Nike R1 200.00 12
2 Payment of supplier: Tough Takkies R300.00 13
Petty cash R50.00 14
3 Stationery bought from CAN stationers R250.00 15
Payment of supplier: Sinderela Slippers R2 500.00 16
4 Payment of supplier: XXX Shoes sales R1 000.00 17
101
Solution:
Date Chq Details Fol Purchases Accounts Sundries Details of Total
no payable sundries bank
Aug 1 11 Payable: BB Boots 200.00 200.00
Accounting for All
12 Cash purchase: Nike 1200.00 1 200.00

2 13 Payable: Tough Takkies 300.00 300.00
14 Cash 50.00 Petty cash 50.00
3 15 CAN stationers 250.00 Stationery 250.00
16 Payable: Sinderela Slippers 2 500.00 2 500.00
4 17 Payable: XXX Shoes 1 000.00 1 000.00
1 200.00 4 000.00 300.00 5 500.00
102
Amounts are posted individually from the Payments to accounts payable are posted Totals are posted to the
sundries column to the general ledger at the end individually during the month to accounts general ledger at the end of
of the month. payable accounts in the general ledger the month
(petty cash R50 and stationery R250) R200 (debit) R2 500 (debit) R1 200 to purchases (debit)
(debit) R300 (debit) R1 000 (debit) R5 500 to bank (credit)
All columns added together must equal the bank column.

(R1 200 + R4 000 + R300 = R5 500)
Posting of cash payments journal to general ledger accounts
Dr Purchases Cr
Aug 31 Bank CPJ 1 200.00
BB Boots
Aug 31 Bank CPJ 200.00
Tough Takkies
Sinderella Slippers
Aug 31 Bank 2 500.00
XXX Shoes
Aug 31 Bank 1 000.00
Bank
Aug 31 Cash
payments CPJ 5 500.00
Petty cash
Stationery
103
Accounting for All
5.2.8 Settlement discount allowed and received

So far in this chapter you have practised recording transactions from source
documents into the cash journals, and posting to general ledger accounts.
These transactions have not included discounts.
 Settlement discount received
Settlement discount received is a discount received for payment of the account
balance of an accounts payable earlier than settlement date.
Discounts offered by a supplier (accounts payable) to the business for early
settlement of their account balance is referred to as settlement discounts received.
A business may, for example, offer a 4% settlement discount if the account is
settled within 30 days of the date of statement. In such a case, the 96% would be
accepted by the organisation as full payment.
 Settlement discount allowed
To encourage accounts receivable to settle their accounts before the settlement
date, a business may offer a settlement discount to accounts receivable.
Settlement discount allowed is therefore a discount given for payments from
accounts receivable for settlement of their account balance earlier than settlement
date.
A business may, for example, offer a 2.5% settlement discount if the account is
settled within 30 days of the date of statement. In such a case, the 97.5% would be
accepted by the organisation as full payment.
Settlement discount allowed and settlement discount received are other types of
discount; they are not the same as bulk, cash or trade discounts.
Example 5.3
Enter the following transactions in the general journal (periodic inventory system,
ignore VAT):
1 September Sold goods on credit to a receivable, R10 000.

20 September The receivable paid us R9 500 in full settlement of their account
(after 5% discount was allowed for early payment within 30
days).
104
Solution:
The two transactions will be recorded as follows:
General journal
Debit Credit
R R
1 Sept Accounts receivable 10 000
Sales 10 000
20 Sept Bank 9 500

Settlement discount allowed 500
Accounts receivable 10 000
 Recording settlement discount allowed in the cash receipts journal
Settlement discount allowed is recorded in the cash receipts journal before being
posted to general ledger accounts. Settlement discount allowed is always ‘given’
to a receivable.
To record payments made by customers, which include settlement discount
allowed, we make use of the following columns:
– Accounts receivable: The gross amount receivable from the receivable (in
other words, before settlement discount allowed /the amount owed by the
receivable) is recorded in this column.
– Settlement discount allowed: Settlement discount allowed by the
organisation is recorded in this column (please note that this column must be
deducted during cross casting).
– Bank: The actual payment received from the receivable is recorded in this
column.
105
Example 5.4
Example of cash receipts journal with column for settlement discount allowed

Accounting for All

Date Details Folio Sales Accounts Settlement Sundries Details of Bank
receivable discount sundries
allowed
Apr 2 Cash sales 18–19 740.00 740.00
3 J Johnson receipt 12 1 225.00 (6.00) 219.00
3 G Groenewald receipt 13 4 375.00 375.00
4 E Pienaar receipt 14 Capital 2 000.00 Capital 2 000.00
5 B Barry receipt 15 2 1 238.00 (31.00) 1 207.00
106
7 S Swanepoel receipt 16 6 3 000.00 3 000.00
10 Cash sales 20–31 2 840.00 2 840.00
3 580.00 4 838.00 (37.00) 2 000.00 10 381.00
Credit Credit Debit Credit Debit

sales accounts settlement capital bank
receivable discount
allowed
3 580 + 4 838 – 37 + 2 000 = 10 381
Please note that the totals of the various columns should cross cast (R3 580 + R4 838 – R37 + R2 000 = R10 381).
Note that the discount column is deducted (because the full amount received is being credited against the accounts receivable
account).
 Posting settlement discount allowed to general ledger accounts

When a business gives discounts to customers who pay their accounts on or
before the required date, the business is allowing the customer to pay less than
they owe.
This represents a loss to the business. The business receives less money than what
was originally recorded when the sale was made. The way this loss is recorded in
the accounts of the business reflects the effect of settlement discount allowed on
its assets and owner’s equity.
We record the transaction in three places in the ledger:
1. The individual customer (accounts receivable) account
2. The owner’s equity account, settlement discount allowed (expense)
3. The bank account.
Example 5.5
Use the information given in example 5.4.
Follow how postings are made to individual accounts and to the settlement
discount allowed account and bank account from the previous example of a cash
receipts journal page.
*The posting of the receivable’s payment and the settlement discount allowed to
the general ledger
Only the accounts affected by the payment of the receivable are shown here.
Solution:
Dr J Johnson Cr
Apr 3 Bank and discount CRJ 225.00
B Barry
Apr 5 Bank and discount CRJ 1 238.00
G Groenewald
S Swanepoel
Apr 7 Bank CRJ 3 000.00
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Accounting for All
Dr Bank Cr
Apr 3 Accounts CRJ 219.00
receivable
– Johnson
3 Accounts CRJ 375.00
receivable
– Groenewald
5 Accounts CRJ 1 207.00
receivable
– Barry
7 Accounts CRJ 3 000.00
receivable
– Swanepoel
4 801.00
Settlement discount allowed

Apr 3 Accounts CRJ 6.00
receivable
– Johnson
5 Accounts CRJ 31.00
receivable
– Barry
37.00
Notice how:
 Credit entry – the full amount received is posted to the credit side of the
accounts receivable account, to decrease receivables with the total amount of
payment plus settlement discount granted.
 Debit entries – settlement discount granted plus bank (debits) equals to the
credit entries.
On the credit side : 225 + 1 238 + 375 + 3 000 = 4 838.00
On the debit side : 219 + 375 + 1 207 + 3 000 + 6 + 31 = 4 838.00
 Recording settlement discount received in the cash payments
journal
Settlement discount received is recorded in the cash payments journal before

being posted. Settlement discount received is always ‘received’ from a payable.
To record payments received from accounts payable, which include settlement
discount received, we make use of the following columns:
 Accounts payable: The gross amount paid to the supplier (in other words,
before settlement discount received) is recorded in this column.
 Settlement discount received: Settlement discount received by the payable is
recorded in this column (please note that this column must be deducted during
cross casting).
 Bank: The actual amount paid to the payable (not the amount owed to the
payable) is recorded in this column.
108
Example 5.6
Example of cash payments journal showing accounts payable and settlement discount received column
Date Chq Details Fol Purchases Stationery Accounts Settlement Sundries Details of Bank
no payable discount sundries

received
Jul 2 26 TVL Metals 1 13 895.00 (695.00) 13 200.00
12 27 Capital Motors 384.00 Repairs, 384.00
(R&M) maintenance
18 28 XX Sales 1 162.00 1 162.00
20 29 Sappi Paper 2 945.00 (47.00) 898.00
22 30 SA Industries 312.00 312.00
26 31 CNA 120.00 120.00
109
28 32 JB Sales 130.00 130.00
30 33 Paper Products 500.00 500.00
442.00 120.00 16 502.00 (742.00) 384.00 16 706.00
Debit Debit Debit Credit Debit Credit

purchases stationery accounts settlement repairs & bank
payable discount maintenance
received
442 + 120 + 16 502 – 742 + 384 = 16 706
Please note that the totals of all columns should cross cast (R442 + R120 + R16 502 – R742 + R384 = R16 706).
Notice how the discount column is being deducted (because the full amount paid is being debited against the accounts payable
account).
Accounting for All
Note how settlement discount received is deducted.

Notice how:
 Debit entry – the full amount paid is posted to the debit side of accounts
payable account, to decrease payables with the total amount of payment plus
settlement discount received.
 Debit entries – settlement discount received and bank (credits equal the debit
entries)
On debit side: 442 + 120 + 16 502 + 384 = 17 448
On credit side: 742 + 16 706 = 17 448
 Posting settlement discount received to general ledger accounts
When a business receives discounts from suppliers, the business pays less than
what they owe.
This represents an income to the business. Settlement discount received increases
the owner’s equity of the business because less money is paid than what they owe.
We record the transaction in three places in the ledger:
1. The individual supplier’s (payable) account
2. Settlement discount received account (income)
3. The bank account.
Example 5.7
Use the information given in example 5.6.
Follow how postings are made to individual accounts and to the settlement
discount received and bank account from the previous example cash payments
journal page.
*Only the accounts affected by the payment to the accounts payable are shown
here.
Solution:
Dr TVL Metals Cr
Jul 2 Bank and discount CPJ 13 895.00
Sappi Paper
Jul 20 Bank and discount CPJ 945.00
XX Sales
Jul 18 Bank CPJ 1 162.00
110
Dr Paper products Cr
Jul 30 Bank CPJ 500.00
Bank
Jul 2 Accounts CPJ 13 200.00
payable –
TVL
18 Accounts CPJ 1 162.00
payable –
XX
20 Accounts CPJ 898.00
payable –
Sappi
payable –
Paper
15 760.00
Settlement discount received

Jul 2 Accounts CPJ 695.00
payable –
TVL
Metals
payable –
Sappi
742.00
5.2.9 Recording of VAT

Mojani Traders is registered for VAT and charges VAT on its sales (Output VAT)
Mojani Traders can claim the VAT paid on purchases (input VAT) back.
(Periodic inventory system)
Example 5.8
Recording output VAT.
7 May Tombelo Traders sells goods R200 plus VAT of R30 for cash.
14 May Cash sales R400, VAT R60.
Note how these two transactions are recorded in the cash receipts journal.
111
Accounting for All
Solution:
Date Details Fol Sales VAT Accounts Settlement Sundries Details of Bank
receivable discount sundries
allowed
May
7 Cash sales 200.00 30.00 230.00
14 Cash sales 400.00 60.00 460.00
600.00 90.00 690.00
Credit Credit Debit

sales VAT bank
All the columns cross cast = Bank column total

R600 + R90 = R690
Notice how the full amount of the cheque, for example R230, is recorded in the
bank column , the sales amount (R200) in the sales column and the VAT amount
(R30) in the VAT column (R200 + R30 = R230).
Example 5.9
Recording input VAT in the cash payments journal.
May 3 Pays Transet, carriage on purchases R30 plus VAT R4.50 by cheque.
May 5 Pays rental R300 and VAT R45 per cheque.
May 7 Cash purchases R500 plus VAT R75.
Check how these transactions are recorded in the cash payments journal.
Solution:
Date Details Fol Purchases VAT Accounts Settlement Sundries Details of Bank
payable discount sundries
received
May 3 Transet N1 4.50 30.00 Carriage 34.50
carriage on on
purchases purchases
5 Rental for N3 45.00 300.00 Rent paid 345.00
May
7 Cash 500.00 75.00 575.00
purchases
500.00 124.50 330.00 954.50
Debit Debit Debit carriage Credit

purchases VAT Debit rent paid bank
112
Notice again that the full amount of the cheque, for example R34.50, is recorded
in the total bank column. The R30 carriage on purchases is recorded in the
sundries column and the VAT amount in the VAT column (R30 + R4.50 =
R34.50).
All the columns cross cast = Bank column total
R330 + R500 + R124.50 = R954.50
The posting of VAT and settlement discount allowed to the general ledger
Follow how the bookkeeper posts from the cash receipts journal and cash
payment journal to the general ledger.
Example 5.10
Posting of cash receipts and cash payments journal with VAT to the general
ledger accounts (from examples 5.8 and 5.9)
Solution:
General ledger
Dr VAT Cr
May May
30 Bank CPJ 124.50 30 Bank CRJ 90.00
Balance c/f 34.50
124.50 124.50
1 Jun Balance b/f 34.50
Bank
May May
30 Bank CRJ 690.00 30 Bank CPJ 954.50
Balance c/f 264.50
954.50 954.50
1 Jun Balance b/f 264.50
Sales
May
30 Bank CRJ 600.00
Purchases
May
30 Bank CPJ 500.00
Carriage on purchases
May
30 Bank CPJ 30.00
113
Accounting for All
Dr Rent paid Cr
May
30 Bank CPJ 300.00
Because VAT has a debit balance, it means that VAT is payable by SARS (input
VAT was more than output VAT).
Example 5.11
Record the cash receipts and cash payments journals for N Tovey Sportshop from
the following source documents (periodic inventory system).
Record the opening balances in the general ledger.
Post from the subsidiary journals to the relevant ledger accounts and balance the
ledger accounts.
*NB Remember the effect of discount on VAT
R
Favourable balance in the bank 5 400
Accounts payable: Nike 1 710
Adidas 1 095
Kennex 525
Accounts receivable: J Rodes 105
H Cronje 575
G Adams 230
M Fish 510
Capital 63 490
Furniture and equipment 85 000
Loan NBS 25 000
Cheque counterfoil
To: Cash
R
DATE FOR AMOUNT
1/6/20X6 Petty cash 500.00
CHEQUE NO: 002 500.00
114
Cheque counterfoil
To: Nike
R
DATE FOR AMOUNT
1/6/20X6 Running shoes 1 500.00
VAT @ 15% 225.00
CHEQUE NO: 003 1 725.00
Cheque counterfoil
To: Amprop
R
DATE FOR AMOUNT
5/6/20X6 Rent 1 000.00
VAT @ 15% 150.00
CHEQUE NO: 004 1 150.00
Cheque counterfoil
To: Cash
R
DATE FOR AMOUNT
10/6/20X6 Wages 1 000.00
CHEQUE NO: 005 1 000.00
Cheque counterfoil
To: Adidas
R
DATE FOR AMOUNT
11/6/20X6 Shirts 1 100.00
VAT @ 15% 165.00
CHEQUE NO: 006 1 265.00
115
Accounting for All
Cheque counterfoil
To: Kennex
R
DATE FOR AMOUNT
12/6/20X6 Rackets 1 600.00
VAT @ 15% 240.00
CHEQUE NO: 007 1 840.00
Cheque counterfoil
To: Nike
R
DATE FOR AMOUNT
25/6/20X6 Account 1 710.00
Settlement discount received 60.00
CHEQUE NO: 008 1 650.00
Cheque counterfoil
To: Eskom
R
DATE FOR AMOUNT
28/6/20X6 Electricity 250.00
VAT @ 15% 37.50
CHEQUE NO: 009 287.50
Cheque counterfoil
To: Adidas
R
DATE FOR AMOUNT
30/6/20X6 Account 1 095.00
Settlement discount received 95.00
CHEQUE NO: 010 1 000.00
116
Cheque counterfoil
To: Cash
R
DATE FOR AMOUNT
30/6/20X6 Salaries 2 500.00
CHEQUE NO: 011 2 500.00
Cheque counterfoil
To: Cash
R
DATE FOR AMOUNT
30/6/20X6 Petty cash 200.00
CHEQUE NO: 012 200.00
Tovey journals No 1
 Cash sale receipt
Received from J Smal Date 5/6/20X6
Description R c
Nikes Pegasus 255 00
Vat Reg No: VAT Rate 15% 38 25

283 6424 241 Total 293 25
Initials K White
Tovey journals No 2
Received from D Cullinan Date 12/6/20X6

Description R c
Running shorts 150 00
Large bat 850 00
Cricket pads 500 00
1500 00
283 6424 241 Total 1 725 00
Initials K White
117
Accounting for All
Tovey journals No 3
Received from Sharper Image Date 19/6/20X6
Description R c
Gym equipment 1 150 00

283 6424 241 Total 1 322 50
Initials K White
Tovey journals No 4
Received from NSL Date 26/6/20X6
Description R c
Soccer shorts 1 000 00
Soccer shirts 710 00
Soccer balls 1 500 00
3 210 00
283 6424 241 Total 3 691 50
Initials K White
Tovey journals No 5
Received from SARFU Date 30/6/20X6
Description R c
Rugby jerseys 1 150 00
Shorts 250 00
1 400 00

283 6424 241 Total 1 610 00

Initials K White
118
Cash receipt
111 Date 2/6/20X6 R C
RECEIVED from J Rodes 105 00
Less discount 5 00
the sum of 100 00
One hundred Rand

Zero Cents 0
With thanks K White
Cash receipt
112 Date 5/6/20X6 R C

RECEIVED from H Cronje 575 00
Less discount 25 00
the sum of 550 00
Five hundred and fifty Rand

Zero Cents 0
With thanks K White
Cash receipt
113 Date 26/6/20X6 R C

RECEIVED from G Adams 200 00
Less discount 15 00
the sum of 185 00
One hundred and eighty-five Rand

Zero Cents 0
With thanks K White
119
Accounting for All
Cash receipt
114 Date 30/6/20X6 R C

RECEIVED from M Fish 340 00
Less discount 30 00
the sum of 310 00
Three hundred and ten Rand

Zero Cents 0
With thanks K White

 Deposit slips of all receipts
Bank deposit slip
MULTI PURPOSE SLIP
RAINBOW
RAINBOW LIMITED REGISTERED BANK
DATE: __05/06/20xx_______
DATE: 05/06/20X6
BRANCH WHERE THE ACCOUNT IS KEPT ___ Centurion____________________________________________
CREDIT ___N Tovey Sportshop_______________________________________________________________

STATE NAME IN BLOCK LETTERS
NOTE: CHEQUES, ETC. HANDED IN TO BE COLLECTED AND TO BE MADE AVAILABLE AS CASH WHEN PAID.
WHILE ACTING IN GOOD FAITH AND EXERCISING REASONABLE CARE, THE BANK WILL NOT ACCEPT RESPONSIBILITY FOR
ENSURING THAT DEPOSITORS / ACCOUNT-HOLDERS HAVE LAWFUL TITLE TO CHEQUES, ETCETERA, COLLECTED.
Cash RAND CENTS
390
293 25
70
Sales
CHEQUES / STATE NAME OF DRAWER
1 H Cronje 550 00
2 Rodes 100 00
3
R 943
940 00
70
FOR BANK USE ONLY ACCOUNT NUMBER
8 0 0 3 5 7 0 9 2 0
JOHANNESBURG 1996 456-3999
DEPOSITED BY______BBoss______________________________________________________________
(Reg. No. 63/00007/05) Rainbow Limited 01/96 4-3TS
120
Bank deposit slip
MULTI PURPOSE SLIP
RAINBOW
DATE: __12/06/20xx_______
DATE: 12/06/20X6

Cash RAND CENTS
Sales 1 725 00
1 D Cullinan 1 710 00
R 11725
710 00
8 0 0 3 5 7 0 9 2 0
121
Accounting for All
Bank deposit slip
MULTI PURPOSE SLIP
RAINBOW
DATE: 19/06/20X6
DATE: __19/06/20xx_______

Cash RAND CENTS
Sales 1 322 50
1 Sharper Image 1 311 00
R 11322
311 00
50
8 0 0 3 5 7 0 9 2 0
122
Bank deposit slip
MULTI PURPOSE SLIP
RAINBOW
DATE: 26/06/20X6
DATE: __26/06/20xx_______
BRANCH WHERE THE ACCOUNT IS KEPT ___Centurion____________________________________________

Cash RAND CENTS
Sales 185
3 691 00
50
NSL
1 Adams 3185
659 40
00
R 33691
844 40
50
8 0 0 3 5 7 0 9 2 0
123
Accounting for All
Bank deposit slip
MULTI PURPOSE SLIP
RAINBOW
DATE: 30/06/20X6
DATE: __30/06/20xx_______
BRANCH WHERE THE ACCOUNT IS KEPT ___Centurion____________________________________________

Cash RAND CENTS
Sales 310
1 610 00
1 SARFU
Fish 1310
596 00
R 11920
906 00
8 0 0 3 5 7 0 9 2 0

124
Solution:
Cash receipts journal CRJ1

Doc Date Details Folio Sales VAT Accounts Settlement Sundries Detail of Analysis Total
receivable discount sundries bank
allowed

1 June 5 Sales (1) 255.00 38.25 293.25
111 2 J Rodes (111) 5 (0.65) 105.00 (4.35) 100.00
112 5 H Cronje (112) 6 (3.26) 575.00 (21.74) 550.00 943.25
2 12 Sales (2) 1 500.00 225.00 1 725.00 1 725.00
3 19 Sales (3) 1 150.00 172.50 1 322.50 1 322.50
113 26 G Adams (113) 7 (1.96) 200.00 (13.04) 185.00
4 Sales (4) 3 210.00 481.50 3 691.50 3 876.50
114 29 M Fish (114) 8 (3.91) 340.00 (26.09) 310.00
125
5 30 Sales (5) 1 400.00 210.00 1 610.00 1 920.00
7 515.00 1 117.47 1 220.00 (65.22) – 9 787.25
Credit Credit Credit Debit Debit

sales VAT accounts settlement bank
receivable discount
allowed
Cash payments journal CJP1

Date Cheque Details Folio Purchases VAT Settlement Accounts Sundries Detail of Total bank
No Discount payable sundries
received
June 1 002 Cash 12 500.00 Petty cash 500.00
Accounting for All
1 003 Nike 1 500.00 225.40 1 725.00

5 004 Amprop 18 150.00 1 000.00 Rent 1 150.00

10 005 Cash 19 1 000.00 Wages 1 000.00
11 006 Adidas 1 100.00 165.00 1 265.00
12 007 Kennex 1 600.00 240.00 1 840.00
25 008 Nike 2 (7.83) (52.17) 1 710.00 1 650.00
28 009 Eskom 20 37.50 250.00 Electricity 287.50
30 010 Adidas 3 (12.39) (82.61) 1 095.00 1 000.00
30 011 Cash 19 2 500.00 Salaries 2 500.00
126
30 012 Cash 12 200.00 Petty cash 200.00
4 200.00 797.28 (134.78) 2 805.00 5 450.00 13 117.50
Debit Debit Credit Debit Debit Credit

VAT purchases settlement accounts petty cash bank
discount payable rent
received wages
electricity
salaries
General ledger
Dr Bank Cr
June 1 Balance b/f 5 400.00 June 30 Payments CPJ1 13 117.50
30 Receipts CRJ1 9 787.25
Balance c/f 2 069.75
15 187.25 15 187.25
July 1 Balance b/f 2 069.75
Nike
June 25 Bank CPJ1 1 710.00 June 1 Balance b/f 1 710.00
Adidas
June 30 Bank CPJ1 1 095.00 June 1 Balance b/f 1 095.00
Kennex
June 1 Balance b/f 525.00
J Rodes
June 1 Balance b/f 105.00 June 2 Bank CRJ1 105.00
H Cronje
June 1 Balance b/f 575.00 June 5 Bank CRJ1 575.00
G Adams
Jun 1 Balance b/f 230.00 Jun 26 Bank CRJ1 200.00
30 Balance c/f 30.00
230.00 230.00
July 1 Balance b/f 30.00
127
Accounting for All
Dr M Fish Cr
Jun 1 Balance b/f 510.00 Jun 29 Bank CRJ1 340.00
Balance c/f 170.00
510.00 510.00
Capital
Jun 1 Balance b/f 63 490.00
Furniture & equipment

Loan NBS
VAT
Jun 30 Bank CPJ1 797.28 Jun 30 Bank CRJ1 1 117.47
Balance c/f 320.19
1 117.47 1 117.47
Sales
Jun 30 Bank CRJ1 7 515.00

Jun 30 Bank CPJ1 65.22
Settlement discount received

Purchases
Jun 30 Bank CPJ1 4 200.00
Rent
128
Dr Wages Cr
Petty cash
30 Bank CPJ1 200.00
700.00
Electricity
Salaries
5.3 Petty cash

Most businesses need a ready source of cash to pay for minor expense items. It is
not always convenient to pay for everything with a cheque or EFT. So a small
amount of cash is kept to cater for small payments.
Cash forms part of the assets of a business however large or small the amount and
as such must be managed and controlled.
5.3.1 What is petty cash used for?
Petty cash is a ready source of cash to pay for small expenses that arise from day
to day. These are things like postage, milk, tea and coffee, delivery of parcels,
transport costs, etc.
Since it is not practical to pay for these items by cheque or EFT, a cash fund is
kept.
Sometimes employees pay for things out of their own pocket, for example taxi
fares incurred on official business, and then claim the expense back from petty
cash. Some organisations may not allow this practice. They may have a policy of
always drawing money for expenses before they are incurred, even if the exact
cost is not known.
5.3.2 The imprest system
Another name for cash float is the imprest amount.
The imprest system is the term used to describe the pre-set level at which a cash
float is kept. It is similar to the way the water level in a toilet cistern is topped up
whenever the level drops after ‛flushing’.
Using this system, a set amount of money is maintained in the petty cash fund by
topping it up to this level on a regular basis.
129
Accounting for All
In Mojani Traders, for example, this amount is R200. During the month, as
payments are made for various expenses, the amount of cash left in the petty cash
box goes down.
When it starts to get low, the person in charge of petty cash draws money from
the bank to top it up to R200 again (the imprest amount).
The amount of money that is drawn must equal the amount of petty cash
payments since the float was last topped up.
For example, suppose the petty cash payments at Mojani Traders for the month
added up to R125. If we started with R200 there should be R75 left in the box.
The petty cash will then be topped up to the imprest amount of R200 by drawing
a cheque for R125 from the bank.
5.3.3 Petty cash vouchers
Petty cash vouchers are important source documents.
They provide the proof of where the money from the fund has been spent.
An example of a completed petty cash voucher is shown below.
PETTY CASH VOUCHER 001 Date 20/2/20X6
AMOUNT
Rand Cents
Checkers
Tea, milk and sugar 77 75
Signature
B Smith.................................
Account:
Refreshments......................
Authorised by Cost centre: Accounts
B Boss..............................................
A completed voucher should include:

 Description of what the payment was for
 The amount paid
 Name and signature of the person receiving the cash
 An authorising signature
 The date of issue
 The account/cost centre to which it should be allocated.
130
5.3.4 Security and control

Whenever cash is involved there must be security. Some measures you can take
are listed below:
 Vouchers are numbered in sequence. The number may be pre-printed or
written in. This makes it possible to detect missing vouchers.
 Vouchers should be signed by the person receiving the cash as well as the
person authorising the payment.
 A receipt should be attached to the voucher as proof that the money was used
for the intended purpose.
 Completed vouchers should be kept in the petty cash box until the float is
next topped up.
 Regular checks should be made to ensure that the amount of cash in the box
plus the total value of vouchers in the box equals the float.
 Blank petty cash vouchers should be kept in a safe place at all times.
5.3.5 Receipts into petty cash
So far we have only dealt with money going out of petty cash. Money is also
received by petty cash.
To replenish the float, a cheque is usually drawn from the business bank account
for the amount needed to increase the cash in the box up to the imprest amount.
Money can also be drawn at the bank or at an ATM.
Money may also be collected from staff members when they pay for personal use
of business equipment and facilities. For example, a parent may use the
photocopier to copy a child’s school project, or someone may buy stamps for their
own use.
Some businesses prefer to enter any money received straight into the cash book of
the business. However, using petty cash may be more convenient.
A cash receipt must be issued to the person paying in the money. The receipt
should state the amount of money received, who it is from and for what purpose.
The cashier usually signs the receipt and a copy is kept as proof of the amount
received.
All petty cash transactions are recorded in the petty cash book.
The petty cash book is a record of cash placed into the petty cash box and of
payments made from petty cash. People use this record to check that the correct
amount is available in the petty cash box.
5.3.6 Purpose of the petty cash book
The petty cash book:
 Provides a record of every petty cash transaction
 Enables posting of petty cash expenses to ledger accounts.
131
Accounting for All
The pages of a petty cash book usually spread over a double page and have a large
number of columns. An example appears on the next page.
The design of the pages of a petty cash book may vary, but in general:
 The left-hand side of the page (the debit side – shaded) is used to record the
cash received into the petty cash box (eg to top up the float). This is a
memorandum because the payments to petty cash will be recorded in the cash
payments book.
 The right-hand side (the credit side) is used to record all payments made from
petty cash. This side typically has columns to record expenses such as:
– Postage and stationery
– Refreshments
– Casual labour
– Office expenses
– Cleaning materials.
Each time there is a payment from petty cash, the petty cashier records it on a
separate line in the petty cash book.
A new page is started whenever the float is topped up to the imprest amount or at
the end of each month.
132
Example of a petty cash book

Petty cash book
January 2013
Received Payments
Date Details Amount Date Details Folio Voucher Total Refresh- Postage Casual Station- Sundries Details
# ments labour ery of
sundries

133
Example 5.12
The petty cashier at Temba Traders starts a petty cash book on 1 January with a cash float of R200.
During the month the following payments are made from petty cash (ignore VAT):
Date Detail Voucher number Amount

Jan 3 Postage paid 1 R23.00
Jan 10 Paid casual labour one hour 2 R40.00
Jan 12 Tea & coffee from café 3 R28.00
Jan 15 Repairs (glass) 4 R70.00
Jan 20 Paper and pens 5 R25.00
On the next page you can see how these transactions are recorded in the petty cash book.
Solution:
Petty cash book – Temba Traders PCB1
January 2016
Received Payments
Date Details Amount Date Details Folio Voucher Total Refresh- Postage Casual Stationery Sundries Details of
# ments labour sundries
Accounting for All
Jan 1 CB3 200.00 Jan 3 Postage 1 23.00 23.00

10 Wages 2 40.00 40.00
12 Tea & coffee 3 28.00 28.00
15 Repairs 4 70.00 70.00 Repairs
20 Paper & pens 5 25.00 25.00
200.00 186.00 28.00 23.00 40.00 25.00 70.00
A B C D E F G H I
Credit Debit Debit Debit Debit Debit
Petty Refresh- Postage Casual Stationery Repairs
134
Cash ments labour
C = D + E + F + G + H
R186.00 = R28.00 + R23.00 + R40.00 + R25.00 + R70.00
5.3.7 Topping up the float and balancing the petty cash book
Whenever the petty cash float needs to be topped up, the petty cash book must be
balanced. Balancing means to determine the difference between the two sides of
an account.
In this case, it means finding the difference between the amount that has been
received into petty cash and the amount that has been paid out.
Follow the cashier at Rondo Traders as she balances the petty cash book, tops up
the float, and starts a new page for the month. As you work through this
procedure it may help to follow the example of a balanced petty cash book on the
next page. (Ignore VAT)
1. The first thing she does is total the payments column c (R186).
2. Then she cross checks her addition by adding up the totals of the item
columns d, e, f, g and h. She compares this total with the total payment
column. If the totals are the same, she knows her arithmetic is correct.
3. She totals the receipt column a. At this stage she has only received R200.
4. Then she calculates the difference between total payments c (R186) and total
receipts column a (R200). She checks that this number equals the amount of
cash in the box.
5. She draws a cash cheque for the exact amount needed to top up the float to
R200 again (the value of the total payments column c (R186)).
6. She records receipt of this cheque (R186) in the receipt column and adds it to
the existing receipts total.
7. Then she calculates the difference between the total receipts (R386 = R200 +
R186) and total payments (R186). This amount (R200) is written beneath
total payments as the balance carried forward and added to it. This balance of
R200 is also recorded into the sundry column m for balancing purposes.
8. She checks that the total in the receipts column is now the same as the total
payments column c and draws a double line beneath the figures to indicate
that they are balanced totals.
9. Finally the opening balance (which is the same as the balance carried
forward in step 7) is recorded in the receipts column c as the balance brought
down (R200).
10. This balance is the amount of money in the cash box (R200).
135
Example 5.13
Example of a balanced petty cash book (ignore VAT)
Petty cash book – Rondo Traders PCB1

January 2016
Accounting for All
Received Payments

Date Details Amount Date Details Folio Voucher Total Refresh- Postage Casual Stationery Sundry Details
# ments labour of
sundries
Jan 1 001 200.00 Jan 3 Stamps 1 23.00 23.00
10 Wages 2 40.00 40.00
12 Tea & coffee 3 28.00 28.00
15 Repairs 4 70.00 70.00 Repairs
20 Paper & pens 5 25.00 25.00
20 002 186.00 186.00 28.00 23.00 40.00 25.00 70.00
136
31 Balance c/o 200.00 200.00
386.00 386.00 28.00 23.00 40.00 25.00 270.00
Feb 1 Bal b/f 200.00
A B C D E F G H I J K L M N
Debit Credit Debit Debit Debit Debit Debit

petty cash petty refresh- postage casual stationery repairs
cash ments labour
H= I + J + K + L + M
R186.00 = R28.00 + 23.00 + R40.00 + R25.00 + R70.00
*On 1 Feb the petty cash starts again with a float of R200.
You should now be able to record entries in the petty cash book, top up the float
and balance the book on your own.
5.3.8 Posting petty cash transactions
So far you have learnt how to enter details from the source documents (petty cash
vouchers) to the petty cash book. The next step is to post the petty cash payments
to the appropriate accounts in the general ledger (similar to the cash receipt and
cash payments journal).
Every petty cash payment should be posted to an expense or income account in
the general ledger.
There should be a separate general ledger account for each of the expenditure
items for which there is an analysis column in the petty cash book. For example,
stationery, refreshments and postage will have their own accounts.
Only the payment of the petty cash is posted to the relevant ledger accounts. The
receipt side is not posted as it acts purely as a memorandum column. The receipt
side will be posted to petty cash from the cash payments journal’s column ‘petty
cash’.
Example 5.14
See how the entries in the petty cash book in example 5.13 are posted to the
appropriate ledger accounts.
Solution:
Dr Petty cash Cr
Jan 1 Balance b/f 200.00 Jan 31 Expenses PC1 186.00
20 Bank 186.00
Jan 31 Balance c/f 200.00
386.00 386.00
Feb 1 Balance b/f 200.00
Refreshments
Jan 31 Petty cash PC1 28.00
Postage
Casual labour
137
Accounting for All
Dr Stationery Cr
Repairs
5.3.9 Postings from the petty cash book with VAT column
If the business is registered for VAT, then all purchases from petty cash where
VAT paid is allowed as an input VAT, can be claimed back. The petty cash book
will have a column on the ‘expenses’/payment side for VAT.
For example: buy stationery for R25 (inclusive of VAT)
R3.26 will go to VAT column (debit VAT) (VAT input)
R21.74 will go to stationery column (debit stationery)
R25.00 will go to total column (credit petty cash)
5.4 Accounts payable journal

The accounts payable journal is a record of all items bought on credit for the
month. It gives details:
 In date order
 Of what the business has bought
 From whom and
 For how much.
It is important to know that the accounts payable journal is not limited only to the
purchase of goods or merchandise on credit but to all credit purchases. Any credit
purchase, or a service delivered on credit, will be entered into the accounts
payment journal.
Remember: An entry in the accounts payable journal does not mean that an
account has actually been debited or credited.
The source document used is an original credit purchase invoice.
The information to be recorded will depend on the information needed. A
business can design their accounts payable journal to capture a lot of detail or
only the essentials.
You may include columns in the accounts payable journal to record amounts
spent on items bought regularly such as purchases (of inventory), stationery,
packaging, etc. For example, if a business wanted to record the purchase of men
and women’s shoes separately, they would have columns that would record this
information.
138
Below is an example of what a page in an accounts payable journal may look like.
Accounts payable journal PJ2
Date Supplier Invoice Fol Total Stationery Purchases VAT Sundries Details of
name no amount sundries
Did you notice that:

 There is a column referring to purchases. This refers to all goods bought for
resale purposes, in other words, trading inventory.
 There is a folio reference in the top right hand corner reading PJ2. This refers
to the second page of the business’s accounts payable journal.
5.4.1 Checking suppliers’ invoices
Before the bookkeeper of a business enters any invoices into the accounts payable
journal, he/she makes sure everything on the invoice is correct, for example
discount, VAT etc.
5.4.2 Security and controls
1. First make sure that the person responsible for ordering the goods checks the
invoice and signs it, thus confirming that the invoice reflects the items
ordered.
2. If VAT is charged make sure that the invoice is a tax invoice.
3. Check that there is evidence of receiving the goods. This could be in the
form of a signed delivery note, or a signature in a goods received book, or a
goods received note (GRN).
4. Check that the details on the invoice – especially pricing details – match the
details given on the order (a copy of which will be filed when the order was
placed) and on the delivery note.
5. Check the calculations on the invoice, especially if it has been manually
produced.
6. When satisfied that all the details match up, enter the invoice in the accounts
payable journal.
5.5 Accounts payable allowance journal

The accounts payable allowance journal is the subsidiary journal used for all
purchases returns. Goods returned by us to the supplier. Returns outwards =
purchases returns. The source document used is the original credit note or credit
note received.
Anything the business bought previously on credit which was entered into the
accounts payable journal and is now sent back to the supplier (eg wrong colour,
broken etc) will be entered into the accounts payable allowance journal.
139
Accounting for All
The accounts payable allowance journal looks exactly the same as the accounts
payable journal, but the entries/posting to the general ledger accounts will all be
the opposite entries.
For example: previously bought purchases on credit
 Purchases → debit
 Accounts payable → credit
Send purchases back to the supplier
 Accounts payable → debit
 Purchases → credit
Example 5.15
During March, the bookkeeper of Mojani Traders receives the following purchase
invoices from various suppliers. She satisfies herself that the details are correct
and the goods have been received in good order. Enter the source documents into
the accounts payable journal. (periodic inventory system)
Footwear Supplies (Pty) Ltd. Tax Invoice
Invoice No.No.FW
FW 1059
1059
P.O. Box 425
Pretoria
0001
Telephone 012
(012) 654
654 5656
5656 Account No. 700/551
VAT Reg. No.: 482 398 4010 Date: 15-03-20X6

15-03-20xx
Invoice to: Mojani

Mabasa Traders
Traders Order
OrderNo. 55001 No.
SS001 P.O. Box 321
P.O.
Selby Box 321
2001
Selby
VAT 2001
reg no: 847 321 8855
Product Description Quantity Unit Price Total Amount

Code R c R c
00167DM Size 9 Doc Martins (Black) 2 320.00 640.00

00174RS Pairs Jogging Shoes 6 240.00 1 200.00
Comments: Sub-Total 1 840.00
VAT @ 14%
15% 257.60
276.00
TOTAL R 2 097.60
2 116. 00
Registered No.: 75/51069/2
140
Shoe Colours Ltd Tax InvoiceNo.

Invoice No. AB
AB489
489
P.O. Box 368
Pretoria
0001
Telephone 012 465
(012) 7989
465 7989 Account No. 5027
VAT Reg. No.: 61 254 0632 Date: 18-03-20xx

18-03-20X6
Invoice to: Mabasa
Mojani TradersTraders Order No. SS002
P.O.
P.O. Box 321
Box 321
Selby
Selby 2001 2001
VAT reg no: 847 321 8855

Code R c R c
BD250G Blue Dye 3 40.00 120.00

RD250G Red Dye 6 40.00 240.00
Comments: Sub-Total 360.00
15%
VAT @ 14% 54.00
50.40
TOTAL R 414.00
410.40
Office Supplies (Pty) Ltd Tax Invoice

Invoice No.109
No. 109
P.O. Box 230
Johannesburg
2000
Telephone 011 789
(011) 6565
789 6565 Account No. 55005
VAT Reg. No.: 24 567 9132 Date: 19-03-20X6

18-03-20xx
Invoice to: Mojani

MabasaTraders Traders Order No. Shaun
P.O. Box 321
P.O. Box 321
Order No. SS003
Selby 2001 2001
Selby
VAT reg no: 847 321 8855

Code R c R c
INV 100gB Boxes Invoices

Stationery 2 110.00 220.00
VAT @ 14%
15% 30.80
33.00
TOTAL RR 250.80
253.00
250.80
141
Accounting for All
Shoe
Boots & Colours
All Ltd
Tax InvoiceNo.
Invoice No. WA493
AB 489
P.O.
P.O. BoxBox
432 368
Pretoria
JHB 2000
0001
Telephone
Telephone (011) 3284678
011(012)
328 4678
465 7989 Account
Account No.No. 5027
1023
VAT reg no: 921 123 0892
VAT Reg. No.: 61 254 0632 24-03-20X6
Date: 18-03-20xx
Invoice to: Mabasa

Mojani TradersTraders Order
Order No.No. SS002
SS004
P.O.
P.O. Box 321
Box 321
Selby
Selby2001 2001
VAT reg no: 847 321 8855

Code R c R c
BD250G Black
Blue boots
Dye 23 40.00
800.00 120.00
1 600.00
66 400.00 2 400.00
RD250G Red
Redboots
Dye 40.00 240.00
Comments: Sub-Total 4 000.00

360.00
15%
VAT @ 14% 600.00
50.40
TOTAL R 4 600.00
136.80
410.40
Office Supplies (Pty) Ltd Invoice No. 109

P.O. Box 230 Tax Invoice No. 110
Johannesburg
2000
Telephone (011)
011 789
789 6565
6565 Account No. 55005
VAT Reg. No.: 24 567 9132 Date: 25-03-20X6

18-03-20xx
Invoice to: Mabasa

Mojani TradersTraders Order No. Shaun
P.O.
P.O. Box 321
Box 321
Order No. SS005
Selby 2001
Selby 2001
VAT reg no: 847 321 8855

Code R c R c
Stationery
INV 100gB Boxes Invoices 2 110.00

120.00 220.00
120.00

220.00
VAT @ 15%
14% 18.00
30.80
TOTAL 136.80
R 138.00
250.80
142
Solution:
Accounts payable journal – Mojani Traders APJ3

Date Name of supplier Invoice Folio Total Purchases VAT Stationery Packaging Sundries Details of
no sundries
2013

Mar 15 Footwear supplies FW1059 2 116.00 1 840.00 276.00
18 Shoe colours AB489 414.00 54.00 360.00 Consumables
19 Office supplies 109 253.00 33.00 220.00
24 Boots & All WA493 4 600.00 4 000.00 600.00
25 Office supplies 110 138.00 18.00 120.00
7 521.00 5 840.00 981.00 340.00 0 360.00
A B C D E F G H I J K
143
CHECK THAT: E = F + G + H+ I + J
(R5 840 + R981 + R340 + R360 = R7 521)
Credit Debit Debit Debit Debit

accounts purchases VAT stationery consumables
payable
Example 5.16
The following transaction took place during March 2016 in Mojani Traders (periodic inventory system):
15 March: Purchase of 1 pair of Doc Martin shoes was sent back to supplier with VAT inclusive amount of R368.00.
Solution:
Accounting for All

Accounts payable allowance journal – Mojani Traders APAJ3
Date Name of supplier Credit note Fol Total Purchases VAT Packaging Stationery Sundries Details of
no sundries
2016
Mar 15 Footwear Supplies CR38 368.00 320.00 48.00
– 1 Doc Martins
368.00 320.00 48.00
144
A B C D E F G H I J K
CHECK THAT: E = F + G + H + I + J
(R368.00 = R320.00 + R48.00)
Debit Credit Credit

accounts purchases VAT
payable
5.6 Posting the accounts payable journal and accounts payable

allowance journal to the general ledger accounts
Example 5.17
At the end of March, the bookkeeper of Mojani Traders has to post the
transactions recorded in the month’s accounts payable journal and accounts
payable allowance journal, to the relevant accounts in the general ledger
(examples 5.15 and 5.16).
Postings must be made to individual accounts payable accounts in the general
ledger and the total of all other columns to the relevant accounts in the general
ledger.
Note: We will deal with postings to the accounts payable control account later.
Solution:
General ledger of Rambo Traders
Dr Purchases Cr
Mar 31 Accounts APJ3 5 840.00 Mar 31 Accounts APAJ3 320.00
payable payable
5 840.00 5 840.00
April 1 Balance b/f 5 520.00
Stationery
Mar 31 Accounts APJ3 340.00
payable
Consumables
Mar 31 Accounts APJ3 360.00
payable
Footwear supplies
Mar 31 Purchases APAJ3 368.00 Mar 15 Purchases APAJ3 2 116.00
and VAT and VAT
2 116.00 2 116.00
April 1 Balance b/f 1 748.00
145
Accounting for All
Dr Shoe colours Cr
Mar 18 Consumables APJ3 414.00
and VAT
VAT control account

Mar 31 Accounts APJ3 981.00 Mar 31 Accounts APAJ3 48.00
payable payable
Balance c/f 933.00
981.00 981.00
April 1 Balance b/f 933.00
Office supplies
Mar 19 Stationery APJ3 253.00
and VAT
25 Stationery APJ3 138.00
and VAT
391.00
Boots & All

Mar 24 Purchases APJ3 4 600.00
and VAT
146
Example 5.18
Practise posting from the May purchases journals to the general ledger with the following example:
Accounts payable journal – Tammy Traders APJ5

Date Invoice Creditor Folio Total Purchases VAT Packaging Stationery Sundries Details of sundries
no

May
4 X210 XXX Shoe Sales 2 673.75 2 325.00 348.75
11 TT11 Tough Takkies 5 704.00 4 960.00 744.00
15 S21 Sinderela 1 086.75 141.75 945.00
Slippers
20 FT213 Folio Stationers 83.95 10.95 73.00
21 BB14 BB Motors 129.00 – 129.00 Petrol
26 PP215 Mabasas Pumps 769.35 100.35 669.00
147
28 TT16 Tough Takkies 10 275.25 8 935.00 1 340.25
20 722.05 16 220.00 2 686.05 1 614.00 73.00 129.00
Accounts payable allowance journal – Tammy Traders APAJ5

Date Credit Creditor Folio Total Purchases VAT Packaging Stationery Sundries Details of sundries
note
May
8 151 XXX Shoe 172.50 150.00 22.50
Sales
30 152 Folio Stationers 26.45 3.45 23.00
198.95 150.00 25.95 23.00
Accounting for All
Solution:
General ledger
Dr Tough Takkies Cr
May 11 Purchases APJ5 5 704.00
+ VAT
28 Purchases APJ5 10 275.23
+ VAT
15 979.25
XXX Shoe Sales

May 8 Purchases APAJ5 172.50 May 4 Purchases APJ5 2 673.75
+ VAT + VAT
May 31 Balance c/f 2 501.25
2 673.75 2 673.75
Sinderela Slippers
May 15 Packaging APJ5 1 086.75
Folio Stationers
May 31 Stationery APAJ5 26.45 May 20 Stationery APJ5 83.95
+ VAT + VAT
Balance c/f 57.50
83.95 83.95
June 1 Balance b/f 57.50
BB Motors
May 21 Petrol APJ5 129.00
Mabasas Pumps
May 26 Packaging APJ5 769.35

+ VAT
VAT control account

May Accounts APJ5 2 686.05 May 31 Accounts APAJ5 25.95
31 payable payable
2 686.05 2 686.05
148
Dr Purchases Cr
May Accounts APJ5 16 220.00 May Accounts APAJ5 150.00
31 payable 31 payable
16 220.00 16 220.00
Packaging
May Accounts APJ5 1 614.00
31 payable
Stationery
May Accounts APJ5 73.00 May Accounts APAJ5 23.00
31 payable 31 payable
Balance c/f 50.00
73.00 73.00
Jun 1 Balance b/f 50.00
Petrol
May Accounts APJ5 129.00
31 payable
*Note: The credit on the purchases account of R150 for returns could also be
entered in a purchases returns account.
149
Accounting for All
5.7 Subsidiary journals if the perpetual inventory system is used

The following example shows the subsidiary journals with additional column for
COS when the perpetual inventory system is used.
Example 5.19
The following transactions were obtained from the books of B&J Distributors for
the month of July 2016. B&J Distributors uses the perpetual inventory system.
2016
Jul 1 Buy a vehicle from Cosmos Motors on credit for the amount of
R22 000.
2 Sell inventory on credit to AZZ with a cost price of R200 and a selling
price of R350.
3 Pay the telephone account for July, R260.
4 Receive R600 from ACE in settlement of their account.
5 Sell inventory for cash to Cash Ltd, for R650. Cost price R400.
6 Buy inventory on credit from Bargain Centre for R3 000.
7 Receive R20 000 from the owner of the business, being an increase in
capital.
8 Buy inventory on credit from Credit Ltd, for R1 200.
9 Receive a credit note for R300 for goods returned by the business to
Bargain Centre.
10 Sell an old vehicle on credit to Tikkie Ltd, for R10 000.
11 Issue a credit note for goods returned by AZZ for R50. Cost price R20.
12 Buy inventory from BB Ltd, for R3 000 cash.
13 Return faulty inventory to Credit Ltd, and receive their credit note for
R240.
14 Sell inventory on credit to Nasie Ltd For R700. Cost price R600.
15 The owner of the business takes inventory for private use.
Selling price R150.
Cost price R100.
16 Buy inventory for R2 200 and issue a cheque.
Required:
5.19.1 Record the above transactions in the correct subsidiary journals (ignore
VAT).
5.19.2 Do all the postings to the general ledger.
150
Solution:
Cash receipts journal of B&J Distributors for July 2016 CRJ
Doc D Fol Accounts Sales Cost Sundries Details of Bank
no receivable of sundries
sales
4 600 600
5 650 400 650
7 20 000 Capital 20 000
600 650 400 20 000 21 250
Cash payments journal of B&J Distributors for July 2016 CPJ

Doc D Fol Accounts Trading Sundries Details of Bank
no payable Inventory sundries
3 260 Telephone 260
12 3 000 3 000
16 2 200 2 200
5 200 260 5 460
Accounts receivable journal of B&J Distributors for July 2016 ARJ

Doc D Accounts Fol Total Sales Cost of Sundries Details of
no receivable sales Sundries
2 AZZ 350 350 200
10 Tikkie Ltd 10 000 10 000 Vehicles
14 Nasie Ltd 700 700 600
11 050 1 050 800 10 000
Accounts receivable allowance journal of B&J Distributors for July 2016 ARAJ
Doc D Accounts Fol Total Sales Cost of sales
no receivable
11 AZZ 50 50 20
50 50 20
Accounts payable journal of B&J Distributors for July 2016 APJ

Doc D Accounts Fol Total Trading Equipment Sundries Details of
no payable inventory sundries

1 Cosmos
Motors 22 000 22 000 Vehicles
6 Bargain
Centre 3 000 3 000
8 Credit Ltd 1 200 1 200
26 200 4 200 22 000
151
Accounting for All
Accounts payable allowance journal of B&J Distributors for July 2016 APAJ
Doc D Accounts Fol Total Trading Equipment Sundries Details of
no payable inventory sundries
9 Bargain
Centre 300 300
13 Credit Ltd 240 240
540 540
General journal of B&J Distributors for July 2016

Debit Credit
R R
Drawings 100
Inventory 100
General ledger
Dr Capital Cr
2016
July 31 Bank CRJ 20 000
Drawings
2016
July 31 Inventory GJ 100
Vehicles
2016 2016
July 31 Accounts APJ 22 000 July 31 Accounts ARJ 10 000
payable receivable
31 Balance c/f 12 000
22 000 22 000
2016
Aug 1 Balance b/f 12 000
Bank
2016 2016
July 31 Bank CRJ 21 250 July 31 Bank CPJ 5 460
21 250 21 250
2016
152
Dr Trading inventory Cr
2016 2016
July 31 Cost of ARAJ 20 July 31 Cost of sales ARJ 800
sales Accounts
Accounts APJ 4 200 payable APAJ 540
receivable Cost of sales CRJ 400
Bank 5 200 Drawings GJ 100
9 420 9 420
2016
Accounts receivable
2016 2016
July 31 Sales ARJ 11 050 July 31 Sales returns ARAJ 50
Vehicles Bank CRJ 600
11 050 11 050
2016
Accounts payable
2016 2016
July 31 Inventory APAJ 540 July 31 Accounts
payable APJ 26 200
26 200 26 200
2016
Sales
2016 2016
July 31 Accounts ARJ 50 July 31 Accounts ARJ 1 050
receivable receivable
Bank CRJ 650
1 700 1 700
2016
*Note: Sales returns was entered on the debit side of sales, it also could have been
entered in a sales return account on the debit side.
153
Accounting for All
Dr Cost of sales Cr
2016 2016
July 31 Inventory ARJ 800 July 31 Inventory ARAJ 20
Inventory CRJ 400
1 200 1 200
2016
Telephone
2016
July 31 Bank CPJ 260
5.8 Accounts payable ledger and accounts payable control

account
 Introduction
(Using the periodic inventory system)
Large organisations may have hundreds of customers and suppliers buying and
selling on credit. Keeping all these supplier and customer accounts as part of the
general ledger can make the general ledger very large and difficult to control. To
make it easier to manage, the individual customer and supplier accounts are taken
out of the general ledger and put into separate ledgers called subsidiary ledgers.
The subsidiary ledger for suppliers is called the accounts payable ledger, and for
customers, the accounts receivable ledger. They are also sometimes referred to as
the purchases ledger and the sales ledger respectively. There may be many
thousands of transactions in these ledgers in any one month which can easily lead
to errors in posting.
In this section you will learn how entries are posted from the journals to
subsidiary ledgers and how to check the accuracy of these postings using a control
account.
 Explain the principles and purpose of control accounts
 Post purchases journal entries to the accounts payable control account and the
accounts payable ledger
 Reconcile the balance of the control account with the balance of the accounts
payable ledger.
154
 What is the accounts payable ledger?

When an organisation has hundreds of customers and suppliers, all buying and
selling on credit, it is common practice to open separate ledgers for accounts
payable and accounts receivable. These are called subsidiary ledgers.
The accounts that are normally grouped together to form subsidiary ledgers are
the individual customer and supplier accounts. All the other accounts are kept
together in two sections in the general ledger – one for statement of financial
position accounts and one for nominal accounts.
 What is the accounts payable control account?
To check the accuracy of the postings to the individual ledger accounts, a control
account is opened in the general ledger.
The control account for credit purchases is called the accounts payable control
account. The control account for credit sales is called the accounts receivable
control account.
 How do control accounts work?
Another name for ‛control account’ is ‛total account’. This gives a clue to how
they work. The following steps outline the process of transferring totals to the
accounts payable control account:
1. The total value of credit purchases (money owing to suppliers) in a period is
transferred from the total column of the accounts payable journal to the credit
side of the accounts payable control account in the general ledger.
2. The total value of returns to suppliers in the same period is transferred from
the total of the accounts payable allowance journal to the debit side of the
accounts payable control account in the general ledger.
3. The total value of payments made to suppliers in the same period, is
transferred from the accounts payable column of the cash payments journal
or cash book to the accounts payable control account on the debit side.
The difference between the total value of credit purchases, credit purchase returns
and the total value of payments made, is the balance of the control account.
155
Accounting for All
The process for posting from the journals to the accounts receivable and accounts
payable ledger can be illustrated in the following way:
PostingFrom
Posting from Journal
journal to subsidiary
Subsidiaryledgers
Ledgers
PurchaseInvoice
Purchase invoicefrom
fromFootwear
Footwear
SuppliesR1
Supplies R1140
140(VAT
(VATinclusive)
inclusive)
Accounts payable
Purchases journal:
Journal: Footwear
Footwear Supplies
Supplies
R1
R1140,
140,Purchases
PurchasesR991.30,
R1 000, VAT
VAT R148.70
R140.
Accounts payable
Creditors General
GeneralLedger
ledger
(subsidiary) Ledger
(Subsidiary) ledger
Statement of profit and loss and
Statement of Sheet
Balance financial position
Section Income Statement Section
other comprehensive income
Footwear Supplies’ CreditCreditors
Credit accounts Control
payable Account
control
account R1 140 R 1140
account DebitPurchases
Debit account
purchases account
(credit) R1 140 R 1000
R991.30
R1 000
VATcontrol
DebitVAT
Debit controlaccount
account R140
R148.70
Single entry
Single entry in
in
accounts
Creditors payable
Ledger
ledger Double
Doubleentry
entryin
inGeneral
general Ledger
ledger
 How to check the double entry

This brings us to a ‛control’ issue in that the balance of the accounts payable
control account must always be the same as the balance of the accounts payable
ledger. If there is a discrepancy, it must be investigated.
Let us see why this must be the case.
First of all we know that every credit purchase recorded in the accounts payable
journal is posted to the credit side of an individual account in the accounts
payable ledger. Every credit purchase returned to the supplier is posted to the
debit side of an individual account in the accounts payable ledger.
We also know that every payment made to a supplier is first recorded in the cash
payments journal. Every payment made is posted to the debit side of the
individual accounts in the accounts payable ledger. This decreases the outstanding
balance.
So, each individual account in the accounts payable ledger contains a record of
credit purchases made from and payments made to the supplier.
The balance of each individual account in the accounts payable ledger must
therefore represent the amount still owing to that supplier. To find the balance, we
deduct the value of payments made from the value of purchases made.
156
Now, if you balance all the accounts in the accounts payable ledger and add them
up, you will find the total amount owing to all the suppliers (accounts payable).
This amount should equal the balance of the accounts payable control account
because this value also represents the total amount owed by the business to its
accounts payable.
The balance on the accounts payable control account must equal the sum of the
individual balances on the individual accounts in the purchases ledger.
Example 5.20
Posting of Rambo Traders’ July accounts payable journal and accounts payable
allowance journal to the general ledger (periodic inventory system).
157
During July, Rambo Traders received purchases invoices from the following suppliers:
Accounts payable journal – Rambo Traders APJ7

Date Supplier Invoice # Fol Total Purchases VAT Packaging Stationery Sundries Details of
sundries
2016
Accounting for All
Jul 1 Footwear Supplies 1061 CL1 230.00 200.00 30.00

1 Boots & All BA313 CL2 172.50 150.00 22.50
1 Sinderella Slippers S9203 CL3 345.00 300.00 45.00
10 Tough Takkies 9225 CL4 460.00 400.00 60.00
10 Mabasa Pumps 1117 CL5 402.50 350.00 52.50
17 XXX Shoe Sales X018 CL6 287.50 250.00 37.50
1 897.50 R1 650.00 R247.50
158
The following goods were returned to suppliers and credit notes received:
Accounts payable allowance journal – Rambo Traders APAJ7

Date Supplier Credit Folio Total Purchases VAT Sundries Details of sundries
note #
2016
Jul 18 XXX Shoe Sales CN203 CL6 57.50 50.00 7.50
R57.50 R50.00 R7.50

Solution:
Accounts payable ledger
Dr Footwear Supplies CL1 Cr
Jul 1 Purchases & APJ7 230.00
VAT
Boots & All CL2

VAT
Sinderella Slippers CL3

VAT
Tough Takkies CL4

VAT
Mabasa Pumps CL5

VAT
XXX Shoe Sales CL6

Jul 18 Purchases APAJ7 57.50 Jul 17 Purchases & APJ7 287.50
& VAT VAT
Balance c/f 230.00
287.50 287.50
Aug 1 Balance b/f 230.00
159
Accounting for All
General ledger
Real accounts section
Dr Accounts payable control account Cr
Jul 3 Purchases APAJ7 57.50 Jul 31 Purchases & APJ7 1 897.50
& VAT VAT
1 897.50 1 897.50
Balance b/f 1 840.00
VAT account
Dec 31 Accounts APJ7 247.50 Dec 31 Accounts APAJ7 7.50
payable payable
Balance c/f 240.00
247.50 247.50
Aug 1 Balance b/f 240.00
Nominal accounts section

Purchases
Jul 31 Accounts AP 1 650.00 Jul 31 Accounts APAJ7 50.00
payable J7 payable
31 Balance c/f 1 600.00
1 650.00 1 600.00
Aug 1 Balance b/f 1 600.00
5.9 How to reconcile the accounts payable control account with

the accounts payable ledger
We have said that the balance of the accounts payable control account should equal
the sum of the individual accounts payable balances extracted from the accounts
payable ledger.
Reconciling these balances is an important procedure and should be done often.
This ensures that any errors are discovered early.
The first thing you do is total all the separate balances on the individual accounts
payable accounts (after making sure the balances are correct).
Then you compare the total from the accounts payable ledger with the balance of
the accounts payable control account.
Try the next exercise to see if you understand.
160
Example 5.21
Use example 5.19 and reconcile the accounts payable control account with the
individual accounts payable accounts.
Solution:
Prepare an accounts payable list:
Supplier Balance
Footwear Supplies 230.00
Boots & All 172.50
Sinderella Slippers 345.00
Tough Takkies 460.00
Mabasa Pumps 402.50
XXX Shoe Sales 230.00
1 840.00
Total of accounts payable control account = R1 840.00

Individual accounts payable accounts do reconcile with the accounts payable
control account.
Accounts payable = R1 897.50 – R57.50 = R1 840.00
5.10 Accounts receivable journal

An accounts receivable journal is a book in which a business keeps a record of its
credit sales. It is similar to an accounts payable journal with credit sales recorded
instead of credit purchases.
All sales on credit will be entered into the accounts receivable journal. Not only
sales of inventory, but any transaction where there is a sale on credit.
Details of the sales are listed in date order. There are no debits and credits.
Individual entries and totals are posted from the journal to appropriate ledger
accounts.
The accounts receivable journal contains almost the same information as the
accounts payable journal. The main difference is that instead of recording the
supplier’s name you record the customer’s name.
The invoice number relates to your own invoice numbering system. Invoices are
numbered in sequence so you can quickly see if any are missing. This is an internal
document. The source document for credit sales is a duplicate sales credit invoice.
The column headings of the accounts receivable journal will depend on what
information about the sales the business wants to capture.
For example, Mojani Traders may want to separate sales of men’s shoes from
ladies’ shoes. As the bookkeeper you would record these sales in two different
columns.
161
Accounting for All
Sales can be split to suit your needs.

Below is an example of the column headings that Mojani Traders may have in its
accounts receivable journal.
Accounts receivable journal ARJ

Date Name of Invoice Folio Total Sales VAT Sundries Details of sundries
customer no
Note: The accounts receivable journal is almost the same as the accounts payable
journal.
5.10.1 The credit sales invoice
It is important to any business that the sales invoices are made out correctly. To
ensure this, a business needs to check invoices before they go out and also check it
with the order and goods sold.
Information needed on a sales invoice:
 Date
 The business name, address and contact details
 The business banking details
 Customers name, address and contact details
 Account number of supplier
 Our VAT number (will be printed on the invoice)
 The customer’s VAT number
 Invoice number (will be printed on the invoice numerically)
 Number of items sold
 Unit price
 Total price
 Discounts
 Total amount excluding VAT

 VAT
 Amount including VAT.
162
Example 5.22

Example of a credit sales invoice
Mabasa Traders Invoice No. No.

Tax Invoice 000001
P.O. Box 321
Selby
2001
VAT
VATReg.
Reg.No.
No.468912435
468912 Account No . 1234
Telephone 011 432-2222
(011) 432-2222 Date 1/1/x1
1/1/20X6
Fax (011)
011 432-2210
432-2210
Invoice to: Deliver to:

P. Power P. Power
P.O. Box 444 123 Bright Road
Johannesburg Johannesburg
2000 2000
Product VAT Reg. No. 458123479

Description Quantity Unit Price Total Amount
Code R c R c
00203 Black school shoes size 6 2 55.00 110.00
VAT @ 14%
15% 15.40
16.50
TOTAL R 125.40
126.50
Registered No.: 822 4742
Discount of 2% for payment within 30 days.
Banking details:
Mabasa Traders
FFB, Cheque account
Branch Code: 261660
Acc No: 80852014448
163
Accounting for All
Example 5.23
Follow how the bookkeeper of Temba Traders records details of the following
invoices in the accounts receivable journal, 15% VAT inclusive (periodic
inventory system).
Date No Customer Amount

March 5 101 Mr J Johnson R225.00
March 10 102 The Sports Centre R1 238.00
March 15 103 S Swanepoel – display stands R4 000.00
March 20 104 Long Walkers R675.00
March 30 105 Walk for Life R458.00
164
Solution:
Accounts receivable journal – Temba Traders ARJ2

Date Debtor Invoice no Fol Total Sales VAT Sundries Details of sundries
Mar
5 J Johnson 101 225.00 195.65 29.35
10 Sports Centre 102 1 238.00 1 076.52 161.48

15 S Swanepoel 103 4 000.00 521.74 3 478.26 Display stands
20 Long Walkers 104 675.00 586.96 88.04
30 Walk for Life 105 458.00 398.26 59.74
6 596.00 2 257.39 860.35 3 478.26
165
A B C D E F G H I
Check that: E = F + G + H
(R6 596 = R2 257.39 + R860.35 + R3 478.26)
Debit Credit Credit Credit

accounts sales VAT furniture
receivable & fittings
Accounting for All
5.10.2 Calculating discounts

 Trade discount
 Bulk discount
 Cash discount.
Temba Traders offers certain customers trade discount on their purchases.
Example 5.24
A customer who is normally allowed 10% trade discount wants to buy goods
worth R1 500.
Quote them a price including VAT.
The discount is deducted from the price before VAT is calculated.
(List price excl VAT) – (Discount) + (VAT) = Amount due
Solution:
R1 500 – R150 (10%) = R1 350.00
R1 350 × 15% = R 202.50
R1 350 + R202.50 = R1 552.50
Calculate the total amount due in the following cases (VAT is applicable):
1. A customer who normally receives 25% trade discount, orders goods worth
R3 650.
2. A customer orders goods worth R2 000 and gets 10% trade discount.
3. A customer who receives 5% trade discount, orders goods worth R500.
Solution:
1. R3 148.13
2. R2 070.00
3. R546.25
Bulk discount, cash discount and trade discount is not the same as settlement
discount allowed. Bulk, cash and trade discounts are deducted from the original
price before VAT is calculated. Only entries for the amount and VAT after these
discounts are entered into the accounts receivable journal. No entries are made in
the books for trade, bulk or cash discounts.
166
5.11 Accounts receivable allowance journal

The accounts receivable allowance journal is the subsidiary journal used for all
sales returns. Anything which the business sold previously on credit and which
was entered into the accounts receivable journal and is now received back from
the customer (eg. wrong colour, wrong size etc.) will be entered into the accounts
receivable allowances journal.
If we sell goods on credit, accounts receivable increases, which means the
customers owe us more money. If the customer returns goods previously bought,
accounts receivable will decrease, which means the customers owe us less money.
Goods returned by customers = Returns inwards = Sales returns
The source document used is the duplicate credit note or credit note issued.
The accounts receivable allowance journal looks exactly the same as the accounts
receivable journal but the entries/posting to the general ledger accounts will be the
opposite entries.
For example: previously sold inventory on credit (periodic inventory system)
 Accounts receivable → debit
 Sales → credit
Receive goods back from customer
 Sales → debit
 Accounts receivable → credit
5.11.1 Security and controls
Because credit notes have the effect of reducing the amount owing by customers
they must be strictly controlled.
Credit notes must be signed by a person authorised to issue credit notes, and the
details checked before being entered in the accounts receivable allowances
journal.
167
Accounting for All
Example 5.25
Example of a credit note issued.
Mabasa Traders Credit Note

Invoice no.:000
No. CN003
P.O. Box 321
Selby
2001
VAT
VATReg.
Reg.No. 468912435
No. 468912 Account No . 1234
Telephone 011
(011) 432-2222
432-2222 Date 2/1/x1
2/1/x6
Fax (011)
011 432-2210
432-2210
Credit to:
P. Power
123 Bright Road
Johannesburg
2000
VAT Reg. No. 432 841 7783
Code R c R c
00203 Black school shoes size 6 1 55.00 55.00
11 pair
Pairof
ofbrown
brownshoes
shoessent
sentinstead
instead
of
of black
black shoes
shoes. VAT@@14%
VAT 15% 8.25
7.70
TOTAL R 62.70
63.25
Registered No.: 822 4742
Now that we have looked at a credit sales invoice and a credit note, let us
continue with the journals used to record credit sales and credit sales returns.
168
Example 5.26
Follow how the bookkeeper of Rambo Traders records internal credit notes (credit notes issues)(VAT of 15% included).
Date No Customer Amount

March 11 45 J Johnson R450.00

March 21 46 Long Walkers R75.00
March 30 47 Walk for Life R201.00
Solution:
Accounts receivable allowances journal – Rambo Traders ARAJ3
Date Account credited and description Credit Folio Total Sales VAT Sundries Details of
note no sundries
169
March 11 J Johnson – damaged goods 45 450.00 391.30 58.70
21 Long Walkers 46 75.00 65.22 9.78
30 Walk for Life 47 201.00 174.78 26.22
726.00 631.30 94.70
Credit Debit Debit

accounts sales VAT
receivable
 The date is the date the credit note was issued.

 The credit notes are numbered in sequence for quality control.
Accounting for All
5.12 Posting the accounts receivable journal and accounts

receivable allowances journal to the general ledger
account
At the end of May the bookkeeper of Rondo Traders has to post the transactions
recorded in the month’s accounts receivable journal and accounts receivable
allowances journal to the relevant accounts in the general ledger.
Postings must be made to the individual accounts receivable accounts in the
general ledger and the total of all other columns to the relevant accounts in the
general ledger.
Note: We will deal with the posting to the accounts receivable control account
later.
Example 5.27
Help the bookkeeper of Rondo Traders post the May entries in the accounts
receivable journal, accounts receivable allowances journal and cash receipts
journal to the appropriate ledger accounts. Furniture & fittings had an opening
balance on 1 May of R6 000 (periodic inventory system).
Accounts receivable journal – Rondo Traders ARJ5

Date Inv Debtor Fol Total Sales VAT Sundries Details
no of
sundries
May 1 28 K Nel DL1 483.00 420.00 63.00
5 29 J Jones DL2 936.10 814.00 122.10
8 30 G Smith DL3 230.00 30.00 200.00 Shelves
17 31 R Robins DL4 201.25 175.00 26.25
25 32 S Botha DL5 971.75 845.00 126.75
28 33 J Jones DL2 243.80 212.00 31.80
3 065.90 2 466.00 399.90 200.00
Debit Credit Credit Credit

accounts sales VAT furniture

receivable & fittings
170
Accounts receivable allowances journal – Rondo Traders ARAJ5

Date Credit Debtor Folio Total Sales VAT Sundries Details of
note no sundries
May 26 131 S Botha DL5 40.25 35.00 5.25
29 132 J Jones DL2 16.10 14.00 2.10
56.35 49.00 7.35

Credit Debit Debit
accounts sales VAT
receivable
171
Cash receipts journal – Rondo Traders CRJ5

Date Particulars Folio Sales VAT Accounts Settlement Sundries Details of Total
receivable discount sundries Bank
allowed
Accounting for All
May

5 K Nel receipt 22 DL1 (1.43) 478.80 (9.57) 467.80
6 Cash sales 36–51 3 440.00 516.00 3 956.00
8 Cash sales 56–60 2 470.00 370.50 2 840.50
13 G Smith receipt 21 DL3 (0.65) 228.00 (4.35) 223.00
21 J Jones receipt 24 DL2 (2.61) 814.00 (17.39) 794.00
27 S Botha receipt 23 DL5 422.00 422.00
30 P Peers receipt 25 – rent 750.00 Rent received 750.00
5 910.00 881.81 1 942.80 (31.31) 750.00 9 453.30
172
Credit Credit Credit Debit Credit Debit
sales VAT accounts settlement rent received bank
receivable discount allowed
Solution:
General ledger
Dr Bank Cr
May 31 Receipts CRJ5 9 453.30
Furniture & fittings

May 1 Balance b/f 6 000.00 May 8 Accounts ARJ5 200.00
receivable
+ VAT
May 31 Balance c/f 5 800.00
6 000.00 6 000.00
VAT control
May 31 Accounts ARAJ5 7.35 May 31 Accounts ARJ5 399.90
+ VAT
Bank CRJ5 881.81
31 Balance c/f 1 274.36
1 281.71 1 281.71
Sales
May 31 Accounts ARAJ5 49.00 May 31 Accounts ARJ5 2 466.00
+ VAT
Bank CRJ5 5 910.00
31 Balance c/f 8 327.00
8 376.00 8 376.00
Rent received
May 31 Bank ARJ5 750.00

May 31 Accounts CRJ5 31.31
receivable
173
Accounting for All
Accounts receivable ledger

Dr K Nel DL1 Cr
May 1 Sales ARJ5 483.00 May 5 Bank CRJ5 478.80
31 Balance c/f 4.20
483.40 483.40
J Jones DL2
May 5 Sales & VAT ARJ5 936.10 May 21 Bank CRJ5 814.00
28 Sales & VAT ARJ5 243.80 29 Sales & ARAJ5 16.10
VAT
1 179.90 1 179.90
G Smith DL3
May 8 Sales & VAT ARJ5 230.00 May 13 Bank CRJ5 228.00
31 Balance c/f 2.00
230.00 230.00
R Robins DL4
May 17 Sales & VAT ARJ5 201.25
S Botha DL5
May 25 Sales & VAT ARAJ5 971.75 Mar 26 Sales & ARAJ5 40.25
VAT
27 Bank CPJ5 422.00
971.75 971.75
5.13 Posting the accounts receivable journal and accounts

receivable allowances journal to the general ledger
accounts
You have seen how the accounts payable control account was used to check the
accuracy of postings to the accounts payable ledger. You also saw how the control
account tells the owner how much money is owed to suppliers.
174
5.14 Accounts receivable ledger and accounts receivable

control account
 Introduction
It is important to know how much money is owed by customers in total as well as
customers individually. This information is available from the accounts receivable
control account.
In this section you will see how totals from the accounts receivable journal,
accounts receivable allowance journal and receipts side of the cash receipts
journal are posted to the accounts receivable control account.
You will also practise checking that the balance of the accounts receivable control
account equals the sum of the balances in the accounts receivable ledger.

 Post sales journal entries to the accounts receivable control account and
accounts receivable ledger
 Post the cash receipts book to the accounts receivable control account and
 Record and post VAT and discount
 Record bad debt
 Correct errors in the general ledger
 Reconcile the balance of the control account with the balance of the accounts
receivable ledger.
 What is the accounts receivable ledger?
The accounts receivable ledger is a collection of customer accounts – a subsidiary
ledger.
It fulfils the same function as the accounts payable ledger, but for customers
rather than suppliers.
Suppose a customer is buying shoes regularly from Mojani Traders on credit. By

opening an account for the customer, a number of needs are met:
 The customer is able to contact the business at any time and find out from the
accounting staff how much he/she owes.
 The business can inform the customer by means of statements of account how
much he/she owes.
 The owners of the business can check that the customer does not go over
his/her credit limit.
 The business can record payments made by the customer and calculate how
much is still owed.
175
Accounting for All
 What is the accounts receivable control account?

In the same way that total credit purchases and total payments to suppliers are
posted to the accounts payable control account, total credit sales and payments
from customers are posted to the accounts receivable control account.
To transfer totals to the accounts receivable control account:
 Total receipts from accounts receivable is transferred from the cash receipts
journal to the accounts receivable control account in the general ledger.
 The total value of credit sales (money owed by customers) in a period, is
transferred from the total column of the accounts receivable journal to the
accounts receivable control account in the general ledger.
 The balance on the accounts receivable control account must equal the sum of
the individual balances on the personal accounts in the accounts receivable
ledger.
 How to reconcile the accounts receivable control account with the
We have said that the balance of the accounts receivable control account should
equal the sum of the individual accounts receivable balances in the sales ledger.
Reconciling these balances is an important procedure and should be done often.
This ensures that any errors are discovered early.
The first thing you do is total all the separate balances on the individual accounts
receivable accounts (after making sure the balances are correct).
Then you compare the total from the accounts receivable ledger with the balance
of the accounts receivable control account.
You should be able to reconcile these balances on your own. The following
exercise will give you practice.
176
Example 5.28
Help the bookkeeper of Xanda Traders to post the June entries in the accounts receivable journal and accounts receivable
allowances journal to the accounts receivable ledger and general ledger. Also reconcile the individual accounts receivable accounts
with the accounts receivable control accounts (periodic inventory system).

Accounts receivable journal – Xanda Traders ARJ6
Date Invoice Detail Folio Sales VAT Total
2016
Jun 3 609 J Smith DL1  300.00 45.00 345.00
8 610 R Robins DL3  700.00 105.00 805.00
13 611 E Swart DL2  1 000.00 150.00 1 150.00
25 612 J Smith DL1  500.00 75.00 575.00
177
2 500.00 375.00 2 875.00
N1 B1 B2
Credit Credit Debit

sales VAT Accounts
receivable
Individual amounts are debited to the accounts The totals of these columns are posted to the relevant general
receivable accounts in the accounts receivable ledger. ledger at the end of each month.
SEE NEXT PAGE FOR DETAIL SEE NEXT PAGE FOR DETAIL
Accounts receivable allowances journal – Xanda Traders ARAJ6

Date Credit note Detail Folio Sales VAT Total
2016
Jun 10 CN700 J Smith DL1  200.00 30.00 230.00
16 CN701 E Swart DL2  150.00 22.50 172.50
Accounting for All
350.00 52.50 402.50

Credit Credit Debit
sales VAT Accounts
receivable
Individual amounts are credited in the accounts The totals of these columns are posted to the relevant general
178
receivable accounts in the accounts receivable ledger. ledger at the end of each month.
Solution:
Accounts receivable ledger General ledger

Dr J Smith DL1 Cr Dr VAT control B1 Cr
Jun 3 Sales & VAT ARJ6 345.00 Jun 10 Sales & ARAJ6 230.00 Jun Accounts ARAJ6 52.50 Jun 30 Accounts ARJ6 375.00
25 Sales & VAT ARJ6 575.00 VAT 30 receivable receivable
30 Balance c/f 690.00 30 Balance c/f 332.50

920.00 920.00 375.00 375.00
July 1 Balance b/f 690.00 Jul 1 Balance b/f 322.50
E Swart DL2 Sales N1

Jun 30 Sales & VAT ARJ6 1 150.00 Jun 16 Sales & ARAJ6 172.50 Jun 30 Accounts ARAJ6 350.00 Jun Accounts ARJ6 2 500.00
VAT receivable 30 receivable
Jun 30 Balance c/f 977.50 30 Balance c/f 2 150.00
1 150.00 1 150.00 2 500.00 2 500.00
179
Jul 1 Balance b/f 977.50 Jul 1 Balance b/f 2 150.00
R Robins DL3
Jun 30 Sales & VAT ARJ6 805.00
The VAT charged on sales (output VAT) is

posted to the credit side of the VAT control
account, because it increased the liability
account (money owed to the Receiver of
Revenue).
Accounting for All
Debtors ledger – list of balances

Customer Balance
J Smith R 690.00
E Swart R 977.50
R Robins R 805.00
R2 472.50
Dr Accounts receivable control account Cr

Jun 30 Sales + VAT ARJ6 2 875.00 Jun 30 Sales + VAT ARAJ 402.50
2 875.00 2 875.00
Jul 1 Balance b/f 2 472.50
Reconciliation check:
Individual customers total = R2 472.50
Accounts receivable control account balance = R2 472.50
5.15 General journal

We have covered the following subsidiary journals:
1. Cash receipts journal (CRJ) – all transactions where cash is received
2. Cash payments journal (CPJ) – all transactions where cash is paid
3. Petty cash (PC) – all payments from petty cash
4. Accounts payable journal (APJ) – all credit purchases
5. Accounts payable allowance journal (APAJ) – all purchases returns
6. Accounts receivable journal (ARJ) – all credit sales
7. Accounts receivable allowance journal (ARAJ) – all sales returns.
Any transaction that does not fall under one of the above ‘type’ of transactions
will be entered into the general journal (GJ).
Examples of these transactions are:
 Credit losses
 Provision for credit losses

 Depreciation
 Charging of interest on a customer’s account
 Owner withdrawing anything other than money
 Correction of incorrect entries (errors).
180
The general journal looks as follows:

Debit Credit
R R
Name of account to be debited XX
Name of account to be credited XX
Description of the transaction
The source document used with general journal transactions is the journal
description.
This subsidiary journal has two columns on the right hand side. One debit column
and one credit column.
Example 5.29
1. Depreciation on vehicles for the year amounts to R5 000.
2. The owner took inventory with a value (CP) of R1 000 and VAT of R150.
Enter the above transactions in the general journal.
General journal
Debit Credit
R R
Depreciation 5 000
Accumulated depreciation – vehicles 5 000
Depreciation on vehicles
Drawings 1 150
Inventory 1 000
VAT 150
Owner took inventory for own use
*Note: The debit amount entry must equal the credit amount entry.
*The account which is debited is always written first and the account to be
credited is in the next line with a little indent to the right.
181
Accounting for All
5.16 Recording credit losses and correcting errors

 What are bad debt/credit losses?
Credit losses occur when an account receivable does not pay the amount owing,
and the business decides that the amount is irrecoverable because the account
receivable has been declared insolvent, or simply cannot pay its debt or even
cannot be traced.
The account receivable account is credited and decreases with the amount written
off as credit losses.
Take VAT into account. With credit losses the amount of VAT has to calculated
and reversed. When we sold the goods it was a VAT input (VAT was credited),
now the amount of VAT needs to be debited.
Example 5.30
D Davey’s account has a debit balance of R150.
On 17 March it was decided to write off D Davey’s account of R150 as he had
disappeared and could not be traced.
Follow how the bookkeeper records this transaction.
Solution:
The bookkeeper’s first procedure is to make a journal entry.
Journal of Rambo Traders

Date Debit Credit
R R
Mar 17 Credit losses 130.43
VAT 19.57
D Davey – account receivable 150
Receivable disappeared and cannot be traced
 Credit losses are debited, because it is a cost to the business and decreases
the owner’s equity (expense).
 D Davey and accounts receivable control are credited, the asset accounts
decreased.
 VAT is debited because we can claim it back from the Receiver – we have not
received the money from the account receivable, but it was paid over to the
Receiver of Revenue when the sale was recorded.
The bookkeeper’s next procedure is to post the journal entries daily to the
general ledger.
182
Accounts receivable ledger

Dr D Davey DL1 Cr
Mar 1 Balance b/f 150.00 Mar 17 Credit losses & VAT 150.00
General ledger
Accounts receivable control
Mar 17 VAT GJ 150.00
Credit losses N1
Mar 17 D Davey 130.43
VAT
Mar 17 D Davey SR 19.57
 The journal entry tells you what to do in the ledger.

 D Davey’s balance in the accounts receivable ledger is nil.
 The double entry happens in the general ledger (debit credit losses account
and credit accounts receivable account).
5.17 Correction of errors

The general journal is also used to make adjustments arising from accounting
errors. For example, if the bookkeeper of Rambo Traders posts items to the wrong
account or enters the wrong amounts, she corrects this in the general journal. The
entry will depend on the error.
Let us look at an example of an error and see how she corrects this.
Example 5.31
On 20 March, cash received from A Mabusa, R150, was posted in error to BA

Mabusa’s account.
This error affects the accounts of A Mabusa and BA Mabusa.
A Mabusa’s account needs to be reduced (he made the payment) by crediting the
account with the payment. No entry should have been made in the account of BA
Mabusa. Since the bookkeeper erroneously credited BA’s account, we have to
make the reverse entry, thus debit his account.
Both of them are accounts receivable accounts and must also be recorded in the
accounts receivable control column in the journal.
183
Accounting for All
This is what the entry in the journal looks like:

Solution:
Journal of Rambo Traders
Date Debit Credit
R R
Mar 20 BA Mabusa 150
A Mabusa 150
Incorrect posting error corrected
 This entry had no effect on the accounts receivable control.

 The error in BA Mabusa’s account is corrected and the correct entry is made
in A Mabusa’s account.
184
Questions
Question 5.1
The following transactions took place during March 2016 in the books of AV
Connection Traders. AV Connection uses the periodic inventory system.
2016
Mar 2 Sell inventory on credit for R6 000 to Multi Broadcast. Cost price R4 800.
6 Sell inventory for R10 000 cash.
8 Buy stationery for cash, R200.
9 Pay the rent for the month, R11 000.
10 Receive R30 000 from accounts receivable.
11 Buy inventory on credit from EGI, worth R70 000.
12 Sell inventory on credit to Mario Distributors for R25 000.
14 Buy a vehicle on credit for R40 000 from BP.
18 Receive a credit note for goods returned to EGI, R1 000.
19 Issue a credit note for goods returned by Multi Broadcast, R600.
21 Pay salaries, R15 000.
24 Depreciation on vehicles for the month, R2 000.
26 Sell inventory for cash, R4 000.
28 Buy inventory for cash, R5 000.
Required:
5.1.1 Prepare all the relevant subsidiary journals (ignore VAT).
5.1.2 Do all the postings to the general ledger.
185
Accounting for All
Question 5.2
Record the following transactions in the correct columns, as in the example.
Periodic inventory system is used (ignore VAT).
Example:
a. The owner of AB Distributors deposited R20 000 in the bank account of the
business as his capital contribution.
Transaction Subsidiary Account Account Amount

no journal debited credited
a. Cash receipts Bank Capital R20 000
journal
Transactions:
1. Purchase land and buildings on credit from MG Properties, R150 000.
2. Purchase inventory from Makro, R5 200 on credit.
3. Pay salaries and wages by cheque, R12 800.
4. Cash sales of inventory, R3 000.
5. Pay the annual insurance premium to CE Insurance Company by cheque,
R2 000.
6. Buy vehicles from Zero Garage, R60 000 cash.
7. Sell a used typewriter to a worker, R50 cash.
8. Purchase stationery on credit from Proes Street Stationeries, R350.
9. Pay the interest on the loan at Alpha Bank per cheque, R300.
10. Receive a cheque of R500 from a debtor, A Mans.
11. Pay our debt to an account payable, B Ben, by cheque in full settlement of
our account of R3 000.
12. Sell inventory on credit to C Coetzee, R1 500.
13. Return damaged goods to Makro, and receive their credit note, R200.
14. Issue a credit note to C Coetzee for damaged goods returned, R300.
15. The owner of B&J Distributors withdraws R2 000 cash for his own use.
186
Question 5.3
During April 2016 the following transactions occurred in the business of BM
Rhapsody, a general dealer. BM Rhapsody uses the periodic inventory system.
2016
Apr 1 Mr Rhapsody deposited an amount of R200 000 cash in the bank
account of the business.
2 Paid for an advertisement in the Cape August (newspaper) per cheque,
R750.
6 Sold merchandise on credit to R Maposa, R100 000.
7 Received an account for repairs to the vehicle of the owner, R800.
This amount is still payable by the business.
10 Received a credit invoice from E Terror for goods purchased, R15 000.
12 Received a cheque from S Vink in full settlement of his account of
R800.
13 Paid an account payable, J van As, R1 200 by cheque.
20 Received a credit note from E Terror for damaged goods sent back to
him, R2 000.
25 Cash sales, R8 000.
28 Received interest on a fixed deposit at the Uno Building Society,
R2 000.
29 Issue a credit note to R Maposa for damaged goods returned, R5 000.
30 The owner took goods for his own private use at cost price, R2 000.
Required:
5.3.1 Record the above transactions in the correct subsidiary journals of BM
Rhapsody (ignore VAT).
5.3.2 Post only to the following general ledger account:
Accounts receivable control.
187
Accounting for All
Question 5.4
The following transactions were obtained from the books of Rampa Traders for
the month of May 2016. Rampa Traders uses the perpetual inventory system.
2016
May 1 The owner deposits his own money into his business account, R280 000.
2 Purchases a delivery van and pays with a cheque, R140 000.
3 Purchases inventory on credit from Bambi Traders, R15 000.
4 Sells goods on credit to M Savimbi, R5 000. Cost price R1 500.
5 Deposits money from cash sales, R4 800. Cost price R1 400.
6 Pays for the following expenses by cheque:
Shop rent, R2 500
Telephone, R1 200
Salaries, R18 000.
7 The owner withdraws money for his personal use, R1 000.
8 Received from M Savimbi, R2 000 as part payment of his account.
9 Issues a cheque to Bambi Traders for payment of our account, R15 000.
10 Cash sales, R8 000. Cost price R2 500.
Required:
5.4.1 Record the above transactions in the correct subsidiary journals (ignore
VAT).
5.4.2 Post only to the following two general ledger accounts:
Accounts payable control.
Question 5.5
Record the following transactions in the general journal of AJAX Traders (ignore
VAT). AJAX uses the perpetual inventory system.
2016
Feb 5 A receivable, A Bantam’s, debt of R5 000 must be written off as
irrecoverable.
8 Bought stationery on credit from S Samuels, R8 000.
10 Issued an invoice for goods sold to R Ronaldi, R60 000. Cost price
R48 000.
15 Received rent in cash from T Tamara, R7 500.
25 Charged A Amcor R1 000 interest on their overdue account.
28 Depreciation on vehicles for the financial year, R15 000.
Question 5.6
Use the information of question 5.4.
Required:
Record all the transactions for July in the general journal of Ramba Traders
(ignore VAT).
188
Question 5.7
The following balances appeared in the books of Boroto Traders on 1 January
2016. Boroto Traders uses the perpetual inventory system (VAT inclusive where
applicable).
R
Land & buildings 60 000
Plant & machinery 50 000
Inventory 75 000
Bank 18 000
Accounts receivable: A Aramis 41 500
R Ronald 7 600
P Puma 17 900
Capital: Boroto 186 800
Long-term loan 27 700
14 700
Accounts payable: B Bennie 14 200
R Nickelson 5 800
R Gould 35 000
The following transactions took place during the month of January 2016:
2016
Jan
1 Cash sales, R14 500. Mark-up, 25% on selling price.
2 Received a cheque from A Aramis to settle his debt to date.
Bought stationery on credit from B Bennie, R700.
3 Cash purchases of merchandise from R Rundle, R7 500.
Paid by cheque for petrol for the private vehicle of Mr Boroto, R60.
6 Paid carriage on purchases, R720.
Received a cheque from P Puma in full settlement of his account and
allowed him R112 discount.
Received rent in cash from R Roberts, R1 500.
9 Issued an invoice for goods to R Ronald, R480. Cost price, R370.
11 Received a credit note from B Bennie for stationery, R50.

15 R Ronald paid us R7 900 in full settlement of his account.
18 Cash sales, R17 600. Mark-up, 10% on cost price.
24 The bank informed us that the cheque from R Ronald has been
dishonoured.
28 R Ronald paid us R7 000 and the balance on his account must be written
off as irrecoverable.
30 Charged A Aramis R100 interest on his overdue account.
189
Accounting for All
Required:
5.7.1 Record the above transactions in the correct subsidiary journals.
5.7.2 Post to the following accounts:
Trading inventory
VAT control
Accounts payable control
Question 5.8
The following balances appeared in the records of TJ’s on 1 March 2016. TJ’s
uses the periodic inventory system. (VAT included where applicable).
R
Bank 20 862.25
VAT (Cr) 1 309.21
List of individual accounts receivable balances:

R
P Lemmer 12 112.20
J Roelof 9 416.53
R Legodi 817.25
P Ervin 19 236.18
List of individual accounts payable balances:

R
Topsport 2 915.21
POPS 899.05
Transactions for March 2016:

2016
Mar 1 Received an invoice from POPS for trading inventory purchased, on
credit, R6 211.23
3 Sold goods on credit and issued invoices to:
R Lemmer R299.99
R Legodi R467.89
4 The owner took inventory for own use at cost price of R161.27.
6 Received a cheque from P Ervin, R19 000 in full settlement of his
account.
8 Paid the VAT for February 2016 to the Receiver of Revenue.
190
9 Returned damaged inventory to POPS, R209.23.

11 P Ervin’s cheque was returned by the bank with a debit note ‘refer to
drawer’.
13 P Ervin is insolvent. Received a first and final dividend of 65c on the
Rand; write the balance off as irrecoverable.
15 Cash sales per cash register roll, R19 252.52.
28 Paid the following by cheque:
Telephone R 520.14
Wages R 3 000
29 Charge J Roelof’s account with 19% interest per year for two months.
Required:
5.8.1 Enter the above transactions in the correct subsidiary journals of TJ’s. All
transactions include, where applicable, VAT at 15%.
5.8.2 Post to the following accounts in the general ledger:
VAT control account
Accounts payable control
Question 5.9
The following transactions appeared in the books of Xumalo Traders during
February 2016. All transactions include VAT of 15% where applicable. Xumalo
Traders use the perpetual inventory system and maintain a mark-up of 25% on
cost price.
2016
Feb 1 Cash sales, R57 000.
3 Cash purchases of inventory, R28 000. Trade discount of 5% must still
be taken into account.
6 C Chabalala charged our overdue account with R80 interest.
12 Paid N Rambo R1 800 in full settlement of our account of R2 000.
13 Received R2 500 from a receivable, S Seroto, in full settlement of his
account of R2 580.
14 A receivable, T Toronto cannot pay his debt of R2 600; write his

account off as credit losses.
16 Issued a credit note to K Kumble for damaged goods returned, R200.
18 The owner, W Xumalo, took goods for private use, R230.
25 Paid railage on goods purchased, R115.
Required:
Record all the above-mentioned transactions in the general journal of Xumalo
Traders.
191
Accounting for All
Question 5.10
The following balances, as at 31 January 2016, were obtained from the general
ledger of Blue Bull Traders. Blue Bull Traders uses the periodic inventory
system.
Land & buildings 300 000

Shop equipment 160 000
Accumulated depreciation – shop equipment 48 000
Trading inventory (31/1/2016) 76 000
Accounts receivable 110 000
Bank (favourable) 10 000
Capital – Blue Bull 502 000
Accounts payable 50 000
Purchases 235 400
Settlement discount received 6 000
Salaries 44 000
Advertising costs 8 000
Bank charges 2 000
Water and lights 6 100
Sales 355 500
VAT – control (receivable) 6 000
Settlement discount allowed 4 000
Additional information:
The books of first entry for February 2016 were recorded and summarised as
follows:
Cash receipts journal – February 2016
Sundry Sales Accounts Settlement VAT Bank

receivable discount allowed
0 12 000 23 000 (2 800) 1 380 33 580.00
Cash payments journal – February 2016
Sundry Purchases Accounts Settlement VAT Bank

payable discount received
4 435 7 400 17 300 (450) 1 107.75 29 792.75
192
Sundry consists of:
R
Salaries 4 000
Bank charges 50
Water & lights 385
Accounts receivable journal – February 2016
Detail Sales VAT Accounts

receivable
19 400 2 910 22 310
Accounts payable journal – February 2016
Detail Purchases VAT Accounts

payable
9 240 1 386 10 626
General journal – February 2016
Debit Credit
R R
Credit losses 148.70
VAT – control 22.30
Accounts receivable control 171
Piet Pompies, a receivable, is insolvent
Advertising 400
Purchases 400
Correcting of an allocation error
Required:
5.10.1 Open the general ledger accounts and post the books of first entry to the
general ledger.
5.10.2 Balance the general ledger accounts off properly.
193
Accounting for All
Question 5.11
The following information was taken from the books of Wasp Traders on
28 February 2016. Wasp Traders uses the perpetual inventory system.
Information:
1. Totals of accounts receivable and accounts payable lists:
28 February
2016
R
Accounts receivable list: debit 4 896

credit 106
Accounts payable list: debit 234
credit 3 934
2. Total of trading inventory lists at 28 February 2016, R19 124.
3. Column totals of journals (subsidiary books) at 28 February 2016.

Sales Cost of Accounts Accounts Settlement Sundry Bank
sales payable receivable discount accounts
control control allowed
R4 810 R3 100 R486 R4 278 (R320) R2 714 R11 968

Trading Wages Accounts Accounts Settlement Sundry Bank
inventory receivable payable discount accounts
control control received
R1 680 R400 R270 R7 658 (R404) R844 R10 448
Accounts receivable journal

Sales Cost of sales Total
R3 560 R2 840 R3 560
Accounts payable journal

Trading Equipment Stationery Sundry Total
inventory accounts
R5 288 R1 712 R184 R1 514 R8 698
Accounts receivable allowance journal

Sales Cost of sales Total
R160 R100 160
194
Accounts payable allowance journal

Trading Equipment Stationery Sundry accounts Total
Inventory
R448 R382 R88 R74 R992
General journal
Accounts receivable control Accounts payable control
Debit Credit Debit Credit
R194 R78 R92 R208
Required:
Record the entries in the following general ledger accounts and balance these
accounts on 28 February 2016:
Accounts receivable control account
Accounts payable control account
Cost of sales
Question 5.12
The following information was extracted from the books of Baxter Ltd. You are
required to use the appropriate information and prepare the accounts receivable
control account and the accounts payable control account in the general ledger.
2016 R
May 1 Credit balances of accounts receivable 340
Credit balances of accounts payable 10 694
Debit balances of accounts receivable 6 698
Debit balances of accounts payable 70
May 31 Totals of subsidiary journals

Accounts receivable journal 12 428
Accounts payable returns journal 206
Purchases in cash payments journal 5 978
Settlement discount allowed in cash receipts journal 244
Sundry expenses in cash payments journal 1 512

Accounts receivable in cash receipts journal 16 420
Accounts receivable allowances journal 410
Accounts payable journal 8 354
Settlement discount received in cash payments 110
journal
Accounts payable in cash payments journal 8 700
Sales in cash receipts journal 16 800
Accounts payable in cash receipts journal 90
Accounts receivable in cash payments journal 2 920
195
Accounting for All
Information taken from the general journal R

Credit losses written off 1 220
Profit on sale of machinery 2 400
Machinery sold on credit 12 400
Credit losses recovered from V Vet 380
Interest charged on accounts receivable accounts 92
Interest charged on payable’s accounts 64
Other journal debits: accounts receivable column 262
Other journal debits: accounts payable column 502
Other journal credits: accounts receivable column 374
Other journal credits: accounts payable column 328
Balances at 31 May
Accounts receivable with credit balances 308
Accounts payable with debit balances 186
Discounts are included in the accounts receivable and accounts payable

columns in the cash receipts journal and cash payments journal.
Question 5.13
Mr L City keeps his ledgers on a control system. The following transactions took
place during January 2016:
R
Purchases of merchandise on credit 23 000
Purchases of merchandise for cash 27 900
Purchases of equipment on credit 17 800
Sales of merchandise on credit 78 600
Sales of merchandise for cash 25 100
Sales of equipment on credit 23 380
Returns inwards 250
Returns outwards 370
Settlement discount allowed 210
Settlement discount received 770
Cash received from accounts receivable 54 000
Payments to accounts payable 60 000

Credit losses written off 250
Dishonoured cheque originally received from a receivable 1 150
Discount on this cheque 15
Journal debits
– Accounts receivable ledger 170
– Accounts payable ledger 80
Journal credits
– Accounts receivable ledger 189
– Accounts payable ledger 160
Credit balance in accounts receivable ledger transferred to 250
accounts payable ledger
196
Additional information:
The accounts receivable control account at 1 January 2016 contained the
following balances:
Debit balance R 34 749
Credit balance R 34
The accounts payable control account at 1 January 2016 contained the following
balances:
Debit R 179
Credit R 31 779
On 31 January 2016 there was a credit balance of R500 in the accounts receivable
ledger.
Required:
An accounts receivable control and accounts payable control account for January
2016.
Question 5.14
The following information was extracted from the subsidiary books of K Tsele
Traders. K. Tsele uses the periodic inventory system.
R
2016
Jan 1 Debit balances of accounts receivable 300 000
Credit balances of accounts payable 150 000
31 Total of total column in accounts receivable journal 120 000
Total of accounts payable allowances journal 20 000
Sundry expenses column in cash payments journal 60 000
Accounts receivable column in cash receipts journal 140 000
Total column in accounts receivable allowances journal 15 000
Total of accounts payable journal 100 000
Accounts payable column in cash payments journal 130 000
Sales in cash receipts journal 200 000
Credit losses written off in general journal 60 000

Machinery bought on credit 90 000
Credit losses recovered 25 000
Interest charged on receivable accounts 15 000
Sundry journal debits: accounts receivable 5 000
Sundry journal credits: accounts receivable 1 000
Sundry journal debits: accounts payable 2 000
Sundry journal credits: accounts payable 6 000
Required:
Prepare the accounts receivable and accounts payable control accounts in the
general ledger of K Tsele Traders.
197

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CHAPTER 5

BOOKS OF PRIME ENTRY

5.2 Cash receipts and cash payments journal

At the end of this section you will be able to:

 Cash slip or cash sale invoice

Sell inventory → debit bank/accounts receivable

Sales returns → debit sales/sales returns

 Periodic inventory system

Sell inventory → debit bank/accounts receivable

Purchases returns → debit sales/sales returns

Cash receipts journal

Details of names of the different accounts of amounts entered into sundry

Cash payments journal

column (there is no column for these items)

5.2.5 Cash receipts journal

Date Transaction Amount Rec no

Created from ujlink-ebooks on 2023-02-28 02:25:55.

Cash receipts journal

Created from ujlink-ebooks on 2023-02-28 02:25:55.

All columns added together must equal the bank column.

Posting of cash receipts journal to general ledger accounts

Date Transaction Amount Chq

12 Cash purchase: Nike 1200.00 1 200.00

Created from ujlink-ebooks on 2023-02-28 02:25:55.

1 200.00 4 000.00 300.00 5 500.00

All columns added together must equal the bank column.

Posting of cash payments journal to general ledger accounts

5.2.8 Settlement discount allowed and received

1 September Sold goods on credit to a receivable, R10 000.

20 Sept Bank 9 500

Cash receipts journal

Created from ujlink-ebooks on 2023-02-28 02:25:55.

Credit Credit Debit Credit Debit

 Posting settlement discount allowed to general ledger accounts

Settlement discount allowed

Settlement discount received is recorded in the cash payments journal before

Created from ujlink-ebooks on 2023-02-28 02:25:55.

Debit Debit Debit Credit Debit Credit

Note how settlement discount received is deducted.

Settlement discount received

5.2.9 Recording of VAT

Credit Credit Debit

All the columns cross cast = Bank column total

Debit Debit Debit carriage Credit

30 Bank CRJ 600.00

*NB Remember the effect of discount on VAT

CHEQUE NO: 002 500.00

CHEQUE NO: 005 1 000.00

CHEQUE NO: 011 2 500.00

CHEQUE NO: 012 200.00

Vat Reg No: VAT Rate 15% 38 25

Received from D Cullinan Date 12/6/20X6

Vat Reg No: VAT Rate 15% 172 50

Vat Reg No: VAT Rate 15% 210 00

283 6424 241 Total 1 610 00

One hundred Rand

With thanks K White

112 Date 5/6/20X6 R C

Five hundred and fifty Rand

CREDIT _N Tovey Sportshop_____________________________________________________________

BRANCH WHERE THE ACCOUNT IS KEPT _ Centurion__________________________________________

CREDIT _N Tovey Sportshop_____________________________________________________________

BRANCH WHERE THE ACCOUNT IS KEPT _ Centurion__________________________________________

CREDIT _N Tovey Sportshop_____________________________________________________________

BRANCH WHERE THE ACCOUNT IS KEPT _Centurion__________________________________________

CREDIT _N Tovey Sportshop_____________________________________________________________

BRANCH WHERE THE ACCOUNT IS KEPT _Centurion__________________________________________

CREDIT _N Tovey Sportshop_____________________________________________________________