H.Randall Trial
H.Randall Trial
H.Randall Trial
Accounting
Harold Randall
Contents
Preface
vii
Topics grid
ix
12
4 Balancing accounts
19
21
23
II Financial accounting
27
28
36
39
43
48
56
62
14 Control accounts
66
15 Suspense accounts
76
16 Incomplete records
84
94
18 Departmental accounts
103
19 Manufacturing Accounts
110
20 Valuation of stock
117
Contents
21 Partnership accounts
125
22 Partnership changes
133
148
164
181
26 Business purchase
192
200
210
29 Company financing
227
vi
Contents
209
233
234
245
32 Process costing
249
33 Marginal costing
255
34 Budgeting
266
35 Standard costing
277
36 Investment appraisal
288
295
297
Index
353
Part I
The accounting system
Double-entry bookkeeping:
cash transactions
In this chapter you will learn:
that every transaction has two aspects
that double-entry bookkeeping records both aspects of a transaction
what ledger accounts are
the meanings of the terms debit and credit
how to record cash transactions in ledger accounts.
Credit
$
240
$
Mar 2 Cash paid
to suppliers
80
116
Example
(Here all transactions are recorded from the point of view
of Abduls business, not from the point of view of the
people with whom the business deals.)
Transaction 1 April 1. Abdul starts business as a trader by
paying $10 000 into a Bank account which he opens for
the business. Abdul gives, and the business receives,
$10 000. An account for Abdul will be opened (his Capital
account) and credited with his capital. The business
Bank account will be debited.
Abdul Capital
118
$
Apr 1
Bank
10 000
Bank
$
Apr 1
Abdul Capital
10 000
Abdul Capital
Apr 4
Sales
10 000
Apr 2
Motor Vehicles
2000
Motor Vehicles
$
Apr 2
Bank
Apr 7
Bank
10 000
Apr 2
Motor Vehicles
2000
Apr 3
Purchases
3000
Sales Returns
40
$
Apr 1
Abdul Capital
Apr 4
Apr 8
10 000
Apr 2
Motor Vehicles
2000
Sales
800
Apr 3
Purchases
3000
Purchases Returns
100
Apr 7
Sales Returns
40
Purchases Returns
$
Apr 8
3 000
Bank
$
Sales
Apr 7
Bank
Bank
100
Apr 4
3000
Abdul Capital
Purchases
Apr 1
Apr 3
Purchases
Bank
800
2 000
Apr 3
2000
Bank
Abdul Capital
Motor Vehicles
40
Apr 1
Apr 2
$
Abdul Capital
10 000
Sales Returns
Bank
Apr 1
10 000
Apr 2
Motor Vehicles
2000
800
Apr 3
Purchases
3000
Bank
$
Apr 1
Abdul Capital
Apr 4
Apr 8
10 000
Apr 2
Motor Vehicles
2000
Sales
800
Apr 3
Purchases
3000
Purchases Returns
100
Apr 7
Sales Returns
40
4000
Motor Vehicles
Sales
$
$
Apr 4
Bank
800
$
Apr 2
Bank
2 000
Apr 10 Bank
4 000
Abdul Capital
Apr 4
Sales
Apr 8
Purchases Returns
Apr 2
Motor Vehicles
2000
800
Apr 3
Purchases
3000
Apr 7
Sales Returns
100
5 000
40
4000
$
Apr 11 Bank
300
Abdul Capital
Apr 4
Apr 8
Apr 4
10 000
Apr 2
Motor Vehicles
2000
Sales
800
Apr 3
Purchases
3000
Purchases Returns
100
Apr 7
Sales Returns
Tania Loan
$
Apr 14 Bank
10 000
Rent Receivable
Rent Receivable
40
5 000
4000
300
1000
Apr 15 Wages
1200
5000
Wages
Transaction 9 April 12. Abdul pays rent on a warehouse
by cheque, $1000.
$
Apr 15 Bank
1 200
Bank
$
Apr 1
Abdul Capital
Apr 4
Apr 8
10 000
Apr 2
Motor Vehicles
Sales
800
Apr 3
Purchases
Purchases Returns
100
Apr 7
Sales Returns
5 000
2000
000
4000
1000
Rent Payable
Apr 12 Bank
Bank
40
1 000
$
Apr 1
Abdul Capital
Apr 4
Apr 8
10 000
Apr 2
Motor Vehicles
2000
Sales
800
Apr 3
Purchases
3000
Purchases Returns
100
Apr 7
Sales Returns
Abdul Capital
10 000
Apr 2
Motor Vehicles
2000
Apr 4
Sales
800
Apr 3
Purchases
3000
Apr 8
Purchases Returns
100
Apr 7
Sales Returns
Apr 1
5 000
300
300
40
4000
1000
40
4000
1000
Apr 15 Wages
1200
600
Drawings
Bank
5 000
Apr 16 Drawings
Apr 16 Bank
600
Exercise 1
Exercise 2
Complete the entries for the following table. The first
item has been done for you.
Debit account
Credit account
Bank
Rent Payable
Debit
account
Credit
account
Bank
Rent Receivable
Rent Payable
Bank
Bank
Noel Capital
Rent Receivable
Bank
Credit account
Bank
Purchase Returns
Bank
Office Equipment
Purchases Returns
Bank
Office Equipment
Bank
Credit account
Bank
Capital
Bank
Drawings
Capital
Bank
Drawings
Bank
Debit account
Credit account
Bank
Purchases
Bank
Purchases Returns
8 Drew cheque for $50 to pay for petrol for motor van.
Purchases
Bank
Purchases Returns
Bank
June 1 Farook commenced business by paying $15 000 into his business
Bank account.
Amna lent the business $5000.
*
**
Carriage inwards is the delivery cost added to the price of goods by the supplier.
Carriage outwards is the cost of delivering goods to a customer.
Credit account
500
Example
Lai sells goods to Chin for $500 on 31 May and gives Chin
until 30 June to pay.
In Lais books Credit the sale to Sales account and debit it
to an account for Chin.
$
May 31 Purchases
500
Goods returned
On 4 June Chin returns some of the goods costing $100
to Lai because they are damaged.
In Lais books Credit Chins account and debit Sales
Returns account.
Chin
May 31 Sales
500
$
Jun 4
Sales Returns
100
$
May 31 Chin
Sales Returns
500
Chin
May 31 Sales
Sales
$
Lai
Jun 4
Chin
100
500
Chin
$
May 31 Sales
Lai
$
Jun 4
Purchases Returns
100
500
Jun 4
$
May 31 Purchases
Lai
100
Jun 28 Chin
380
$
Jun 28 Chin
20
Purchases Returns
Jun 28 Bank
100
May 31 Purchases
20
Bank
$
$
Jun 28 Lai
380
Discounts Received
$
$
Jun 28 Lai
20
Example
Andrew had the following transactions in May.
May 1 Purchased goods from David. The goods cost $1000 less 10%
trade discount.
2 Purchased goods from Rodney for $1600 less 15% trade discount.
3 Purchased a computer for the office on credit from Bernard for
$2000.
4 Sold goods to Mario for $800.
5 Returned goods which had cost $100 after trade discount to
David.
6 Purchased goods from Ludovic for $700 less trade discount of
20%.
7 Sold goods to Ravin for $500.
8 Mario returned goods which had been sold to him for $40.
500
380
Discounts Allowed
20
Bank
$
Jun 4
100
380
500
Purchases Returns
$
Sales Returns
Jun 28 Bank
9 Received cheque from Ravin for amount owing, less cash discount
of 5%.
10 Paid amount owing to David, less cash discount of 5%.
Purchases
$
May 1 David
900
May 2 Rodney
1360
May 6 Ludovic
560
Purchases Returns
$
May 5 David
David
$
100
May 10 Bank
760
Sales
$
May 1 Purchases
100
900
May 4 Mario
800
May 7 Ravin
500
40
Sales Returns
Rodney
$
May 11 Bank
May 11 Discounts Received
$
$
1292
May 2 Purchases
May 8 Mario
40
1360
Discounts Allowed
68
Bernard
$
May 11 Bank
2000
May 9 Ravin
25
May 12 Mario
38
2000
Discounts Received
Ludovic
$
May 12 Bank
May 12 Discounts Received
$
$
532
May 6 Purchases
560
28
Mario
$
May 4 Sales
40
May 11 Rodney
68
May 12 Ludovic
28
Office Computer
$
800
May 10 David
40
$
May 3 Bernard
2000
722
Bank
38
$
Ravin
$
May 7 Sales
500
May 9 Ravin
475
May 10 David
May 12 Mario
722
May 11 Rodney
1292
475
May 11 Bernard
2000
25
May 12 Ludovic
532
$
May 9 Bank
May 9 Discounts Allowed
$
760
Calculations
Purchases:
Amount before
trade discount
Trade discount
$
From:
David
1000
(10%) 100
900
Rodney
1600
(15%) 240
1360
Ludovic
700
(20%) 140
560
Cash settlements:
By
Cost to Andrew
Amount before
cash discount
Amount paid
Ravin
500
25
475
Mario
760
38
722
Exercise 1
Account to be debited
Account to be credited
Purchases $480
Sharon $480
Purchases $480
Discounts Allowed $120
Sharon $600
Purchases $600
Sharon $600
Purchases $600
Sharon $480
Discounts Received $120
Lai and Chin paid Geraud the amounts they owed him after
deducting 5% cash discount.
10
Account to be credited
Bank $608
Discounts Allowed $32
Shirley $640
Bank $608
Discounts Received $32
Shirley $640
Bank $608
Discounts Allowed $152
Shirley $760
Bank $608
Discounts Received $152
Shirley $760
7 Purchased goods from Astle for $7000 less trade discount of 20%.
Astle allowed Fleming 5% cash discount.
12 Sold goods to Flower for $2000 less trade discount of 10%, and
allowed him cash discount of 4%.
10 Purchased goods from Cairns for $4200 less 10% trade discount.
Cairns allowed Fleming 5% cash discount.
14 Fleming settled all accounts owing to his suppliers by cheque,
taking advantage of the cash discount in each case.
Required
Post the transactions listed above in Flemings books in
good form.
Required
Post the transactions listed above in Streaks books in
good form.
11
Use
Sales returns book (or sales returns To record all goods returned from customers. When
journal, or returns inwards journal) customers return goods that were bought on credit they
are sent credit notes showing the amount credited to
their account for the returns. The sales returns book is
prepared from the copies of credit notes sent to
customers.
Purchases journal (or purchases
day book)
Cash book
12
Example
Example
Amount of invoice
$
May 1 Atapattu
2350
May 4 de Silva
1746
May 6 Arnold
520
Atapattu
$
May 1 Sales
$
May 3 Atapattu
350
May 5 de Silva
146
May 7 Arnold
60
5000
May 5 Fernando
3600
May 7 Mubarak
2200
May 6 Sales
520
May 3 Atapattu
350
May 4 de Silva
1746
May 5 de Silva
146
May 6 Arnold
520
May 7 Arnold
60
5 000
May 6 Vaas
May 5 Fernando
3 600
May 7 Fernando
May 7 Mubarak
2 200
60
1000
May 2 Purchases
5000
$
May 7 Purchases Returns
600
$
1000
600
May 5 Purchases
3600
Mubarak
$
$
May 7 Purchases
556
May 2 Vaas
Fernando
2350
4616
$
May 6 Purchases Returns
May 1 Atapattu
10 800
146
Vaas
600
Purchases journal
1746
Arnold
1000
350
$
May 4 Sales
Sales journal
Amount of invoice
May 2 Vaas
May 7 Fernando
2350
de Silva
May 6 Vaas
2200
1600
Sales
$
$
May 7 Sales journal total
4616
Sales Returns
$
13
Purchases
Bank
Discounts
(allowed)
$
Purchases Returns
$
$
May 7 Purchases returns
journal total
1600
May 7
Attapattu
May 7
de Silva
May 7
Arnold
Bank
$
100
1900
80
1520
23
437
Discounts
(received)
$
Bank
200
3800
150
2850
110
2090
May 7
Vaas
May 7
Fernando
May 7
Mubarak
203
460
2350
Discounts
(allowed)
(received)
1900
100
1746
Bank
350
de Silva
May 4 Sales
Discounts Bank
$
$
May 1 Sales
Bank
Atapattu
146
1520
80
Arnold
The words allowed and received are usually omitted
because bookkeepers know which is which.
$
May 6 Sales
520
May 7 Bank
cash book
When a payment is received from a customer who has
deducted cash discount, enter the amount of the discount
in the discounts allowed column next to the amount
received in the bank column.
Enter discounts received from suppliers in the
discounts received column next to the amount paid in the
bank column.
Example
All payments due from customers and all payments to
suppliers in 3.2 were settled on 7 May. In each case, cash
discount of 5% was allowed or received.
60
437
23
Vaas
$
May 6 Purchases Returns
1000
May 7 Bank
3800
$
May 2 Purchases
5000
200
Fernando
$
May 7 Purchases Returns
May 7 Bank
May 7 Discounts Received
600
$
May 5 Purchases
3600
2850
150
Mubarak
$
May 7 Bank
May 7 Discounts Received
14
2090
110
$
May 7 Purchases
2200