Double-Entry Revision Recap & Summary

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-Entry Revision Recap & Summary

    1. Purchases with payment immediately - 'Cash Purchases'.
    2. Sales with payment immediately - 'Cash Sales'.
    3. Purchase on credit - payment later - 'Credit Purchases'.
    4. Sales on credit - payment later - 'Credit Sales'.
    5. Assets bought/ sold - payment immediately.
    6. Assets bought/ sold - payment later.

    The Cash Purchases/Cash Sales will use the Cash book. Purchases will be money OUT of Cashbook (ie Credit-side). Sales will money IN to Cashbook (ie Debit-side). The 'Analysed Cashbook' allows you to see the payments separated, allowing you to keep track of them.

    The Credit Purchases/Credit Sales will use the DayBooks - Purchase Day Book or Sales Day Book. (ie Purchase Invoices into Purchase DayBook.) The Gross, Net and Vat for each invoice go into the Day Book. The 'Gross' value for each invoice goes into the corresponding account for the supplier (ie Purchase on Credit), or customer (for sales).
    At the end of the month (or daily if there is a lot of business), the columns are totalled and posted to other accounts. eg the total for all the Gross values are posted to the Control Account, while the Vat total and Net total are posted to the Vat and either Purchase or Sales Account in the Main Ledger.

    eg Purchase on credit
    Invoice to Purchase DayBook (Gross, Net and Vat)
    Gross value to Supplier's Account in Purchase Ledger. ('credit' entry)
    (end of month... with several invoices in DayBook)
    Total Gross values to Purchase Ledger Control Account (Main Ledger) (credit entry)
    Total Vat values to Debit of Vat Account (Main Ledger)
    Total Net values to Debit of Purchase Account (Main Ledger).

    NB The Purchase Ledger and Sales Ledger are ONLY used for stock (Goods for sale as normal course of business, etc). At level 3/4, includes materials purchased to be processed into Goods, which are then Sold. Control Accounts are used for error tracking and to minimize the masses of entries. They act as summaries - one 'total' entry instead of twenty or so separate invoice values.

    If you purchase an Asset, eg computer.
    1. Paid immediately -
    Debit Computer account (Main Ledger)
    Credit Bank

    2.a. Paid Later -
    Debit Computer account (Main Ledger)
    Credit Dell Plc (for example) (Main Ledger)
    (The 'Dell Plc' account is then a Liability account, while the 'Computer' account is an Asset account.)
    2.b. When paid -
    Debit Dell Plc (Main Ledger)
    Credit Bank
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-Entry Revision Recap & Summary

    I think im having a really bad day, looking over this time and time again and just getting so confused.

    Why is it not sticking in my head!!!!!!!
    :( :? :!:

    For some strange reason i cant get my head around control accounts , PLCA or SLCA i forget what goes in and if its DR or CR... please can someone help on trying to get it stuck into my brain

    I did the revison threads you said for me to do and can do them, so why can i not put this information into practice
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-Entry Revision Recap & Summary

    Okay, Vicky... :)
    Did you read the info posted by Robert - in the 'Control Account' thread? And his explanation of Double-Entry?

    PLCA - These are Creditors, so totals for Gross values from Purchase invoices (credit - payable later) goes on Credit-side.
    Any reversals of the amount owed, eg payments (out), returns outwards, discount received, etc, go into the opposite side (hence Debit).

    SLCA - These are Debtors, so totals for Gross values from Sales invoices (credit - payable later) goes on Debit-side.
    Any reversals of the amount owed, eg payments (in), returns Inwards, discount allowed, etc, go into opposite side (hence Credit-side).

    Use the same rules as you would for the Purchase Ledger and Sales Ledger, except that you are increasing or decreasing the Totals owed, either Debtors or Creditors. (Gross values from Invoice into Purchase/Sales Ledger, while the Net values are put into Purchase/Sales Account in the Main Ledger.)

    My previous post (above) was an attempt to split things up, as they have different treatment in the accounts, and I felt things were being mixed up.
    I will be seeing you on Monday, so we can talk it through, or you can respond on this thread...
    :D
    Edit - I've done some background reading. I've seen both methods used for Asset Acquisitions (buying assets) on credit, now. ie
    (i) debit 'asset' account, credit 'liability' account (both in Main Ledger)
    (ii) debit asset acc (ML), credit Purchase Ledger/Control (as per PhunkyPhantom22's post)
    You will just need to take note of info in question, as either could turn up in skill tests...
    (I've also seen excess/unwanted Stationery - in this case for Expenses - sold (on credit) off to the debit of Sales Ledger(!) So, it looks like Purchase/Sales Ledgers aren't limited to Trade Creditors & Trade Debtors...) :shock:

    Further Discussions-
    http://forums.aat.org.uk/forums/posts/list/14549.page

    Advice for Final Week before Exams
    http://forums.aat.org.uk/forums/posts/list/13816.page

    Reaactions to Critisism
    http://forums.aat.org.uk/forums/posts/list/13648.page#66942

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