The sales, purchases and returns journals, and the general journal Cambridge IGCSE Accounting revision
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In plain words
Transactions are not entered straight into the ledger. They are first listed in a book of prime entry, one for each kind of transaction, and the ledger is written up from those lists. It keeps thousands of small details out of the main accounts.
7 things to know
- A book of prime entry is where a transaction is first recorded, from its business document. The journals are lists. They are not part of the double entry.
- The sales journal lists credit sales of goods. Each one is debited to the customer's account in the sales ledger. The total for the period is credited to the sales account.
- The purchases journal lists credit purchases of goods for resale. Each one is credited to the supplier's account in the purchases ledger. The total is debited to the purchases account.
- The sales returns journal: each return is credited to the customer's account, and the total is debited to the sales returns account. The purchases returns journal: each return is debited to the supplier's account, and the total is credited to the purchases returns account.
- The general journal is for everything that has no other book: opening entries, non-current assets bought or sold on credit, the correction of errors, and year-end transfers. Each entry names the account to be debited and the account to be credited, with a short explanation called a narrative.
- Trade discount is a reduction in the list price, given to customers in the same trade or who buy in bulk. It is taken off on the invoice, and only the net amount is recorded anywhere in the books.
- Recording by hand needs no equipment or training, but it is slow and mistakes are easy to make. Digital recording is fast and accurate, and posts to the ledger automatically, but hardware, software and training cost money, and data can be lost or stolen.
Worked example
Goods with a list price of $500 are sold on credit to Omar, less 20% trade discount. State the amount entered in the sales journal and the ledger entries.
- Trade discount = 20% of 500 = $100. The invoice total is 500 − 100 = $400.
- $400 is entered in the sales journal. The discount itself is not recorded.
- Omar's account in the sales ledger is debited with $400.
- The $400 is part of the month's total, which is credited to the sales account.
Tips and tricks
- Only credit transactions in goods go in the four journals. Cash sales go in the cash book, and a van bought on credit goes in the general journal.
- Trade discount is never entered in the ledger. Cash discount is. Keep the two apart.
It lands in your notebook with its questions as flashcards.
The sales, purchases and returns journals, and the general journal: 6 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
What is a book of prime entry?
The ledger is written up from it.
In which book of prime entry is a credit sale of goods recorded?
It is written up from copies of the sales invoices.
Where is the total of the sales journal posted?
Each customer's account is debited with its own invoice.
A shop buys a delivery van on credit. In which book of prime entry is this recorded?
The purchases journal is only for goods bought to resell.
Goods are listed at $800 with 10% trade discount. What amount is recorded in the books?
Only the net amount, 800 − 80, is recorded.
Which is an advantage of recording transactions digitally?
One input makes both entries and updates the balances.
Quiz
6 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 7 marks. Write your answers on paper, then check them.
The sales, purchases and returns journals, and the general journal
Cambridge IGCSE Accounting 0452 · 7 marks · papermunch.org
Name ______________________________ Date ______________
State the ledger entries made from the purchases journal.[3]
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Each purchase is credited to the supplier's account in the purchases ledger. The total for the period is debited to the purchases account in the nominal ledger.
Goods are listed at $1200 less 25% trade discount. Calculate the amount entered in the purchases journal by the buyer.[2]
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$900. 25% of 1200 = 300, and 1200 − 300 = 900.
State two uses of the general journal.[2]
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To record the correction of errors. To record the purchase of non-current assets on credit. (Also: opening entries and year-end transfers.)
Answers: The sales, purchases and returns journals, and the general journal
- 1. Each purchase is credited to the supplier's account in the purchases ledger. The total for the period is debited to the purchases account in the nominal ledger.
- 2. $900. 25% of 1200 = 300, and 1200 − 300 = 900.
- 3. To record the correction of errors. To record the purchase of non-current assets on credit. (Also: opening entries and year-end transfers.)