HELP NEEDED level 2 bookkeeping transaction mock exam questions

L3X

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

SimplyLearnFinance

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?

L3X

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

L3X

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?

SimplyLearnFinance

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.

SimplyLearnFinance

Please see attached. Hopefully this helps.

L3X

Hi @SimplyLearnFinance thank you very much for the further explanation that's much clearer now

SimplyLearnFinance

Good, I'm glad it helped ;-)