Scribd
Upload
126 views3 pages

Double Entry Class Notes

The document outlines the double-entry accounting system for recording purchases, sales, and returns, emphasizing that purchases are recorded at cost and sales at selling price. It details the accounting entries for cash and credit transactions, including how to handle returns. A summary table is provided for quick reference on debits and credits for various transaction types.

Uploaded by

careerlaunchtutoring96
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
126 views3 pages

Double Entry Class Notes

The document outlines the double-entry accounting system for recording purchases, sales, and returns, emphasizing that purchases are recorded at cost and sales at selling price. It details the accounting entries for cash and credit transactions, including how to handle returns. A summary table is provided for quick reference on debits and credits for various transaction types.

Uploaded by

careerlaunchtutoring96
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Class Notes: Double Entry Records for Sales, Purchases, and Returns

1. Purchases and Sales Accounts

Even though purchases and sales involve the same goods, they are recorded separately.

- Purchases are recorded at cost price

- Sales are recorded at selling price

We use:

- Purchases Account for goods bought

- Sales Account for goods sold

The Inventory Account is only used to record goods remaining at the end of the financial year.

2. Double Entry Principles Apply

The same double-entry rules used for assets and liabilities apply to purchases, sales, and returns.

3. Purchases

a) Goods Purchased for Cash or Cheque:

- Purchases Account: Debited

- Cash/Bank Account: Credited

Example: Bought goods for $500 in cash:

Dr Purchases $500

Cr Cash $500

b) Goods Purchased on Credit:

- Purchases Account: Debited

- Supplier's Account: Credited

Example: Bought goods worth $800 on credit:

Dr Purchases $800

Cr ABC Ltd $800

When payment is made:

Dr ABC Ltd $800


Class Notes: Double Entry Records for Sales, Purchases, and Returns

Cr Bank/Cash $800

4. Sales

a) Goods Sold for Cash or Cheque:

- Sales Account: Credited

- Cash/Bank Account: Debited

Example: Sold goods for $300 in cash:

Dr Cash $300

Cr Sales $300

b) Goods Sold on Credit:

- Sales Account: Credited

- Customer's Account: Debited

Example: Sold goods worth $1,000 on credit:

Dr James $1,000

Cr Sales $1,000

When payment is received:

Dr Bank $1,000

Cr James $1,000

5. Returns

a) Purchases Returns (Returns Outwards):

- Purchases Returns Account: Credited

- Supplier's Account: Debited

Example: Returned $100 worth of goods:

Dr ABC Ltd $100

Cr Purchases Returns $100

b) Sales Returns (Returns Inwards):


Class Notes: Double Entry Records for Sales, Purchases, and Returns

- Sales Returns Account: Debited

- Customer's Account: Credited

Example: Customer returned goods worth $200:

Dr Sales Returns $200

Cr James $200

Summary Table

Transaction Type | Debit | Credit

-------------------------------|------------------|---------------------

Cash Purchase | Purchases | Cash/Bank

Credit Purchase | Purchases | Supplier

Payment to Supplier | Supplier | Cash/Bank

Cash Sale | Cash/Bank | Sales

Credit Sale | Customer | Sales

Payment from Customer | Cash/Bank | Customer

Purchases Return | Supplier | Purchases Returns

Sales Return | Sales Returns | Customer

You might also like