Source documents contd. Credit Note

2. 
   Special journal: This journal is used to record only specific transactions. E.g sales, purchases, cash, credit, purchases return, sales return etc.
   

Special Journal

1. 
   Begin by writing the name of the business as a heading.
   
2. 
   Write the name of the document, i.e Journal entries and also include the last day of the month.
   

3. 
   Draw the format of the Journal.
   
4. 
   Enter your entries but do not forget to conclude with entries with a narration. A narration helps to explain the transaction for easy identification.
   

A ledger is a book of secondary entry. It is secondary because accounts are transferred from the journal entries. A ledger is used to record periodic (weekly, monthly) transfers from the journal.

The standard form of a ledger account is divided into two parts. The left side is called the debit side(Dr) while the right side is called the credit side( Cr)

Dr (Title of the account) Cr

Journal and Ledger apply the Double entry principle of book-keeping.

What is the Double Entry Principle of Book-keeping?

The Double Entry Principle of Book-keeping is a system of book-keeping in which transactions are recorded in both the debit and credit sides of the ledger at the same time. A basic rule is book keeping is that the debit (receiving) entry in an account must have a corresponding credit (giving) entry in another account. The sum of the debit side must always be equal to that of the credit side.

The double entry system divides the page into two halves as shown below:

Double Entry system

Dr Cr

The left side of the page is called the debit side while the right side is the credit side.

Every business that is established must have:

• 
  Asset: This is anything that is owned by the business.
  
• 
  Liability: This is the amount owed by a business to others.
  
• 
  Capital: This is the total investment in a business.
  

• 
  Carried down: This is a term used to describe the balance at the end of the month to show that the amount has to be carried down to another month. It is mostly the difference between the larger side of the ledger and the lower side.
  
• 
  Brought down: This means that the balance of the previous month is brought down as an opening balance at the beginning of a new accounting month.
  
• 
  A/c : Account
  
• 
  Purchases: This is the sum total of the amount of money spent buying goods and services.
  
• 
  Sales: This is the sum total of the amount of money received from selling goods and services.
  
• 
  Goods: These are products or commodities (mostly tangible items) that can be bought or sold.
  
• 
  Services: These are often professional duties performed to earn money.
  
• 
  Creditor: This is a business, company or establishment that you owe.
  
• 
  Debtor: This is a business, company or establish that owes us.
  

Accounts are either described as Personal accounts or Impersonal accounts.

• 
  Personal Accounts: These are debtors (those owing the business) and creditors (those the business is owing.
  
• 
  Impersonal Accounts: These refer to accounts in which property such as machinery and building is recorded. It is also referred to as Revenue and expenses (nominal accounts).
  

Expenses are items that have been paid for in the course of the business from the money of the company in order to yield revenue. A separate account therefore is always opened for every type of expense. Examples of expenses are:

• 
  Rent
  
• 
  Wages/Salaries
  
• 
  Telephone bill
  
• 
  Electricity
  
• 
  Postages
  
• 
  Stationery
  
• 
  Insurance
  
• 
  Motor expenses.
  
• 
  Etc.
  

Mrs Gabriel from Extra-ordinary Make up Plc started her business with a capital of N500,000 cash and N150, 000 bank balance.

May 1^st-Purchased 10 cartons of beauty supplies worth N15,000 each from Maraba Beauty Complex and paid using Bank transfer.

May 2^nd- Sold N250,000 worth of the Spice brand Make up and received the money by cheque.

May 4^th- Paid Utility bill of N15,000 by cash.

May 9^th-Paid Creditor Hassan N100,000 by cash.

May 10^th-Mrs Tayo bought make up worth N20,000 but paid N5, 000 as cash and the rest by bank transfer.

May 14^th-Purchase office furniture worth N200,000 by cheque from Samsons & Son Ltd.

May 20^th-Bought an Air Conditioner from Phillips Electronics worth N105,000 and paid N50, 000 as cheque and the rest as Cash.

May 21^st-Sold N300,000 worth of the Lemon make up brand to Mrs Desmond who paid 125,000 as the cash and the rest as credit.

May 23^rd-Bought a Display stand worth N56,000 on credit.

May 25^th-Mrs. Tina bought the Lemon brand for N45,000 and paid by bank transfer.

May 28^th- Owner withdraws N120,000 for personal use by cheque.

You are required to prepare a journal and make ledger entries regarding these transactions.

Below is the Journal and Ledger entries as required.

Extra-ordinary Make-up PLC

Journal entries as at 31^st May, 2021