BOOKKEEPING – HIGHER LEVEL
QUESTION 1, PAPER 2
SOURCE DOCUMENTS
BOOKS OF FIRST ENTRY
LEDGER ACCOUNTS
TRIAL BALANCE
FINAL ACCOUNTS TRADING, P & L, BALANCE
SHEET
Rule of Bookkeeping
Debit – Receiver
Credit- Giver
 The creditors’ ledger (CL) has a separate account for each creditor. A
creditor is a business we owe money to. A creditor is a liability.
 The debtors’ ledger (DL) has a separate account for each debtor. A
debtor is a business that owes money to us. A debtor is an asset.
 The general journal (GL) holds all other accounts.
 If an asset was bought, this is the receiving account – Debit the account
 If the asset was sold, this is the giving account – Credit the account
 Goods for resale – Debit Purchases, Credit Sales
An Account in the Ledger
BOOKKEEPING SHORT QUESTIONS
Will usually appear as a short question in Paper 1.




All Assets should be recorded in an account named after the asset e.g.
Machinery Account
All expenses should be recorded in an account named after the expense e.g.
Insurance Account
All goods purchased should be recorded in an account called Purchases Account.
All goods sold should be recorded in an account called Sales Account.
Answer
Credit Transactions
This applies where goods are bought and sold ON CREDIT. This means goods are
bought or sold now and payment is not received till a later date.
The following is how to treat credit transactions:
Selling on Credit
Sales Account and Debtors Account
Buying on Credit
Purchases A/C and Creditors Account (Name)
Returning goods to Creditor
Purchases Returns Account and
Creditors Account (Name)
Goods returned by a Debtor
Sales Returns A/C and Debtors
Account
Answer
Always look
at who’s
account are
you
preparing
Practice Questions
2015
2014
2013
2012
2009
2008
DAY BOOKS
Sales Day Book – For recording goods, for resale and sold on credit
Sale Returns Day Book – For recording the return of goods, for resale and
sold on credit.
Purchases Book – For recording the purchase of goods, for resale and on
credit
Purchase Returns Book - For recording the return of goods, for resale and
purchased on credit
Cash Book- For recording cash receipts, bank lodgements (debit), and cash
payments, cheque payments (credit)
General Journal- For recording transactions that are not recorded in the
books of first entry
DOUBLE – ENTRY SYSTEM
STEP 1: (Using 2009 Question)
 Write up the general journals, sales and sales returns books and
purchase and purchase return books, if asked to do so
 Make sure to record dates (including the year), document numbers and
folios
STEP 2:
 Post relevant figures to the ledgers
 Debit the receiving account, credit the giving account
STEP 3:
 Write up the analysed cash book.
 Enter figures in the bank column and in the analysis column. Record the
cheque and receipt numbers given
STEP 4:
 Post the figures to the relevant ledgers
 Debit the receiving account, credit the giving account
AND
STEP 5:
 Balance any accounts with entries on both sides (VAT, bank, debtors,
and creditors accounts)
STEP 6:
 Extract a trial balance. This is a list of all balances standing on the ledger
accounts and cash books at the end of this period. Debit balances go to
the credit column, credit balances go to the credit column. Both debit
and credit totals should be the same to show the accounts have been
completed correctly
General Journal shows:
 Opening and closing balances (ie The Trial Balance)
 All credit transactions not involving goods purchased for resale e.g.
I. Purchase of fixed assets on credit
II. Sale/disposal of fixed assets on credit
Debit - The
III. Bad debts written off
receiving
 The debit side must always equal the credit side
account
Example:
The books of Coyle Ltd showed the following opening and closing balances on
the 1 June 2010.
Buildings
Creditors Finn Ltd
€80,000
€22,000
Enter these balances in the General Journal and find the Ordinary Share Capital
balance.
Solution:
General Journal
Details
Date
01-Jun-01 Buildings
Creditor: Finn LTD
Ordinary Share Capital
Being the Assets, Liabilities and
Ordinary Share Captial)
F
Debit €
80,000
Credit €
22,000
58,000
80,000
80,000
POSTING TO THE LEDGER
Debit in the General Journal – Debit in the Ledger
Credit in the General Journal – Credit in the Ledger
General Journal
Buildings Account (Page 1)
Date
Details
F
Total
01/06/2001 Balance GJ1
Date
Details
F
Total
F
Total
80,000
Ordinary Share Capital Account (Page 2)
Date
Details
F
Total
Date
Details
01/06/2001 Balance GJ1
58,000
CREDITORS LEDGER
Finn Ltd Account (Page 1)
Date
Details
F
Total
Date
Details
F
01/06/2001 Balance GJ1
Total
22,000
The accounting system we use is called the double entry system because each €
is entered twice, once on the debit side and once on the credit.