LESSON 10: 200824 – Buying on Credit Transactions.
(summary)
Now we will be looking at the flip side of the coin in terms of credit transactions. If we (our
business) buy on credit what does it mean:
- We as a business receives Credit
- The business that extending Credit to us, becomes our Creditor
- This means that we must pay someone at a later stage
- The Creditor is a liability to our business.
13 July 2020 – Let’s recap on how to enter the first transactions in the Creditors Journal
See this introduction for a better understanding:
See the following example of how the transactions are set to book. Follow the arrows to
see how it is posted.
After the daily transactions are written up in the Creditors Journal, the Journal is totalled at
the end of month and the totals are posted to the General Ledger, which is the next step in
the ACCOUNTING CYCLE.
Remember there is 2 sections in the General Ledger, ie the Balance Sheet Section (which is
where the Creditors Control will reflect) and the Nominal Account Section (where income
and expense accounts will reflect).
Please see the following step by step explanation of the process to post the total of the
column of the Journal to the General Ledger and then also the individual items that are in
the Sundries Accounts Column :
Remember that the Journal reflects the T-account and the General Ledger is the T-account.
At the en of the day the 2 sides of your book needs to balance.
Once you have posted all your journals to the General Ledger, the accounts will be balanced
or closed off and transferred to the Trial Balance.
Let’s do a few exercises: