1.Introduction to the Accounting System
2.The Accounting Equation and Double Entry Bookkeeping
3.Mastering Double Entry
4.Books of Prime Entry
5.Checking Payments and Prompt Payment Discounts
6.Completing the Cash Book
7.Posting the Cash Book
8.Petty Cash
9.The Trial Balance and Exam Preparation
1.Introduction to the Accounting System
•
The Accounting Process
•
Purchasing Documents
•
Delivery Documents
•
Discounts and Invoice Calculations
(a) The Accounting Process
Financial transactions are recorded on a range of
documents: Price list, quotations, Purchase orders,
invoices, credit notes, delivery notes and more.
Book of prime entry: Invoices are recorded in lists.
Information from source documents are recorded in
the various books of prime entry (also known as day
books) You have a total1.
-
-
-
T accounts (general ledger): Total1 is recorded on T
accounts (daily, weekly, monthly, depending the size
of the organisation). Then the accounts are balanced
and the numbers entered into a master list know as
the trial balance.
Trial Balance: After the T accounts are balanced,
they are recorded (we will use the trial balance to
check our work for errors)
Financial statements: Finally, the information is
taken from the Trial Balance and used to calculate
the profit or loss and to produce the financial
statements.
(b) Purchasing documents
Source documents (doc that records information): email, Price list, form to record a
customer purchase (purchase order PO) or to make a payment (remittance advice).
(c) Delivery documents
Once goods have been ordered, they’ll be despatched to the customer and with each
delivery there’ll be a Delivery Note.
When we sell or buy goods It´s important to be sure that the customer´s management
(customer or supplier) have agreed the purchase. Prices are agreed and correct,
discounts must be authorised and adhere the company policies.
A Delivery Note confirms what goods are being delivered and whether or not it’s the
whole order or just a part of the order; this is important, as it confirms to the
customer what has been sent and whether or not they should expect further
deliveries. It is sent by the supplier to the customer. The customer should check the
delivery note against the goods that have been delivered and notify the supplier
immediately of any discrepancies.
Price lists: These are company-wide agreed prices for standard goods and are often
pubished for all to see. We all Access theses regularly in our day-to-day lives and
know how much customers relay on the information to make decisions.
Discount policies: This is an internal document which states when the company will
give discounts and to whom. Each customer will then have any discount agreements
listed with the customer details. It is important to make sure that sales prices are clear
and correctly applied in order to control our income against our expenses. Good
pricing will help competitiveness but it is important to control prices at a level that is
profitable.
Quotations: These are given to potential customers for on-off sales, for example, if
you want a new carpet for a room in your house, even though there is a price list for
carpets, you will get a quotation. Every house is slightly different, with different sized
romos.
Purchase order (PO): This confirms the customer´s agreement to the purchase. This
document is provided by the customer. It is important to have evidence that the
customer’s management has agreed the purchase (credit or cash) before we send the
goods. This is a key document because it allows the supplier to know that the
purchase has been authorised within the customer´s company. It´s a kind of
guarantee. Without a PO the supplier may find it difficult to get payment from the
customer.
Customer order: This is a document which details an order received from a customer.
It seems a lot of paperwork just to order goods but this paperwork is in place to
ensure that everything is done properly. It´s important for every organisation to
control their money and these policies and documents help that process.
Some customers will have their own document which records which goods have been
received, when the goods arrived and who checked the delivery. This document is
called a goods received note. This internal document is often in place to make sure
that staff actually check deliveries rather than just take them in. Making the staff
identify on the form who took the delivery makes it easer to ask questions if problems
are discovered after delivery. It also makes the staff more careful as they know it will
be easy to hold them accountable.
Occasionally goods will have to be returned to the supplier and when this occurs, the
customer will complete a goods returned note. This allows the customer to identify
the problems with the goods as well as clearly stating what is being returned.
Now that we have discussed the documents that are used for delivery we need to
think about payment.
After the goods have been delivered, an invoice will be sent. When calculating the
invoice, the supplier will check what was ordered and what was sent by looking at the
purchase order, the delivery note and any goods returns notes that have been
received at the time of invoicing. If there is any discrepancy then the person
calculating the invoice must check with the warehouse staff before calculating and
sending the invoice. It´s important to understand what has happened so that the
invoice is sent for the correct amount.
So you see that throughout the process there has been a complete document trail,
identifying what was ordered, delivered and invoiced. Both the company and the
supplier have exchanged documents so that there is no confusion and everyone
knows what is taking place.
Paying-in Slip
Remittance
Order
1.Source of documents
2.Books of Prime Entry
3.Accounts
4.Trial Balance
5.Financial Statements
DEAD
Debit
Expenses
Assests
Drawings
CLIC
Credit
Liabilities
Income
Capital
(d) Discounts and Invoice Calculations
Before we calculate invoices, we need to understand three main
discounts used, which are:
1.Bulk discounts – these are given when customers buy many of the
same item and applied only to the agreed items.
2.Trade discounts – these are given to agreed customers and applied to
a whole invoice before calculating VAT. And finally,
3.Prompt payment discounts – these are given to encourage the
customer to pay quickly and only taken off when payment is made
within an agreed time.
----1) Check the PO and delivery notes to see:
Same company name on them
Any reference numbers must match
Description of the goods ordered and delivered
Product codes
Quantity
Prices between them, and match our price list
2) Complete the invoice as it would be if there were no discounts
Top: name, address,
Account N°
Invoice N° (correlative)
PO N°
Tax date: today
Product description, quantity,
Apply discounts per line
Total per item.
SUB total
Apply trade discount (FOR ALL ITEMS agreed with the customer, customer
records)
SUB TOTAL MINUS TRADE DISCOUNT
Calculate VAT (20%)
Grand total plus VAT (total invoice)
720
1053,93
Al momento de la venta
al credito
Cliente pago una factura
al credito por lo que
ahora se debe “saldar” la
cuenta por cobrar
96
118.80
Al momento de la
compra al credito