Posting Journal's

Rebecca498Rebecca498 Feels At HomePosts: 33Registered
Hi All,

I was wondering if anyone could clear something up for me.

My text book is telling me that if, for example,

"The total purchases for the month were posted from the purchases day book as £2,547.98 instead of £2,457.98"

and then post a journal entry to do this. The solution is shown as;

Debit - PLCA by 90
Credit - Purchases by 90

because "both need to be reduced by £90"

But I dont know why the PLCA is debited and not credited, and vice versa for the Purchases. Is there anyway to remember which way round they should be?

Comments

  • sharonjsharonj Well-Known Posts: 166Registered
    Hi Rebecca498

    The reason you would debit the purchase ledger control account is when you would have posted your original entry from the purchases day book to the PLCA you would have credited the PLCA and debited purchases acc. To rectify this if £90 too much has been put into the PLCA you would have to debit plca and credit the purchases account.

    When dealing with purchases it is always a credit to the PLCA for new purchases transfered from the PDB and then when these purchases are paid for you debit the PLCA and credit Bank.

    If you try and think of it with regard to the bank account which always helps me to remember. Debtors are sold goods on credit and then when they pay for goods the money is received in to the business that sold them to the debtors so the money debits the bank acc and credits the SLCA to credit that customers acc. When purchasing goods from creditors it is the complete opposite. The PLCA is credited when the goods are transferred from the PDB and when the goods are paid for the PLCA is debited and the bank credited to pay the funds away to the supplier.

    Hope this makes sense.

    Sharon
  • CJCCJC Font Of All Knowledge Posts: 1,657Registered
    Just to addto what Sharon said, I always found with journals, both when learning the basics and later when they get more complex, that it helps just to sketch out T-accounts (rough as you like) containing just the figures at hand with ones having the incorrect figures and others with what should have been posted. Then you work out what you need to do with the wrong account to get to the right account. It's probably easer to show than to explain in words.
    journal.gif
    The journal entries will just be those in bold which you can then post in the real ledger accounts.
  • readerreader Experienced Mentor Posts: 1,039MAAT, AAT Licensed Accountant
    What about VAT?

    "The reason you would debit the purchase ledger control account is when you would have posted your original entry from the purchases day book to the PLCA you would have credited the PLCA and debited purchases acc. To rectify this if £90 too much has been put into the PLCA you would have to debit plca and credit the purchases account."

    Just out of interest how does anyone know the amount posted to the PLCA was incorrect? What if the only error that was made was the error that occurred when net purchases was posted? Then there would be no need to make a corrective entry into the PLCA.

    Also, do we have to credit the VAT account for £15.75 and debit the PLCA for £105.75?

    Apologizes in advance for coming across as a pedant (I always seem to give off the wrong impression across the internet)
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    Bcause the vat account was already posted correctly (unless stated it is wrong) you dont have too its just a case of reading the question properly (one of my own biggest pit falls) it will prob say ignore vat.
  • readerreader Experienced Mentor Posts: 1,039MAAT, AAT Licensed Accountant
    Thanks A-Vic

    I don't have too much trouble reading the question but I do have a lot more trouble interpreting the question and trying to deduce what the examiner wants me to do.

    I guess that as long as I follow double-entry principles and only take into account VAT when instructed I should be OK.
  • Rebecca498Rebecca498 Feels At Home Posts: 33Registered
    Hi Reader,

    I always think the same kind of thing 'what about the vat' but unless the papers specifically mentioning it I've learnt to sort of ignore it!

    Thanks for your answers about the journals. I agree with CJC and find that writing out the T accounts so as I can actually see what's happened helps a lot.

    Now I understand journals, my original question is cringe-worthy lol, as the answer seems so glaringly obvious when you know how!
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