topic 2 double entry bookkeeping

• Purchases - the purchase of goods from suppliers for resale to customers. Debit - goods come in
• Sales - the sale of goods to customers. Credit - goods go out
• Sales returns - goods returned to the business by customers. Debit - goods come in
• Purchases returns - goods returned to suppliers by the business. Credit - goods go out
• Sales ledger - contains all the personal accounts of credit customers (trade receivables)
• Purchases ledger - contains all the personal accounts of credit suppliers (trade payables)
• General ledger - contains all the other accounts, namely the impersonal accounts
• Double entry procedure - For every transaction two accounts are effected. One account will have the transaction on the debit side and the other on the credit side. The amounts recorded must be corresponding to ensure the fundamental principles of the accounting equation are followed. A=C+L
• Difference between cash and credit transactions - A cash transaction means that the goods are paid for at the time of the transaction, could be paid in cash or cheque. A credit transaction means the goods are paid for at a later date, giving an increase to trade receivables/payables