LESSON
GRADE 10
7
SOLE TRADER
ACCOUNTING CONCEPTS
WORKSHEET 1
Transaction
ACCOUNTING CYCLE
A transaction takes place between the business and a person outside the business.
It is an activity with a monetary (money) value that takes place in the business. Each
transaction must be recorded in the books of the business
Accounting period/
financial period
It is a period of 12 months in which the financial position of the business is determined,
for example 1 March 2010 to 28 February 2011
Accounting cycle
The accounting cycle is the cycle from when the transaction takes place to the end of
the financial period when the financial position of the business is determined
ACCOUNTING CYCLE
1
Daily
Transaction takes place
Transaction is recorded on source documents
Source documents are used to record transactions in books of first entry –
In the subsidiary journals
- Cash Receipt Journal (CRJ) – record all money received
- Cash Payment Journal (CPJ) – record all money paid out by cheque
- Petty Cash Journal (PCJ) – record all small cash payments
- Debtors Journal (DJ) – record all credit sales
- Creditors Journal (CJ) – record all credit purchases
- Debtors Allowance Journal (DAJ) – record all returns by debtors
- Creditors Allowance Journal (CAJ) – record all returns to creditors
- General Journal (GJ) – record all transactions not recorded in any of the other
journals
- Salaries Journal (SJ) – record all salaries earned monthly by employees
- Wages Journal (WJ) – record all wages earned weekly by employees
7 Accounting Grade 10
Transaction
Source document
Journals
1
2
Monthly
Ledgers
Posting takes place from the subsidiary journals to the ledgers
1 - General ledger
It contains all the accounts that are a summary of all the transactions of the business.
Each account has a debit side and a credit side.
The accounts are in the form of a T, referred to as the T-account
2 - Debtors ledger
It is the accounts of each individual debtor.
3 - Creditors ledger
It is the accounts of each individual creditor.
3
Monthly
A Trial Balance to check the accuracy of the ledgers
4
Pre-Adjustment
Trial Balance
Year-end
Year-end: Balance all accounts
Year-end adjustments are made if necessary
Post-Closing Trial Balance
Final accounts:
Financial Statements:
Trading Account
Profit and Loss Account
Income Statement (shows the net profit)
Balance sheet (shows the financial position of the business)
Adjustments
Post-Closing
Trial Balance
Final Accounts
Financial
Statements
ACTIVITY 1
Look at the following list and tick off which ones are journals. The first one has been done for you.
Cash Receipts

Pre-adjustment
Income Statement
Creditor’s allowance
Post-closing
Petty cash
Trading
Ledger
Debtor’s Allowances
Adjustment
Wages
Salary
Financial
Transaction
Creditor’s
Accounting cycle
Source documents
Debtor’s
Balance sheet
Accounting
Cash Payments
General
Accounting period
Profit & loss
7 Accounting Grade 10
2
WORKSHEET 2
IDENTIFYING WHICH JOURNAL TO USE
The following flow chart can be used to help identify which journal will be used for each transaction.
IS MONEY INVOLVED?
(cash, paid, bank, deposit, receipt, cheque –
indicate that cash is involved)
OR
Yes
No
OR
OR
Is money
being
received?
Is money
being
paid?
Buying?
Selling?
Returning
g
Other?
CJ
DJ
DAJ
or
CAJ
GJ
Wages
Salaries
OR
CRJ
Pay by
cheque?
CPJ
Pay with
cash?
PCJ
STEP 1 Read the transaction e.g. paid wages by cheque.
2 Decide if money is involved. Use the key words to help you decide. e.g. the transaction
mentions paid and cheque so the answer will be yes.
3 If your answer is yes, decide if money is being received or paid e.g the word paid is used.
4. Ask yourself if the money is paid by cheque or with cash e.g. the word cheque is mentioned.
5. We can then see that the Cash Payments journal is to be used.
If the answer to no. 2 above was no then:
3. We have to ask whether we are buying, selling, returning or other transaction. (NB. We have
said that no money is involved!)
4. We will then be able to decide which journal should be used.
7 Accounting Grade 10
3
ACTIVITY 2
Using the chart above identify which journal will be used for the following transactions.
1.
Paid by cheque for rent expense
2.
Received money from the owner as capital
3.
Paid wages from petty cash
4.
Bought goods on account
5.
We returned some of the goods bought
6.
Sold goods to debtors on credit
7.
Debtors returned some of the goods that we
sold to them.
ACTIVITY 3
Using the chart above identify which journal will be used for the following transactions.
1.
Sold goods and received a cheque
2.
Paid for Water and Electricity by cheque
3.
Sold goods on credit
4.
Paid for stationery from petty cash
5.
Bought goods on credit
6.
Issued a receipt for money paid to us.
7.
The owner deposited money into the bank
account.
7 Accounting Grade 10
4
ANSWERS
7
ACTIVITY 1
Cash Receipts

Pre-adjustment
Income Statement
Creditor’s allowance

Post-closing
Petty cash

Trading
Ledger
Debtor’s Allowances

Adjustment
Wages

Salary
Financial
Creditor’s
Transaction

Accounting cycle
Source documents
Debtor’s
Balance sheet
Accounting
Cash Payments


Accounting period
General


Profit & loss
ACTIVITY 2
1.
Paid by cheque for rent expense
CPJ
2.
Received money from the owner as capital
CRJ
3.
Paid wages from petty cash
PCJ
4.
Bought goods on account
5.
We returned some of the goods bought
6.
Sold goods to debtors on credit
7.
Debtors returned some of the goods that
we sold to them.
CJ
CAJ
DJ
DAJ
ACTIVITY 3
1.
Sold goods and received a cheque
CRJ
2.
Paid for Water and Electricity by cheque
CPJ
3.
Sold goods on credit
4.
Paid for stationery from petty cash
5.
Bought goods on credit
6.
Issued a receipt for money paid to us.
CRJ
7.
The owner deposited money into the bank
account.
CRJ
7 Accounting Grade 10
DJ
PCJ
CJ
5
CHALKBOARD SUMMARY
TRANSACTION
Trial Balance
Year End
Year end Adjustments
Post closing Trial Balance
Final Account:
 Trading
 Profit & Loss
Financial Statements
 Income Statement
 Balance Sheet
Documents
Docume
nt
Ledger
Journal
General Ledger
Balance sheet section
Nominal section
Debtor’s Ledger
Creditor’s Ledger
7 Accounting Grade 10
Cash Receipts
Cash Payments
Petty Cash
Debtors
Creditors
Debtor’s Allowances
Creditor’s Allowances
General
Salaries
Wages
6