2023/24 ACADEMIC YEAR

UGBS 205: FUNDAMENTALS OF

ACCOUNTING
WEEK 4- Recording transactions I
 Overview
• The accounting process begins with the recording of
transactions. However, transactions are first recorded
chronological in details in the books of original entry (journal).
This session introduce students to the first stage of recording
transactions in the books of original entry, which precedes the
double entry.

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 Learning Objectives
• At the end of this session, you should be able to
– Identify the books of accounting and explain their nature
and purpose
– Identify the kind of transactions to be recorded in each
type of journal
– Record transactions in the books of original entry

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 Reading List
• Read Chapter 11, 13 to 18 of Recommended Text –
– Chapters 5 & 7 of Marfo-Yiadom, Asante & Tackie
(2015)
– Chapters 11, 13, 14, 15, 16, 17, 18, and 20 of Wood, F. &
Sangster, A. (2008). Frank Wood’s Business Accounting 1.
Volume 1. Pearson Education.

• Other Financial Accounting text books available to

students

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 Introduction

• Accounting information are recorded first in the

prime books / books of original entry / journals.

• They are then posted to the ledgers (subsidiary and

general ledger)

• The main books of accounting are:

– Journals
– Ledgers
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 Books of Original Entry/Journal

• A book which records chronologically

(i.e. in order of date) and in detail the
various transactions of a trader or a
business.

• It is also known as Day Book because it

contains the account of every day's
transactions.
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6
 Characteristics of a Journal
• It is the first successful step of recording and
precedes the double entry system. A
transaction is recorded first of all in the journal.

• A transaction is recorded on the same day it

takes place.

• Transactions are recorded chronologically.

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 Advantages of a Journal
• Each transaction is recorded as soon as it takes place. So
possibility of any transaction being omitted from the books
of account is minimized.
• Since the transactions are kept and recorded in journal
chronologically with narration, it can be easily ascertained
when and why a transaction has taken place.
• Helps to keep the ledger tidy and brief.
• Journal shows the complete story of a transaction in one
entry.
• Any mistake in ledger can be easily detected with the help
of journal.
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 Types of Journals (Books of Original Entry)

Sales day book – for credit sales

Purchases day book – for credit purchases
Returns inwards day book – for returns inwards
Returns outwards day book – for returns
outwards
Cash book – for receipts and payments of cash
and cheques
General journal – for all other items and unusual
transactions.
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 Source Documents for Transactions
Sales (Credit & Cash)
 Invoices, Receipts
Purchases (Credit & Cash)
 Invoice, Receipts
Returns
 Debit note, Credit Note
Bank Transactions
 Cheques, bank statements
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Format of Sales/Purchases/Returns Journal

Name of Journal

Date Detail Ref LF Amt

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11
 Uses of General Journal
• Opening Entries
– When a businessman wants to open the book for a new
year, it is necessary to journalize the various assets and
liabilities before the new accounts are opened in the
ledger.
• Closing Entries
– When the books are balanced at the close of the
accounting period with a view to prepare final accounts it
is necessary that balance of all the income and expenses
accounts must be transferred to trading and profit and loss
account.

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 Uses of General Journal
• Rare Transactions Entries
– In business it may happen sometimes that transactions are usually
rare e.g. the purchase or sale of non-current assets, writing off bad
debts.

• Correction of Errors
– When an error is detected in the books, the same is rectified through
an entry in the journal proper

• Adjusting Entries
– Modification of the accounts at the end of an accounting period is
called adjustments.

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 Uses of General Journal
• Transactions with no special journal
such as:
– Distribution of goods as free sample.
– Distribution of goods as charity.
– Goods destroyed by fire.
– Goods stolen by employees.
– Exchange of one asset for another asset etc.

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 Format of General Journal
General Journal

Date Detail LF Dr Cr

Name of the account to be debited

Name of the account to be credited

The narrative

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 Cash Book
• A book of original entry in which transactions
relating only to cash receipts and payments are
recorded in detail.
• When cash is received, it is entered on the debit
or left hand side of the book.
• When cash is paid out, it’s recorded on the credit
or right hand side of the cash book.
• The cash book, though cash journal it also
represents the cash account of the ledger .
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 Cash Book
• Single column cash book:
– Records only cash receipts and payments. It has only one
money column on each of the debit and credit sides of the
cash book.

• Two column cash book:

– Consists of two separate columns on the debit side as well as
credit side for recording cash and discount.
– The discount column on the debit side of the cash book will
record discounts allowed and that on the credit side discounts
received.
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 Cash Book
• Three column cash book:
– One in which there are three columns on each side
- debit and credit side. One is used to record cash
transactions, the second is used to record bank
transactions and third is used to record discount
received and paid.

– One main advantage of a three column cash book is

that it is very helpful to businessmen, since it
reveals the cash and bank deposits at a glance
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 Format of Cash Book

Single Column Cash Book

Date Detail LF Cash Date Detail LF Cash

Two (Double) Column Cash Book

Date Detail LF Bank Cash Date Detail LF Bank Cash

Three (Treble) Column Cash Book

Date Det. LF Disc Ban Cash Date Det. LF Disc Ban Cash
k . k

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 Petty Cash Book
• It is a book in which petty cash (the sum
of money kept in hand) expenditures are
recorded.

• A petty cash book is generally maintained

on a columnar basis - a separate column
being allotted for each type of
expenditure.
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 Petty Cash Book
• Imprest system
– Under this system a fixed sum of money is given to the
petty cashier to cover the petty expenses for the month.
– At the end of a month the petty cashier submits his
statement of petty expenses to the chief cashier for
reimbursement (of the same amount spent).
– Thus, the imprest for the next month the same as it was at
the beginning of the current month.

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 Petty Cash Book
• Advantages of Imprest System
– It acts as a healthy check on the petty
cashier.
– Petty cash book remains up to date.
– It prevents unnecessary accumulation of
cash in hand and
– Thus the chances of defalcation of cash are
minimized.
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 Format of Petty Cash Book

Analysis of Expenses

Receipt Date Details Ref Total Postage Stationery T&T Fuel Sundry

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 Books of Accounting for Businesses

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 End of Session Questions
• Outline the books of original entry used in
recording transactions
• Identify four uses of the general journal
• Explain the imprest system used in the petty
cash book.

Godfred, Edem & Rita UGBS Slide 25