Recording and Accounting for Credit Transactions

Interactive learning module - Fill in the blanks to test your knowledge

Instructions

Fill in the blanks in the statements below to test your knowledge. Click "Check Answers" to see your results. If in doubt, you should go back to your BPP Interactive Text and revise first.

Sales and Receivables

The sales day book is used to keep a list of all the

and

sent out to customers each day.

The entries in the day books are posted toaccounts in the receivables ledger.

The double entry is completed by posting the daily totals from the day books. Sales day book totals are posted DR Receivables control account, CR sales. The sales returns day book totals are posted DR Returns inwards, CR Receivables control account.

If the business is sales tax registered, sales tax will need to be accounted for. The sales day book postings would be DR Receivables control account, CR Sales (net of sales tax), CR Sales tax account.

Theledger contains the individual personal accounts showing what each customer owes to the business.

Control is kept over the receivables ledger by comparing the totals of the individual accounts with the balance on the receivables control account.

Anof receivables breaks down the receivable balances on the receivables ledger into different periods of outstanding debt.

Old debts may be written off to

debts.

TRY QUESTIONS 3.1 TO 3.7

Purchases and Payables

The purchase day book is used to keep a list of all the invoices received from

of goods and services to the business.

The purchase returns day book is used to keep a list of all

received from suppliers.

The purchase day book will

all invoices between different types of purchase and expenses.

The entries in the day books are posted to

accounts in the payables ledger.

The double entry is completed by posting the daily totals from the day books. Purchase day book totals could be posted DR Purchases, DR Expenses, DR Non-current, DR sales tax, CR Payables control account.

The personal accounts, showing how much is owed to each supplier, are contained in the

ledger.

payables consist of those liabilities which relate to the trade of the business.

Other payables include

and

An age analysis of payables lists payables balances, analysed between different 'ages' of debt.

Entries offset balances on the receivables and payables ledgers which are in the names of the same individual.

TRY QUESTIONS 3.8 TO 3.10

Control Accounts

Control accounts act as an

on the accuracy of the accounting records.

Control account

should be carried out at regular intervals.

The

control account provides a check on the accuracy of postings made to the personal accounts in the receivables ledger.

The

control account provides a check on the accuracy of postings made to the personal accounts in the payables ledger.

TRY QUESTIONS 3.11 TO 3.18

Possible Pitfalls

Mistakes you know you should avoid:

Ignoring sales tax.
Ignoring double entry bookkeeping – exam questions are set on the double entry postings.