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Accounting reading week 3
Chapter 3 to page 34
Purchases and sales:
For immediate payment:
Common business transactions are to buy and sell goods
These transactions are recorded in the purchases and sales accounts respectively
Eg a shoe shop will buy shoes from the manufacturer this will be recorded as a debit in the purchases account. ...
Extracting a trial balance:
If the debit and credit totals are equal this proves that the accounting records are arithmetically correct
The heading for a trial balance gives the name of the business, the date it was extracted i. ... the end of the accounting period
The figure inserted for each account is the figure brought down after the accounts have been balanced
As well as the name of each account it is quite normal to show in the trial balance the account number. These can be listed in a separate folio’ or reference column
Debit and credit balances:
Certain accounts always have a credit balance and others always have a debit balance
See page 65 for list
If the trial balance doesn’t balance
The procedure for finding errors is as follows:
Excluding the obvious:
Calculate the amount by which the trial balance is wrong then check the accounts for a this figure
Halve the amount and repeat
If the error is still not found it is necessary to check the book-keeping transactions since the date of the last trial balance by going back to the original documents and primary accounting records
Errors not shown by a trial balance:
Error of omission:
Transaction has been completely omitted
Reversal of entries:
Entries have been made on the wrong sides of the accounts concerned
Mispost / error of commission:
Transaction is entered into the wrong person’s account
Usually involves debtors and/or creditors
Error of principle
Transaction is entered in the wrong type of account
Error of original entry (or transcription)
Wrong figure is entered on both accounts.
Approximate Word count = 1902
Approximate Pages = 7.6
(250 words per page double spaced)
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