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Recording credit transactions of commercial and service enterprises

Module by: Siyavula Uploaders. E-mail the author

ECONOMIC AND MANAGEMENT SCIENCES

Grade 9

BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND SKILLS

Module 18

RECORDING CREDIT TRANSACTIONS OF COMMERCIAL ANS SERVICE ENTERPRISES

ACTIVITY 1:

To record credit transactions of commercial and service enterprises

[LO 3.3]

Not all transactions done by businesses are cash transactions. Sometimes transactions are on credit, in other words payment is only made at a later date.

When credit transactions are done, they must be recorded in order to have a record and to ensure that the amounts owing are paid on the due date and are received. The entries are usually made from the credit invoices.

The business can sell goods on credit to clients. The persons who owe money to the business are called debtors and are a current liability to the business.

These transactions are entered in the Debtors Journal. It is important that the cost price of sales be taken into account to be able to calculate the correct profit.

The entry is made as follows in the Debtors Journal:

Table 1
In­voice Day Debtors Fol. Sales Selling costs
101 1 S. Swanepoel   140 100

The effect of such transactions on the accounting equation is as follows:

(a) Asset + (debtor’s debt decreases)Ownership interest + (income increases)

(b) Ownership interest – (expenditure increases)Asset - (trading inventory decreases)

The purchase of goods or other items on credit means that the business owes money to another business or person, called a creditor. A creditor is regarded as a current liability to the business. These entries are based on credit invoices and are made in the Creditors Journal as follows:

Table 2
In-voice Day Creditor Creditors control Trading inventory Statio-nery
Sundries accounts
Amount Fol. Details
001 1 Werda Suppliers R520 R520          

The effect of such transactions on the accounting equation is as follows:

(a) If an asset is purchased on credit: Asset + (trading inventory increases) Liability + (creditors increase)

(b) If credit expenditure is incurred: Ownership interest – (expenditure increases) Liability + (creditors increase)

ASSIGNMENT 1:

Record the transactions below in the Debtors Journal of Gesina Dealers and close the journal by adding up the column totals. (Use DJ 3.2.1 on the next page.)

The information for April 2003 is as follows:

Goods are sold at a profit of 33⅓%.

Table 3
Invoice Date To whom Selling price
713 April 3 C. Simpson R210
714 April 10 C. Simpson R346
715 April 11 N. Nguni R920
716 April 16 C. Simpson R400
717 April 18 L. Naidoo R312

ASSIGNMENT 2:

Record the transactions in the Creditors Journal of Toledo Dealers and close the journal by adding up the column totals. (Use CJ 3.2.1 on the following pages.)

The information for May 2003 is as follows:

Original invoices received from suppliers have been renumbered as follows:

2003

May 1 No. 225 from Transo Dealers for equipment, R380

5 No. 226 from Trixo Suppliers for goods, R1 328

8 No. 227 from S & S Distributors for goods purchased, R625, and stationery, R185

12 No. 228 from Computec for repairs to the computer, R500

15 No. 229 from Trixo Suppliers for goods, R300, and packaging material, R260

22 No. 230 from S & S Distributors for goods, R530

25 No. 231 from Zee Signs for advertising poster, R285

31 No. 232 from Trixo Suppliers for stationery, R220, and packaging material, R345

Assessment

Table 4
Learning Outcomes(LOs)
 
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards(ASs)
 
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business documentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.

Memorandum

ACTIVITY1

ASSIGNMENT 1

Debtors journal of gesina dealers - April 2003DJ 3.2.1

Table 5
Invoice Day Debtors Fol Sales Selling costs
713 3 C. Simpson   210 157.50
714 10 C. Simpson   346 259.50
715 11 N. Nguni   920 690-
716 16 C. Simpson   400 300-
717 18 L. Naidoo   312 234-
        2 188 1 641
        B2/N1 B1/N2

ACTIVITY1

ASSIGNMENT 2

CREDITORS JOURNAL OF TOLEDO DEALERS - MAY 2003CJ 3.2.1

Table 6
In-voice Day Creditors Fol Creditors control Trading inventory Stationery Packaging material  
Sundries account
Amount Fol Details
225 1 Transo Dealers   380 -                 380 - B1 Equipment
226 5 Trixo Suppliers   1 328 - 1 328 -                    
227 8 S & S Distributors   810 - 625 - 185 -                
228 12 Computec   500 -                 500 - N3 Repairs
229 15 Trixo Suppliers   560 - 300 -     260 -            
230 22 S & S Distributors   530 - 530 -                    
231 25 Zee Signs   285 -                 285 - N4 Advertising
232 31 Trixo Suppliers   565 -     220 - 345 -            
        4 958 - 2 783 - 405 - 605 -     1 165 -    
        B3   B2   N1   N2              

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