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Tutorial 3 Purchases & Sales Cycles
3
Tutorial 3: Suggested solutions
Section A:
1. (a) Purchases Journal is also known as Purchases Day Book. It is a
listing of all the credit purchases during the period, based on dates of
purchases. The details listed are the suppliers names, suppliers’ invoice
numbers and amounts of the invoices. The total amount of purchases
will be posted to the purchases account at the end of the month.
(b) Sales Journal is also known as Sales Day Book. It is a listing of all
the credit sales during the period, based on dates of sales. The details
listed are the customers’ names, seller’s invoice numbers and amounts.
The total amount of sales will be posted to the sales account at the end
of the month.
2. (a)Sales returns are also known as returns inwards. These are returns of
goods by credit customers mainly due to defects, spoilage, legal rights
or etc. They are recorded in the returns inwards journal and the cource
document is the credit notes of the seller.
Purchases returns are also known as returns outwards. These are returns
to the trade suppliers due to defects, spoilage, wrong goods etc. They
are recorded in the returns outwards journal based on the credit notes of
the suppliers.
(b) Credit notes are issued by seller to buyer (receivables) to reduce the
amount owed by the buyer. This happens when the buyers return goods
to seller either due to defects, spoilage, wrong goods etc. Credit notes
are also used to reduce the debt when the seller has overcharged the
buyer in the first place.
Debit notes are issued by seller to buyer to increase the amount owed
by the buyer. This normally happens when the seller has undercharged
the buyer in the first place or where there is additional charges that has
been missed out. Normally a debit note is issued rather than a new
invoice.
3. Sales ledger basically is the “book” that consists of all the trade
receivables accounts. Trade receivables exist because of credit sales. It
should be noted that sales ledger does not include sales account, which is
included in the general ledger. This sales ledger is separately kept mainly
to monitor collections from the various trade receivables and usually is
the job of the credit control department. The total of all these trade
receivables are represented by a Trade Receivables Contol amount in the
general ledger for the purpose of accounts closing at the end of the
month.
Purchases ledger consists of all the trade payables accounts which arise
due to credit purchases. Similarly, it does not include the purchases
account , which is included in the general ledger. Purchases ledger are
kept separately mainly for payment purposes. The total of the trade
payables are represented by a Trade Payables Control amount in the
general ledger for accounts closing purpose.
Since they are not part of the general ledger, they are called the
secondary ledger. They are not part of the double entry system because
they are not used in the month end closing of accounts.
Tutorial 3 Purchases & Sales Cycles
4
Question 4
(a) Purchases Journal
Date
Particular
s
Invoice No.
RM
RM
Jan
3
Fantastic
23
5,000
Less: trade discount
1
0%
(500
)
4,500
10
Super
542
7,000
Grand
421
6,000
15
Grand
455
8,000
31
Purchases Account (D
r)
25,500
Returns Outwards Journal
Date
Particular
s
Credit
RM
RM
Note
Jan
5
Super
876
500
8
Grand
098
1,000
(b) Purchases Ledger
Trade Payables: Super Account
Jan
RM
Jan
RM
5
Return outwards
500
1
Bal b/d
18,000
5
Bank
9,000
10
Purchases
7,000
5
Discount received
1,000
31
Bal c/d
14,500
25,000
25,000
Trade Payables: Fantastic Account
Jan
RM
Jan
RM
22
Return outwards
2,700
1
Bal b/d
30,000
12
Cash
4,500
3
Purchases
4,500
12
Discount received
500
31
Bal c/d
26,800
34,500
34,500
