2.3 Books of prime entry (3)
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1.
Question 3: The following transactions occurred at Green Grocers.
Date | Particulars | Debit (£) | Credit (£)
15/04/2024 | Cash | 1,500 |
15/04/2024 | Sales | | 2,000
17/04/2024 | Rent | 600 |
17/04/2024 | Cash | | 600
19/04/2024 | Purchases of Goods on Credit | 1,800 |
19/04/2024 | Accounts Payable | | 1,800
21/04/2024 | Cash | 400 |
21/04/2024 | Sales Returns | | 100
21/04/2024 | Sales | | 100
Post the above transactions into the appropriate ledgers.
Answer 3:
Cash Account
| Date | Particulars | Debit (£) | Credit (£) |
| 15/04/2024 | Sales | 2,000 | |
| 17/04/2024 | Rent | | 600 |
| 21/04/2024 | Sales | 100 | |
Sales Account
| Date | Particulars | Debit (£) | Credit (£) |
| 15/04/2024 | Cash | 2,000 | |
| 21/04/2024 | Sales Returns | | 100 |
Rent Account
| Date | Particulars | Debit (£) | Credit (£) |
| 17/04/2024 | Cash | 600 | |
Purchases Account
| Date | Particulars | Debit (£) | Credit (£) |
| 19/04/2024 | Accounts Payable | 1,800 | |
Accounts Payable Account
| Date | Particulars | Debit (£) | Credit (£) |
| 19/04/2024 | Purchases | 1,800 | |
2.
Question 2: The following transactions occurred at XYZ Company.
Date | Particulars | Debit (£) | Credit (£)
05/04/2024 | Bank | 5,000 |
05/04/2024 | Capital | | 5,000
08/04/2024 | Furniture | 2,000 |
08/04/2024 | Accounts Payable | | 2,000
10/04/2024 | Drawings | | 1,000
10/04/2024 | Cash | 100 |
12/04/2024 | Purchases | 3,000 |
12/04/2024 | Accounts Payable | | 3,000
Post the above transactions into the appropriate ledgers.
Answer 2:
Bank Account
| Date | Particulars | Debit (£) | Credit (£) |
| 05/04/2024 | Capital | 5,000 | |
| 10/04/2024 | Drawings | | 1,000 |
| 10/04/2024 | Cash | 100 | |
Capital Account
| Date | Particulars | Debit (£) | Credit (£) |
| 05/04/2024 | Bank | 5,000 | |
Drawings Account
| Date | Particulars | Debit (£) | Credit (£) |
| 10/04/2024 | Bank | | 1,000 |
Furniture Account
| Date | Particulars | Debit (£) | Credit (£) |
| 08/04/2024 | Bank | 2,000 | |
Accounts Payable Account
| Date | Particulars | Debit (£) | Credit (£) |
| 08/04/2024 | Furniture | | 2,000 |
| 12/04/2024 | Purchases | 3,000 | |
3.
A company uses a cash book to record its daily transactions. Explain how the information recorded in the cash book is used to prepare the bank and cash ledger accounts. Include a description of the format of each ledger account.
The information recorded in the cash book is used to prepare the bank and cash ledger accounts through a process called posting. Posting involves transferring the debit and credit entries from the cash book to the appropriate ledger accounts.
Bank Ledger Account:
The bank ledger account typically includes the following information:
- Date of the transaction
- Description of the transaction (e.g., payment of rent, receipt of interest)
- Debit/Credit amount
- The balance of the bank account after the transaction
The cash book entries relating to bank transactions are posted to the bank ledger account. Debits from the cash book are posted as credits to the bank ledger account, and vice versa. This reflects the movement of money in and out of the bank account.
Cash Ledger Account:
The cash ledger account typically includes the following information:
- Date of the transaction
- Description of the transaction (e.g., receipt from customer, payment for supplies)
- Debit/Credit amount
- The balance of the cash account after the transaction
The cash book entries relating to cash transactions are posted to the cash ledger account. Debits from the cash book are posted as credits to the cash ledger account, and vice versa. This reflects the movement of cash in and out of the business.
Posting Process:
- Identify the relevant entries in the cash book.
- Determine whether each entry is a debit or a credit.
- Transfer the debit and credit amounts to the appropriate ledger accounts.
- Update the balance of the ledger accounts after each posting.