Question

Meet the chief accountant/accounts manager of a business firm. Find out from him the accounting records/book of account maintained by the firm.

Answer 1

1. All transactions are recorded first in the journal, in chronological order, as the primary book of entry. It includes subdivisions such as Purchase Journal, Sales Journal, Purchase Returns Journal, Sales Returns Journal, and Journal Proper for miscellaneous entries.
2. Records all credit purchases based on supplier invoices. Cash purchases are recorded elsewhere.
3. Records all credit sales based on invoices sent to customers. Cash sales are recorded separately.
4. Records goods returned by customers, using credit notes.
5. Records goods returned to suppliers, using debit notes.
6. Records all cash and bank transactions, combining elements of both journal and ledger.
7. Contains separate accounts for each debtor, creditor, asset, liability, income, and expense. It is the book of final entry where transactions from journals are posted and classified for summary and permanent records.