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Credit Journals
UNIT 3 CH 5
| Question | Answer |
|---|---|
| Special journal | An acc record that summarises similar transactions |
| Do you have to specify Purchase or Sales Journals refer to credit transactions? | No. All cash transactions are recorded in CPJ and CRJ |
| 4 Types of Journals and their uses: | 1.CRJ - Cash received (from all sources) _ 2 _ CPJ - Cash paid (for all uses) _ 3 _ Sales Journal - Credit sales of stock (to debtors) _ 4 _ Purchases Journal - credit purchases of stock *GJ for no cash + infrequent transactions |
| Purpose of special Journals: | Summarise similar transactions so that totals can be posted to GL, reducing no of ledger entries required, improving efficiency of recording system. |
| Note about Journals: | All transactions must be recorded in a journal before it is posted to the ledger accounts. |
| Purchases Journal: | An accounting record that summarises all transactions involving the purchase of stock on credit during a month |
| Details in Purchases Journal: | Date, creditor, invoice no *ensures Reliability, stock control *cost price, GST, creditors control |
| Explain the effect on the valuation of stock of GST (charged by suppliers) on credit purchases. | GST charged does not affect valuation of stock. Reduces GST L owed to the ATO, increases the debt owed to creditors |
| Referring to the Purchases Journal, state one reason why the amount recorded in the Creditors Control column is greater than the value of stock purchased. | Due to GST charged by the supplier, increases debt to creditors |
| Debit and credit entries necessary to post the Purchases Journal to the General Ledger. | SC - debit __ GST Clearing - Debit __ Creditors Control - Credit |
| Explain the effect on the GST Clearing account of GST charged by suppliers on credit purchases. | Reduces GST L business has accrued. Treated as a payment of GST to the ATO. Debits GST C |
| Explain the relationship between the Creditors Control account and the Creditors Ledger. | Creditors Control account=summary acc that records a summary of all t that affect C as a whole. Creditors Ledger (a subsidiary ledger) contains a separate account for each individual creditor, showing each individual t affecting that creditor’s balance. |
| State two differences in the way the Purchases Journal is posted to the Creditors ledger (as compared to the General Ledger). | 1. The purchases journal is posted to the General Ledger at the end of the month, using the column totals. __ 2.Individual transactions are posted to the Creditors Ledger accounts on the day they occur. |
| Control account: | Account in the GL summarising all transactions recorded in in the subsidiary ledger accounts. |
| Subsidiary ledger: | An additional set of ledger accounts kept outside the GL, recording individual transactions for each individual debtor or creditor |
| What dates are used when posting Purchases Journal to the Creditors Ledger? | Individual dates of transactions the date they occurred |
| Creditors schedule: | A list of a name and balance of each individual account in the creditors ledger, added together to enable checking against the balance of creditors of the Creditors Control account. |
| Sales Journal: | An acc record summarising all transactions involving the sale of stock on credit during a month/RP |
| Explain how the Creditors Schedule aids in the control of creditors. | The Creditors Schedule fulfils a control function by acting as a checking mechanism against the balance of the Creditors Control account. |
| List the debit and credit entries necessary to post the Sales Journal to the General Ledger. | DC - Debit __ Sales Rev - Credit __ GST Clearing - Credit __ COS - Debit __ Stock Control - Credit |
| Explain the relationship between the Debtors Control account and the Debtors Ledger. | GL: Debtors Control account - summary of all transactions that affect debtors as a whole __ Debtors Ledger (subsidiary ledger) contains a separate account for each individual debtor, showing each individual transaction affecting that debtor’s balance. |
| State two differences in the way the Sales Journal is posted to the Debtors Ledger (as compared to the General Ledger). | 1. The Sales Journal is posted to the General Ledger at the end of the month, using the column totals. _2_ Individual transactions are posted to the Debtors Ledger accounts on the day they occur. |
| State the function of a Debtors Schedule. | List of the name and balance of each individual account in the Debtors Ledger, added together to enable checking against the balance of the DC account. |
| How does Debtors Schedule aid in control of Debtors? | It fulfils a control function by acting as checking mechanism of accuracy of posting. Only the balance of the DC account will be reported in the BS. |
| Explain how the GST Clearing account may end up with a credit balance. | If GST on sales is more than GST on purchases (and other payments), the GST Clearing account may end up with a credit balance. |
| GST settlement: | GST settlement is a cash payment made to the ATO to settle the liability that occurs when GST on its sales is greater than GST on purchases. |
| Explain how the GST Clearing account may end up with a debit balance. | If GST on purchases (and other payments) is more than GST on sales, the GST Clearing account may end up with a debit balance. |
| GST Refund: | GST refund is a cash receipt from the ATO to refund the excess that occurs when GST on sales is less than GST on purchases. |
| 3 main benefits of using control accounts and subsidiary ledgers: | 1: double checking allows detection for recording errors _ 2: ease of reporting _ 3: allocation of responsibility |
| How do control accounts and subsidiary ledgers allow for detection for recording errors: | prep of the D and C schedules allow balance of control account to be checked against sum of balances of the subsidiary ledger accounts. Allows for recording errors to be detected/corrected. + Reliability++ of balances in BS |
| How do control accounts and subsidiary ledgers allow for ease of reporting: | single balance for all D or C provided by control account in GL and schedule means BS only needs to report the balance of the control account, rather than list each individual D/C/ Relevance +in BS+ omitting these details. |
| How do control accounts and subsidiary ledgers allow for allocation of responsibility: | management of the subsidiary ledger can be allocated to particular employee. this employee can be responsible for managing all dealings with D. e.g. assessing credit worthiness, issuing of sales invoices, collection of receipts from debtors etc |
| How do control accounts and subsidiary ledgers allow for allocation of responsibility cont: | also this employee can manage bad debts. FOR CREDITORS: collection of purchase invoices and timely payment of creditors.) Greater accountability, improve effectiveness. |
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