Books of original entry

Question 1

The Books of original entry

Answer 1

Transactions are first recorded here. The details about transactions are listed in these books by dates order.

Question 2

The Books of original entry advantage

Answer 2

the books of original entry provide totals, reducing both the time needed to make entries in the ledger accounts and the volume of detail shown In them

Question 3

Use of Sales journal and its source document

Answer 3

Sales of goods on credit
invoice issued by a customer

Question 4

Use of Purchases journal and its source document

Answer 4

record ONLY credit purchases
invoice issued by a supplier

Question 5

Use of Return inwards journal and its source document

Answer 5

Returns on goods previously sold on credit
source- Credit note issued to a customer

Question 6

Use of Return outwards journal and its source document

Answer 6

Returns of goods previously purchased on credit

Also know as Purchases returns day book or
purchases returns journal

source-Credit note received from a supplier

Question 7

Use of Cash book and its source document

Answer 7

Receipts and payments that affect cash In hand
and cash at bank

source- Bank statements, Cheque counterfoils, Cash receipts or vouchers

Question 8

Use of The General journal and its source document

Answer 8

Transactions that cannot be recorded in the
other books of original entry

The purchase and sale of fixed assets

Correction of errors

Writing off bad debts

Opening entries

Closing entries

Recording adjustments

Question 9

Use of Petty cash book and its source document

Answer 9

Cash payments of small value
Petty cash voucher is source

Question 10

Identify source documents related to books of original entry

Answer 10

sales invoice
purchases invoice
credit notes
debit note
petty cash vouchers
receipts from cash transactions
non-cash transactions.

Question 11

Distinguish between cash and credit transactions

Answer 11

Cash- immediate payment
credit- delayed payment

Question 12

Distinguish between trade and cash discounts

Answer 12

Trade discount- This is a reduction in the unit price of items purchased for resale but the following conditions must be met:
* The businesses must be engaged In the same line of activity.
* A large order must be placed.

Cash discount- This is to get the buyer to pay immediately before the scheduled date so the business can ensure it has adequate cash resources.

Question 13

Distinguish between discounts allowed and discounts received

Answer 13

Discounts allowed are given to the customers
of a company so as to Induce those who owe money to settle within a time specified by the company.

A discount received occurs when a business takes advantage of cash discount terms offered by a supplier
*recorded as income in the income statement of the business.

Question 14

What is the significance of the balances brought down on the cash book

Answer 14

A credit balance on the bank account would Indicate that the business was overdrawn at the bank

The balanced cash book reveals how much money in cash and at the bank the business has

Question 15

What is a suspense account

Answer 15

A suspense account is a general ledger account in which amounts are temporarily recorded.

Question 16

Advantages of General Journal

Answer 16

It reduces the risk of only entering the item once only instead of having double entry

It makes fraud by book keepers more difficult

Question 17

The difference between the 3 column and 2 column cash book

Answer 17

The difference between the 3 column and 2 column cash book is the 2 column cash book does not account for discounts.

Question 18

Imprest system

Answer 18

senior cashier gives the petty cashier a sum of money to make petty payment. This is called a float.