HELP NEEDED level 2 bookkeeping transaction mock exam questions

L3XL3X Registered Posts: 8
Hi guys,

I wonder if someone might be able to help me with the question below? I'm not sure why but it seems to be the cashbook questions that throw me off:

The following transactions all took place on 30 September 20XX and have been entered into the cash book, as shown below.
No entries have yet been made in the ledgers.

Dr
Balance b/f 7680
J Bentham LTD - Discounts- 200, bank - £5500

Cr
Wages - 2350
Rent - 2400
Advertising - VAT - 240 - bank -1440
Balance c/d - 6990

What will be the entries in the sales ledger?

What will be the entries in the general ledger?

Thanks

Comments

  • SimplyLearnFinanceSimplyLearnFinance UKRegistered Posts: 16
    Hello

    How do you approach these types of question? I would draw up a rough cash book then using T accounts and I would enter the corresponding Dr/Cr transactions.

    To answer your questions:

    Sales Ledger Control Account £5700 Cr
    Discounts Allowed £200 Dr
    Wages £2350 Dr
    Rent £2400 Dr
    Advertising £1200 Dr
    VAT £240 Dr

    The points to remember here are that the discount is in relation to a customer payment therefore Discount Allowed. This is an expense to the business and will have a Debit balance. The discount column in the cashbook is a memorandum only and not part of the double entry system. To detail this longhanded the double entry steps are:

    Sales Ledger Control Account £200 Cr
    Discounts Allowed £200 Dr

    Sales Ledger Control Account £5500 Cr
    Bank £5500 Dr

    Also VAT needs to be extracted from expenditure as this is not a business expense and is part of the liability that could be owed to HMRC dependent on other input and output VAT calculations. If the business is not VAT registered then this would not be reclaimed and the Advertising cost above would be £1440 instead of extracting the VAT.

    Does this make sense?
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  • L3XL3X Registered Posts: 8
    Hi Thank you for your response but i'm not quite sure i'm clear on this still. :/

    If we've entered 'sales ledger control account' then why would the discount be related to a purchase? wouldn't it be related to a sale?

    Thanks
  • L3XL3X Registered Posts: 8
    alsp what would be the entry in to the sale ledger as im assuming the above was for the general ledger? would the sales ledger be J Bentham LTD -£5700?
  • SimplyLearnFinanceSimplyLearnFinance UKRegistered Posts: 16
    Hello

    The discount does relate to Sales (Discount Allowed) as opposed to Purchases (Discount Received).

    The Sales Ledger is a memorandum of the Sales Ledger Control Account. Within the SLCA each trade receivable/customer will have its own individual account which when totalled equals the SLCA balance. The SLCA is part of the general ledger.

    In this example, if you credit the SLCA with £5700 then the Sales Ledger individual account for J Bentham LTD should also receive an identical credit.

    I'll try to write this up and upload it as it may make more sense visually.
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  • SimplyLearnFinanceSimplyLearnFinance UKRegistered Posts: 16
    Please see attached. Hopefully this helps.
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  • L3XL3X Registered Posts: 8
    Hi @SimplyLearnFinance thank you very much for the further explanation that's much clearer now =)
    SimplyLearnFinance
  • SimplyLearnFinanceSimplyLearnFinance UKRegistered Posts: 16
    Good, I'm glad it helped ;-)
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    www.simplylearnfinance.co.uk
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