GRADE 10
ACCOUNTING
Bookkeeping of a sole trader
Credit transactions
CREDIT TRANSACTIONS
•➢ Credit purchases
• ➢ Returns and allowances
CREDIT TRANSACTIONS
•A credit transaction is when the Trader gets in
debt to obtain the items he wants.
•For a business to sell goods the trader needs
to buy these goods and sell them at a mark up
price to make a profit.
•Creditor is a supplier that the business owes
money to. This makes the Creditor a liability to
the business.
•Some creditors can give the trader 30, 60 or
90 days to pay/settle their debts.
ACCOUNTING CYCLE
1.
2.
3.
4.
5.
6.
Source document
Subsidiary Journal
Posting to general ledger
Posting to debtors & creditor ledger
Reconciling
Trial balance
7. Financial statements. ❖
We will focus on 1 to 2
Todays class we focus on
• 1.Returns (creditors
allowance)
These are the products that we
bought on credit and are taken
back to business we bought them
from
When we return these products
the money that we owe to them
will be decreased ,therefore this
will decrease out creditors on a
debit side and also decrease the
trading stock on the credit side
• 2. Discount received
• When we buy on credit and we
pay in time that is required by
our creditors , our creditors
may give us a discount either
for paying early or buying in
bulk or being a regular
customer
• A discount received will debit
or decrease the creditors
control account showing the
decrease on the balance we
will pay
Returns and allowances
• After a business buys and received the goods and then they are realize
they are satisfied with the with some of the products they bought .
• There are many reasons why traders can be unsatisfied
• Goods are damaged
• Goods have expired
• Goods delivered are of wrong quality or quantity
• Etc.
• When the trader returns goods the trader issues a debit note together
with the damaged goods claim the allowance and keep the duplicate
credit note to record the transaction the creditors allowance journal
• The supplier will then issue a credit note and accept the returns
QUESTIONS FROM
THE CLASS
Discussion
• What does it mean if a creditor gives
you a discount when paying your
account?
• What effect will this have on the
amount you have to pay?
• What entries will have to be made in
the journal to record?
• How would you post these
transaction to the ledger?
CLASS DISCUSSION
ANSWER THE
FOLLOWING
QUESTIONS
Now leaners go do a pre reading
on how we will account for
returns and discount on the
creditors control and t
CONCLUSION