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Accounting system and accounting records (Purchases or creditors ledger,…
Accounting system and accounting records
Business transactions are nearly always recorded on a document
Source document:
Documents that contain the information that is put into an accounting system
Sales order: A customer provides a written order detailing the goods or services they wish to buy
Purchase order: A business sends a written order to a supplier for the purchase of goods or materials
Invoice from suppliers: A business buys goods or services from a supplier and receives an invoice from the supplier. The goods or services received should correspond to the details on the purchase order
Invoice sent to customers: A business sells goods or services to a customer and sends an invoice to the customer. The details on the invoice should correspond to the details on the sales order
Credit notes from suppliers for purchases returned or to customers for sales returned: sent out when the goods or services are returned to the supplier by the customer. Contains the same information as an invoice, but usually printed in red. Represents a negative sales invoice
Goods received note (GRN): Sent with goods as they are shipped to the customer. Used to book the goods into the warehouse, a copy is usually sent to the accounts department before an invoice can be paid
The ledger is a book that consists of pages called accounts
There is an account in the ledger for each different type of item the business wishes to analyse
Accounts can be personal accounts of the customers (debtors) which are kept in the sales or debtors ledger
Accounts can be personal accounts of suppliers (creditors) which are kept in the purchases or creditors ledger
Accounts can be impersonal, which includes accounts such as sales, purchases, wages, depreciation, stock, cash and bank, fixed assets, capital and liabilities etc. Will also include the total debtors and creditors of the business
Impersonal accounts are kept in the nominal ledger
Sales or debtors ledger
A collection of the accounts or records receivable from each customers
Contains an account or record for each customer
Invoices raised will be posted to the account to increase the customers indebtedness
Credit notes will be posted to reduce a customers indebtedness
Any cash received will be posted to the cash book and to the customers account to reduce their indebtedness
The balance column on the account shows at any one time how much is owing by that customer
Purchases or creditors ledger
A ledger for a supplier's personal account
Completed in a similar manner to the sales ledger
Contains an account or record for each supplier
Invoices received will be posted to the account to increased the amount owed to the supplier
Credit notes will be posted to reduce the business's indebtedness
Any cash paid will be posted to the cash book and to the suppliers account to the reduce the business's indebtedness
The balance column on the account shows at any one time how much is owed by the business to that supplier
Nominal (general) ledger
A ledger for impersonal accounts
Made up of all the non-personal accounts
Examples of accounts in the nominal ledger
Fixed assets at cost - a separate account for each type of fixed asset , eg motor vehicles, machinery
Provision for depreciation of fixed assets - a separate account for each provision, eg provision for depreciation of motor vehicles, provision for depreciation of machinery
Capital account - of owner
Stocks of finished goods
Total debtors
Total creditors
Sales income
Expense accounts - a separate account for each expense, e.g salaries, heating, bank charges & petrol
Total cash
These accounts form the basis for preparing the profit and loss account and balance sheet