Oxford excellence for the Caribbean

Principles
of Accounts
SECOND EDITION
®

FOR THE
CSEC

NEW
SYLLABUS

pa g e s
pl e
Sam
David Austen
Estellita Louisy
with online support
Seema Deosaran-
Pulchan
Theodora Sylvester
Clear contextualisation of topics to
prepare students effectively for the exam
 Develop critical thinking, problem-solving and entrepreneurial skills with clear and
concise explanations of accounting principles and procedures.

 Prepare students effectively with a course fully matched to the new CSEC® syllabus
and written by an experienced team of Accounting educators and examiners.

 Test students’ understanding with carefully constructed practice and exam-style

questions.

 Help students understand and deliver what’s required for their assessment with
guidance on the business cognate School-Based Assessment.

 Online support provides extra practice questions for each section of the syllabus, as
well as answers for the Student Book activities.

Key terms are identified Objectives set out clearly what Hints and tips help students avoid
throughout the book will follow in each chapter common pitfalls in the exam

4 Ledgers and the trial balance

4.1 Types of accounts and ledgers

Practice questions
1. Classifying ledger accounts
Objectives
Complete the following table. Identify the type of account and the
By the end of this unit you will be able to: ledger in which the account would be recorded. The first item has
• describe the different classes of accounts been answered as an example.
• identify the different types of ledgers
• interpret entries and balances Account Type of account Ledger
a. Khan, a credit supplier Personal Purchases
b. Delivery vehicles
Key terms Different classes of accounts c. Vehicle running expenses
Ledger accounts can be divided into different categories as follows: d. Discounts allowed
Nominal accounts:
• Nominal accounts: recording gains (incomes) and losses e. Shop premises
accounts recording
(expenses) f. Interest received
expenses and incomes.
• Real accounts: asset accounts g. Faye, a credit customer
Real accounts: accounts • Personal accounts: the accounts of people or organizations who
recording assets. have supplied goods or services or credit, or to whom goods or 2. Classifying ledger accounts
Personal accounts: services have been sold on credit. Complete the following table. Identify the type of account and the
accounts of credit Here are some examples of these types of account: ledger in which the account would be recorded.
customers and credit
Nominal Real Personal Account Type of Ledger
suppliers. account
Expenses Premises Accounts payable
Purchases Machinery Accounts receivable a. Purchases
Tip
Sales Equipment b. M Ltd (an account receivable)
Discounts received Motor vehicles Once you have completed
c. Fittings
Interest received Furniture and fittings these questions you can
d. Dillon (an account payable)
There are also: e. Discounts received check your answers online
• Liability accounts: for amounts due to other organizations f. Machinery at: www.oxfordsecondary.
• Capital accounts: for accounts recording the interest of the owner(s) g. Bank charges
com/9780198437260
of the business.

Tip Different ledgers Interpreting account entries and balances

Ledger accounts are grouped in different ledgers as follows:
Tip
The cash book can also It is important that you can explain in detail what an account shows, as
• General ledger: for nominal, real, liability and capital accounts well as being able to prepare entries in accounts. A good test of how well
be regarded as a ledger as
• Sales ledger (or accounts receivable ledger): for the accounts of you have interpreted
it includes two accounts: The best approach is to:
credit customers an account, is to ask
cash and bank • take each entry in date order
• Purchases ledger (or accounts payable ledger): for the accounts of yourself: “Could I prepare
credit suppliers. • describe the transaction that has caused the entry to be made the account accurately
(including where appropriate a mention of the source document from the answer I have
involved) given?”
Note: • state the amount.
• two real accounts – the cash account and bank account
– are normally recorded separately in a cash book (see
Chapter 3).

202 203

Sample not final pages from Principlals of Accounts for CSEC© Student Book

Please note that this sample material is taken from an early draft of the revised edition. Content may change prior to publication.
Contents
Contents
Contents
Contents
Contents
Introduction
Introduction vv
Introduction
Introduction vv
Introduction v
1.1.Accounting
Accounting asasa profession
a profession 66
1.1.Accounting
Accounting asasa profession
a profession 66
1.
1.1 Accounting
1.1 Introduction
Introduction astoatoprofession
accounting
accounting 67 7
1.11.1 Introduction
Introduction totoaccounting
accounting 77
1.2
1.11.2 Introduction
Traditional
Traditional andand
to emerging
emerging
accounting careers
careers in in
accounting
accounting 10710
1.21.2 Traditional
Traditional andand emerging
emerging careers
careers in in
accounting
accounting 1010
1.3
1.21.3 Traditional
Accounting
Accounting ethics
and ethics
emerging careers in accounting 1414
10
1.31.3 Accounting
Accounting ethics
ethics 1414
1.3 Accounting ethics 14
2.2.Accounting
Accounting asasa system
a system 1919
2.2.Accounting
Accounting asasa system
a system 1919
2.
2.1 Accounting
2.1 Background
Background astoatosystem
accounting
accounting 19
2020
2.12.1 Background
Background totoaccounting
accounting 2020
2.2
2.12.2 Background
Introducing
Introducing the
tothestatement
statement
accounting of of
financial
financial position
position (balance
(balance sheet)
sheet) 2929
20
2.22.2 Introducing
Introducing thethestatement
statement of of
financial
financial position
position (balance
(balance sheet)
sheet) 2929
2.3
2.22.3 Introducing
The
Theeffect
effect
ofthe
of
transactions
transactions
statementon ofon
afinancial
statement
a statement of of
financial
position financial
(balanceposition
position
sheet)(balance
(balancesheet)
sheet) 4040
29
2.32.3 The
Theeffect
effect
of of
transactions
transactions onon a statement
a statement of of
financial
financial position
position (balance
(balancesheet)
sheet) 4040
2.4
2.32.4 The
Preparing
Preparing
effect simple
ofsimple ledger
ledger
transactions accounts
accounts
on a statement of financial position (balance sheet) 5151
40
2.42.4 Preparing
Preparing simple
simple ledger
ledgeraccounts
accounts 5151
2.5
2.42.5 Preparing
Using
Using expenses,
expenses,
simplepurchases,
purchases,
ledger sales
accounts salesandanddrawings
drawings accounts
accounts 6767
51
2.52.5 Using
Using expenses,
expenses, purchases,
purchases, sales
salesandanddrawings
drawings accounts
accounts 6767
2.6
2.52.6 Using
The
Thetrial
trial
balance
balance
expenses, purchases, sales and drawings accounts 7878
67
2.62.6 The
Thetrial
trial
balance
balance 7878
2.7
2.62.7 The
Preparing
Preparing simple
simple
trial balance income
income statements
statements 8888
78
2.72.7 Preparing
Preparing simple
simple income
income statements
statements 8888
2.8
2.72.8 Preparing
Balancing
Balancing andand
simple closing
closing
income accounts
accounts
statements 107
107
88
2.82.8 Balancing
Balancing andandclosing
closingaccounts
accounts 107
107
2.8 Balancing and closing accounts 107
3.3.Books
Books ofoforiginal
original entry
entry 127
127
3.3.Books
Books ofoforiginal
original entry
entry 127
127
3.3.1
3.1 Books of original
Recording
Recording credit
credit entry
purchases
purchases and andcredit
credit
sales
sales 127
129
129
3.13.1 Recording
Recording credit
creditpurchases
purchases and andcredit
credit
sales
sales 129
129
3.2
3.13.2 Recording
The
Thereturns
returnsbooks
books
credit purchases and credit sales 146
146
129
3.23.2 The
Thereturns
returnsbooks
books 146
146
3.3
3.23.3 The
Thecash
cash
returnsbook
book
books 159
159
146
3.33.3 The
Thecash
cashbook
book 159
159
3.4
3.33.4 The
Thepetty
petty
cash cash
bookcash book
book 174
174
159
3.43.4 The
Thepetty
petty
cashcash book
book 174
174
3.5
3.43.5 The
Thegeneral
general
petty cashjournal
journal
book 183
183
174
3.53.5 The
Thegeneral
general journal
journal 183
183
3.6
3.53.6 The
Preparing
Preparing
general source
source
journal documents
documents 191
191
183
3.63.6 Preparing
Preparing source
source documents
documents 191
191
3.6 Preparing source documents 191
4.4.Ledgers
Ledgers and
and the thetrial
trial
balance
balance 201
201
4.4.Ledgers
Ledgers and
and the thetrial
trial
balance
balance 201
201
4.4.1
4.1 Ledgers
Types
Types ofand
of the trial
accounts
accounts and balance
andledgers
ledgers 201
202
202
4.14.1 Types
Types of of
accounts
accounts and
andledgers
ledgers 202
202
4.2
4.14.2 Types
Review
Reviewof–accounts
posting
– posting from
from
and books
books
ledgers of of
original
originalentry
entry 207
207
202
4.24.2 Review
Review – posting
– posting from
frombooks
books of of
original
originalentry
entry 207
207
4.2 Review – posting from books of original entry 207
5.5.The Thepreparation
preparation andandanalysis
analysis ofoffinancial
financial statements
statements ofof
sole
soletraders
traders 223
223
5.5.The Thepreparation
preparation andandanalysis
analysis ofoffinancial
financial statements
statements ofof
sole
soletraders
traders 223
223
5.5.1
5.1 The preparation
Preparing
Preparing a sole
a sole and analysis
trader’s
trader’sincome
income ofstatement:
financial
statement: statements
thethetrading
trading of sole traders
account
account 223
224
224
5.15.1 Preparing
Preparing a sole
a sole trader’s
trader’sincome
income statement:
statement: thethetrading
tradingaccount
account 224
224
5.2
5.15.2 Preparing
Preparing a sole
a sole trader’s
trader’s other
other
income financial
financial
statement:statements
statements
the tradingusing
usinga vertical
a vertical
account format
format 234
234
224
5.25.2 Preparing
Preparing a sole
a sole trader’s
trader’sother
other financial
financial statements
statements using
usinga vertical
a vertical
format
format 234
234
5.3
5.25.3 Preparing
The
Theanalysis
analysis of of
a sole financial
financial
trader’s statements
statements
other – accounting
financial – statements
accounting ratios
ratiosa vertical format
using 241
241
234
5.35.3 The
Theanalysis
analysis of of
financial
financial statements
statements – accounting
– accounting ratios
ratios 241
241
5.4
5.35.4 The
Reporting
Reporting
analysis ononperformance
of performance
financial statements – accounting ratios 250
250
241
5.45.4 Reporting
Reporting ononperformance
performance 250
250
5.4 Reporting on performance 250
6.6.Accounting
Accounting adjustments
adjustments 265
265
6.6.Accounting
Accounting adjustments
adjustments 265
265
6.6.1
6.1 Accounting
Adjusting
Adjusting adjustments
expenses
expenses andandincome
income 265
266
266
6.16.1 Adjusting
Adjusting expenses
expenses andandincome
income 266
266
6.2
6.16.2 Adjusting
Depreciation
Depreciation
expenses and income 279
279
266
6.26.2 Depreciation
Depreciation 279
279
6.2 Depreciation 279
33
33
3
Contents
Contents
Contents
Contents
Contents

6.3
6.3 Bad
Baddebts
debts and andprovisions
provisions forfor
doubtful
doubtful debts
debts 291
291
6.3
6.3 Bad
Baddebts
debts and andprovisions
provisions forfor
doubtful
doubtful debts
debts 291
291
6.4
6.4 End-of-year
6.3 End-of-year
Bad debtsfinancial
financial
and statements
statements
provisions forfor
for doubtfula service
a service
debtsbusiness
business 303
303
291
6.4
6.4 End-of-year
End-of-year financial
financial statements
statements forfor
a service
a service
business
business 303
303
6.5
6.5 Revenue
6.4 Revenue expenditure
End-of-year expenditure
financialand and capital
capital
statements expenditure
expenditure
for a service business 306
306
303
6.5
6.5 Revenue
Revenue expenditure
expenditure andand capital
capital expenditure
expenditure 306
306
6.5 Revenue expenditure and capital expenditure 306
7.7.Control
Control systems
systems 313
313
7.7.Control
Control systems
systems 313
313
7. The
7.1
7.1 Control
The
trial
trialsystems
balance
balance andandthethe
correction
correction of of
errors
errors 313
314
314
7.1
7.1 The
The
trial
trial
balance
balance andandthethe
correction
correction of of
errors
errors 314
314
7.2
7.2 Control
7.1 Control
The accounts
trial accounts
balance and the correction of errors 330
330
314
7.2
7.2 Control
Control accounts
accounts 330
330
7.3
7.3 The
7.2 The
bankbank
Control reconciliation
reconciliation
accounts statement
statement 345
345
330
7.3
7.3 The
The
bankbank reconciliation
reconciliation statement
statement 345
345
7.3 The bank reconciliation statement 345
8.8.Accounting
Accounting forforpartnerships
partnerships 370
370
8.8.Accounting
Accounting forforpartnerships
partnerships 370
370
8. An
8.1
8.1 Accounting
An
introduction
introduction fortopartnerships
to
partnerships
partnerships accounts
accounts 370
371
371
8.1
8.1 AnAn
introduction
introduction totopartnerships
partnerships accounts
accounts 371
371
8.2
8.2 More
8.1 More
An about
about accounting
introduction accounting forfor
partnerships
to partnershipspartnerships
accounts 387
387
371
8.2
8.2 More
More about
about accounting
accounting forfor
partnerships
partnerships 387
387
8.2 More about accounting for partnerships 387
9.9.Accounting
Accounting forforlimited
limited liability
liabilitycompanies,
companies, co-operatives
co-operatives
and
and
non-profit
non-profit
organizations
organizations 406
406
9.9.Accounting
Accounting forforlimited
limited liability
liabilitycompanies,
companies, co-operatives
co-operatives
and
and
non-profit
non-profit
organizations
organizations 406
406
9. An
9.1
9.1 Accounting
An
introduction
introduction fortolimited
to liability
accounting
accounting forforcompanies,
limited
limited co-operatives and non-profit organizations
companies
companies 406
407
407
9.1
9.1 AnAn
introduction
introduction totoaccounting
accounting forfor
limited
limited companies
companies 407
407
9.2
9.2 Limited
9.1 Limited
An company
company
introduction financial
tofinancial statements
accounting statements
for limited companies 417
417
407
9.2
9.2 Limited
Limited company
company financial
financial statements
statements 417
417
9.3
9.3 Accounting
9.2 Accounting
Limited forfor
company co-operatives
co-operatives
financial statements 436
436
417
9.3
9.3 Accounting
Accounting forfor
co-operatives
co-operatives 436
436
9.4
9.4 Accounting
9.3 Accounting forfor
non-profit
non-profit organizations
co-operatives organizations 447
447
436
9.4
9.4 Accounting
Accounting forfor
non-profit
non-profit organizations
organizations 447
447
9.4 Accounting for non-profit organizations 447
10.
10.
Manufacturing
Manufacturing andandinventory
inventory control
control 456
456
10.
10.
Manufacturing
Manufacturing andandinventory
inventory control
control 456
456
10. Manufacturing
10.1
10.1 Manufacturing
Manufacturing and inventory control
accounts
accounts 456
457
457
10.1
10.1Manufacturing
Manufacturing accounts
accounts 457
457
10.2
10.2Applying
10.1 Applying basic
Manufacturing basic costing
costing
accountsprinciples
principles 469
469
457
10.2
10.2Applying
Applying basic
basic costing
costing principles
principles 469
469
10.3
10.3Inventory
10.2 Inventory
Applying control
control
basic costing principles 479
479
469
10.3
10.3Inventory
Inventory control
control 479
479
10.3 Inventory control 479
11.
11.
Accounting
Accounting forforthetheentrepreneur
entrepreneur 490
490
11.
11.
Accounting
Accounting forforthetheentrepreneur
entrepreneur 490
490
11. Payroll
11.1
11.1 Accounting
Payroll for the entrepreneur 490
491
491
11.1
11.1Payroll
Payroll 491
491
11.2
11.2Forecasting
11.1 Forecasting
Payroll andand preparing
preparing a business
a business plan
plan 512
512
491
11.2
11.2Forecasting
Forecasting andand preparing
preparing a business
a business plan
plan 512
512
11.2 Forecasting and preparing a business plan 512
Navigating
Navigating thetheschool-based
school-based assessment
assessment 524
524
Navigating
Navigating thetheschool-based
school-based assessment
assessment 524
524
Navigating the school-based assessment 524
Glossary
Glossary 528
528
Glossary
Glossary 528
528
Glossary 528
Index
Index 534
534
Index
Index 534
534
Index 534

44
44
4
 4 Ledgers and the trial balance

Setting the scene

In this chapter you will have the opportunity to learn a little more
about ledger accounts, in particular:
• the ways in which ledger accounts can be classified
• the structure of the accounting system leading to the
preparation of a trial balance
• how to interpret entries and balances in ledger accounts
This chapter also provides an opportunity to develop your skills and
review your understanding of the double-entry accounting system.
It includes a worked example of an accounting system up to and
including the preparation of a trial balance.

Syllabus coverage
This Chapter covers the remaining aspects of Section 4 of the syllabus not covered in the previous
chapter.

Syllabus Unit
1 Describe the different classes of accounts
4.1
2 Identify the different types of ledgers
5 Post from books of original entry to the general ledger and the subsidiary ledgers 4.2
7 Interpret entries and balances 4.1

Link
Other aspects of Section 4 of the syllabus
(syllabus objectives 3, 4, 6, 8 and 9) have
been covered in Chapter 2, units 2.4, 2.6
and 2.8.

201
4.1 Types of accounts and ledgers

Objectives
By the end of this unit you will be able to:
• describe the different classes of accounts
• identify the different types of ledgers
• interpret entries and balances

Key terms Different classes of accounts

Nominal accounts:
accounts recording
expenses and incomes.
Real accounts: accounts
recording assets.
Personal accounts:
accounts of credit
customers and credit
suppliers.
Ledger accounts can be divided into different categories as follows:
• Nominal accounts: recording gains (incomes) and losses
(expenses)
• Real accounts: asset accounts
• Personal accounts: the accounts of people or organizations who
have supplied goods or services or credit, or to whom goods or
services have been sold on credit.
Here are some examples of these types of account:
Nominal Real Personal
Expenses Premises Accounts payable
Purchases Machinery Accounts receivable
Sales Equipment
Discounts received Motor vehicles
Interest received Furniture and fittings

There are also:

• Liability accounts: for amounts due to other organizations
• Capital accounts: for accounts recording the interest of the owner(s)
of the business.

Tip Different ledgers

Ledger accounts are grouped in different ledgers as follows:
The cash book can also
• General ledger: for nominal, real, liability and capital accounts
be regarded as a ledger as
• Sales ledger (or accounts receivable ledger): for the accounts of
it includes two accounts:
credit customers
cash and bank
• Purchases ledger (or accounts payable ledger): for the accounts of
credit suppliers.

Note:
• two real accounts – the cash account and bank account
– are normally recorded separately in a cash book (see
Chapter 3).

202
 4 Ledgers and the trial balance

Practice questions
1. Classifying ledger accounts
Complete the following table. Identify the type of account and the
ledger in which the account would be recorded. The first item has
been answered as an example.

Account Type of account Ledger

a. Khan, a credit supplier Personal Purchases
b. Delivery vehicles
c. Vehicle running expenses
d. Discounts allowed
e. Shop premises
f. Interest received
g. Faye, a credit customer

2. Classifying ledger accounts

Complete the following table. Identify the type of account and the
ledger in which the account would be recorded.
Account Type of Ledger
account
a. Purchases
Tip
b. M Ltd (an account receivable)
c. Fittings Once you have completed
d. Dillon (an account payable) these questions you can
e. Discounts received check your answers online
f. Machinery
at: www.oxfordsecondary.
com/9780198437260
g. Bank charges

Interpreting account entries and balances

Tip
It is important that you can explain in detail what an account shows, as
well as being able to prepare entries in accounts. A good test of how well
you have interpreted
The best approach is to: an account, is to ask
• take each entry in date order yourself: “Could I prepare
• describe the transaction that has caused the entry to be made the account accurately
(including where appropriate a mention of the source document from the answer I have
involved) given?”
• state the amount.

203
4.1 Types of accounts and ledgers

Illustration 1
Interpreting the account of a credit customer
Dr Sherwin Romon (Account No 32) Cr
Mar 1 Balance b/d 3 400 Mar 8 Bank 3 230
19 Sales 12 840 Discounts allowed 170
23 Returns inwards 590
31 Balance c/d 12 250
16 240 16 240
April 1 Balance b/d 12 250

The account reveals the following details:

March 1 The credit customer Sherwin Romon owes $3 400.
March 8 Sherwin Romon settles the amount outstanding on 1 March
by cheque, $3 230. Sherwin is allowed a cash discount of
$170. The cash discount is 5% (see workings below).
March 19 Goods are sold on credit to Sherwin Romon. The sales
invoice is for $12 840.
March 23 Sherwin Romon returns goods sold on credit. The credit
note sent to Sherwin is for $590.
March 31/ Sherwin Romon owes $12 250.
April 1

The percentage cash discount can be calculated as follows:

cash discount × 100
amount settled
i.e. in this example:
$170 × 100 = 5%
$3 400

Illustration 2
Interpreting a capital account
Dr Capital account (Account No 15) Cr
2018 2018
Dec 31 Drawings 24 800 Jan 1 Balance b/d 88 500
31 Balance c/d 103 670 Aug 15 Equipment 4 500
Dec 31 Net profit 35 470
128 470 128 470
2019
Jan 1 Balance b/d 103 670

204
 4 Ledgers and the trial balance

The account reveals the following details:

Jan 1 The value of the owner’s investment in the business is $88 500
at the beginning of 2018.
Aug 15 The owner introduces additional capital into the business in
the form of some equipment valued at $4 500.
Dec 31 The business has made a net profit increasing the value of the
owner’s capital by $35 470.
Dec 31 The owner’s total drawings for the year have reduced the
value of capital by $24 800.
Dec 31/ The value of the owner’s investment in the business is
Jan 1 $103 670 at the end of 2018/beginning of 2019.

Practice questions
3. Interpreting the account of a credit supplier
Here is the account of a credit supplier in the books of the business
owned by Janard.
Dr TDK Supplies (Account No 11) Cr
June 15 Bank 8 580 June 1 Balance b/d 8 800
15 Discount received 220 11 Purchases 14 600
25 Returns outwards 190
30 Balance c/d 14 410
16 240 16 240
July 1 Balance b/d 14 410

Explain the entries in the ledger account.

4. Interpreting the account of a credit customer

Here is the account of a credit customer in the books of the business
owned by Leta.
Dr Umar’s Stores (Account No 29) Cr
Sept 1 Balance b/d 500 Sept 9 Returns inwards 85
3 Sales 873 25 Bank 490
25 Discounts allowed 10
30 Balance c/d 788
1 373 1 373
Oct 1 Balance b/d 788

Explain the entries in the ledger account.

205
4.1 Types of accounts and ledgers

5. Interpreting general ledger accounts

Here are two accounts in a business’s general ledger.
Dr Bank loan (Account No 3) Cr
2018 2018
Oct 15 Bank 3 000 Jan 1 Balance b/d 10 000
Dec 31 Balance c/d 7 000
10 000 10 000
2019
Jan 1 Balance b/d 7 000

Dr Capital (Account No 5) Cr
2018 2018
Dec 31 Drawings 11 400 Jan 1 Balance b/d 104 000
31 Net loss 3 480
31 Balance c/d 89 020
104 000 104 000
2019
Jan 1 Balance b/d 89 020

Explain the entries in the ledger accounts.

6. Interpreting general ledger accounts

Here are two accounts in a business’s general ledger.
Dr Bank loan (Account No 5) Cr
2018 2018
Dec 31 Balance c/d 18 400 Jan 1 Balance b/d 13 400
Sept 1 Bank 5 000
18 400 18 400
2019
Jan 1 Balance b/d 18 400

Dr Motor vehicles (Account No 27) Cr

2018 2018
Jan 1 Balance b/d 33 600 Feb 3 Bank 5 200
Tip
April 4 Bank 19 200 Dec 31 Balance c/d 47 600
Once you have completed 52 800 52 800
these questions you can 2019
check your answers online Jan 1 Balance b/d 47 600
at: www.oxfordsecondary.
com/9780198437260 Explain the entries in the ledger accounts.

206
4.2 Review – posting from books of original entry

Objectives
By the end of this unit you will be able to:
• review the accounting cycle
• post from books of original entry to ledger accounts
• check the accuracy of the ledger accounts

This unit provides an opportunity to review a major part of the

double-entry process. There is a fully worked example of how entries
are made in ledger accounts posting details from books of original
entry.

Review the accounting cycle

In this unit the focus is on the following aspects of the accounting
cycle:

START: source
documents

Preparing end
Books of
of year FINANCIAL
original entry
STATEMENTS

Checking Posting
double-entry information
with a TRIAL to LEDGER
BALANCE ACCOUNTS

Posting from the books of original entry to

ledger accounts
Entries in the general, sales and purchases ledgers are all made from
details first recorded in the books of original entry. Apart from recording
opening balances, entries should never be made in ledger accounts
from anywhere other than the books original entry.

207
4.2 Review – posting from books of original entry

Illustration 3
Preparing ledger accounts from books of original entry
Here is a business’s trial balance at 1 May 2018.
Sophie’s Marine Stores
Trial balance at 1 May 2018
Folio $ $
Accounts payables
Jaden Supplies PL1 2 800
Lesia Ltd PL2 3 600
Accounts receivable
Jacinta Stores SL1 1 500
Yari Retail Units SL2 2 290
Bank CB31 4 400
Capital GL1 47 770
Cash CB31 850
Discounts allowed GL2 440
Discounts received GL3 590
Drawings GL4 20 240
General expenses GL5 32 620
Non-current assets GL6 58 000
Petty cash in hand PCB3 30
Purchases GL7 83 420
Sales GL8 149 500
Returns inwards GL9 2 460
Returns outwards GL10 2 830
Travel expenses GL11 840
207 090 207 090

The books of original entry have been prepared and are shown below.
You will notice that at this stage folio references, linking the books
of original entry to ledger accounts, have not been entered. Folio
references are only recorded in the books of original entry when
transactions are posted to ledger accounts. Actually, individual entries
will be posted to ledger accounts as soon as possible after they are
entered in the books of original entry. It is important, for example,
that the accounts of accounts payable and accounts receivable are
kept up to date.

208
 4 Ledgers and the trial balance

Purchases book (Page 28)

Date Supplier Invoice Folio $
number
May 10 Jaden Supplies B4372 4 820
22 Lesia Ltd S2972 3 680
31 Total purchases 8 500

Sales book (Page 42)

Date Customer Invoice Folio $
number
May 7 Jacinta Stores J1006 2 400
19 Yari Retail Units J1007 1 850
31 Total sales 4 250

Returns inwards book (Page 7)

Date Customer Credit note Folio $
number
May 17 Jacinta Stores X306 250
29 Yari Retail Units X307 140
31 Total returns inwards 390

Returns outwards book (Page 9)

Date Supplier Credit note Folio $
number
May 21 Jaden Supplies P422 580
26 Leslia Ltd R117 470
31 Total returns outwards 1 050

Dr Cash book (Page 31) Cr

Folio Disc Cash Bank Folio Disc Cash Bank
all rec
$ $ $ $ $ $
May 1 Balances b/d 850 4 400 May 1 Petty cash PCB4 120
11 Sales 2 120 12 Bank C 2 300
12 Cash C 2 300 14 Jaden 140 2 660
Supplies
14 Jacinta 30 1 470 18 Lesia Ltd 180 3 420
Stores
23 Sales 1 960 21 General 320
expenses
24 Cash C 1 500 23 Drawings 520
30 Yari Retail 80 3 920 24 Bank C 1 500
Units

110 320

209
4.2 Review – posting from books of original entry

Petty cash book (Page 4)

Receipts Date Details Folio/ Payments General Travel
Voucher expenses expenses
$ $ $ $
30 May 1 Balance b/d
120 1 Bank CB31
11 Train fares 56 43 43
14 Cleaning 57 23 23
19 Taxis 58 29 29
28 Stationery 59 11 11
106 34 72

General journal (Page 4)

Dr Cr
$ $
May 31 Discounts received 140
Jaden Supplies 140
Cancellation of discount as payment
made outside date limit

Stage 1
Entries relating to individual transactions in the books of original
entry are posted to ledger accounts and folio references are
completed.
The books of original entry are shown again with folio references
completed.
Tip
Stage 2
It is easy to forget to post
Totals from the purchases, sales and returns books, cash book
totals from the books of
discount columns and petty cash book analysis columns are posted
original entry at the end
to the ledger accounts.
of a month.

Stage 3
The cash book and ledger accounts are balanced before preparing
the trial balance.

Stage 4
A trial balance is prepared at the end of May 2018.

210
 4 Ledgers and the trial balance

Purchases book (Page 28)

Date Supplier Invoice number Folio $
May 10 Jaden Supplies B4372 PL1 4 820
22 Lesia Ltd S2972 PL2 3 680
31 Total purchases GL7 8 500

Sales book (Page 42)

Date Customer Invoice number Folio $
May 7 Jacinta Stores J1006 SL1 2 400
19 Yari Retail Units J1007 SL2 1 850
31 Total sales GL8 4 250

Returns inwards book (Page 7)

Date Customer Credit note number Folio $
May 17 Jacinta Stores X306 SL1 250
29 Yari Retail Units X307 SL2 140
31 Total returns inwards GL9 390

Returns outwards book (Page 9)

Date Supplier Credit note number Folio $
May 21 Jaden Supplies P422 PL1 580
26 Leslia Ltd R117 PL2 470
31 Total returns outwards GL10 1 050

Dr Cash book (Page 31) Cr

Folio Disc Cash Bank Folio Disc Cash Bank
all rec
$ $ $ $ $ $
May 1 Balances b/d 850 4 400 May 1 Petty cash PCB4 120
11 Sales GL8 2 120 12 Bank C 2 300
12 Cash C 2 300 14 Jaden PL1 140 2 660
Supplies
14 Jacinta SL1 30 1 470 18 Lesia Ltd PL2 180 3 420
Stores
23 Sales GL8 1 960 21 General GL5 320
expenses
24 Cash C 1 500 23 Drawings GL4 520
30 Yari Retail SL2 80 3 920 24 Bank C 1 500
Units
31 Balances c/d 3 110 4 570
GL2 110 7 230 11 290 GL3 320 7 230 11 290
June 1 Balances b/d 3 110 4 570

211
4.2 Review – posting from books of original entry

Petty cash book (Page 4)

Receipts Date Details Folio/ Payments General Travel
Voucher expenses expenses
$ $ $ $
30 May 1 Balance b/d
120 1 Bank CB31
11 Train fares 56 43 43
14 Cleaning 57 23 23
19 Taxis 58 29 29
28 Stationery 59 11 11
106 34 72
31 Balance c/d 44 GL4 GL11
150 150
44 June 1 Balance b/d

General journal (Page 4)

Dr Cr
$ $
May 31 Discounts received GL3 140
Jaden Supplies PL1 140
Cancellation of discount as payment
made after date limit

Here are the general, purchases and sales ledgers showing opening
balances and the transactions posted at this stage from the books of
original entry.
GENERAL LEDGER

Dr Capital (Account No 1) Cr
$ $
May 1 Balance b/d 47 770

Dr Discounts allowed (Account No 2) Cr

$ $
May 1 Balance b/d 440 May 31 Balance c/d 550
31 Cash book CB31 110
550 550
June 1 Balance b/d 550

Dr Discounts received (Account No 3) Cr

$ $
May 31 Jaden Supplies J4 140 May 1 Balance b/d 590
31 Balance c/d 770 31 Cash book CB31 320
910 910
June 1 Balance b/d 770
212
 4 Ledgers and the trial balance

Dr Drawings (Account No 4) Cr
$ $
May 1 Balance b/d 20 240 May 31 Balance c/d 20 760
23 Cash book CB31 520
20 760 20 760
June 1 Balance b/d 20 760

Dr General expenses (Account No 5) Cr

$ $
May 1 Balance b/d 32 620 May 31 Balance c/d 32 974
21 Cash book CB31 320
31 Petty cash PCB4 34
32 974 32 974
June 1 Balance b/d 32 974

Dr Non-current assets (Account No 6) Cr

$ $
May 1 Balance b/d 58 000

Dr Purchases (Account No 7) Cr
$ $
May 1 Balance b/d 83 420 May 31 Balance c/d 91 920
31 Purchases book PB28 8 500
91 920 91 920
June 1 Balance b/d 91 920

Dr Sales (Account No 8) Cr
$ $
May 31 Balance c/d 157 830 May 1 Balance b/d 149 500
11 Cash book CB31 2 120
24 Cash book CB31 1 500
31 Sales book SB42 4 250
157 830 157 830
June 1 Balance b/d 157 830

Dr Returns inwards (Account No 9) Cr

$ $
May 1 Balance b/d 2 460 May 31 Balance c/d 2 850
31 Returns RIB7 390
inwards book
2 850 2 850
June 1 Balance b/d 2 850

213
4.2 Review – posting from books of original entry

Dr Returns outwards (Account No 10) Cr

$ $
May 31 Balance c/d 3 880 May 1 Balance b/d 2 830
31 Returns ROB9 1 050
outwards book
3 880 3 880
June 1 Balance b/d 3 880

Dr Travel expenses (Account No 11) Cr

$ $
May 1 Balance b/d 840 May 31 Balance c/d 912
31 Petty cash PCB4 72
912 912
June 1 Balance b/d 912

PURCHASES LEDGER

Dr Jaden Supplies (Account No 1) Cr

$ $
May 14 Bank CB31 2 660 May 1 Balance b/d 2 800
14 Discounts CB31 140 10 Purchases PB28 4 820
received book
21 Returns ROB9 580 31 Disc rec J4 140
outwards (cancel)
31 Balance c/d 4 380
7 760 7 760
June 1 Balance b/d 4 380

Dr Lesia Ltd (Account No 2) Cr

$ $
May 18 Bank CB31 3 420 May 1 Balance b/d 3 600
18 Discounts CB31 180 22 Purchases PB28 3 680
received book
26 Returns ROB9 470
outwards
31 Balance c/d 3 210
7 280 7 280
June 1 Balance b/d 3 210

214
 4 Ledgers and the trial balance

SALES LEDGER

Dr Jacinta Stores (Account No 1) Cr

$ $
May 1 Balance b/d 1 500 May 14 Bank CB31 1 470
7 Sales book SB42 2 400 14 Discounts CB31 30
allowed
17 Returns RIB7 250
inwards
31 Balance c/d 2 150
3 900 3 900
June 1 Balance b/d 2 150

Dr Yari Retail Units (Account No 2) Cr

$ $
May 1 Balance b/d 2 290 May 29 Returns RIB7 140
inwards
19 Sales book SB42 1 850 30 Bank CB31 3 920
30 Discounts CB31 80
allowed
4 140 4 140

Sophie’s Marine Stores

Trial balance at 31 May 2018

Folio $ $
Accounts payables
Jaden Supplies PL1 4 380
Lesia Ltd PL2 3 210
Accounts receivable
Jacinta Stores SL1 2 150
Yari Retail Units SL2 –
Bank CB31 4 570
Capital GL1 47 770
Cash CB31 3 110
Discounts allowed GL2 550
Discounts received GL3 770
Drawings GL4 20 760
General expenses GL5 32 974
Non-current assets GL6 58 000
Petty cash in hand PCB3 44
Purchases GL7 91 920
Sales GL8 157 830
Returns inwards GL9 2 850
Returns outwards GL10 3 880
Travel expenses GL11 912
217 840 217 840

215
4.2 Review – posting from books of original entry

Practice questions

7. Posting purchases, sales and returns books

to ledger accounts
Dewain has prepared some books of original entry for transactions in
February 2018.
Purchases book (Page 28)
Date Supplier Invoice number Folio $
Feb 10 Alissa Stores K429 3 490
22 Tyrell Wholesale D2297 4 870
28 Total purchases 8 360

Sales book (Page 42)

Date Customer Invoice number Folio $
Feb 9 Brittney Ltd 8 382 1 120
17 Sameer Retail Ltd 8 383 3 360
28 Total sales 4 480

Returns inwards book (Page 7)

Date Customer Credit note number Folio $
Feb 14 Brittney Ltd 185 170
22 Sameer Retail Ltd 186 330
28 Total returns inwards 500

Returns outwards book (Page 9)

Date Supplier Credit note number Folio $
Feb 17 Alissa Stores R518 280
27 Tyrell Wholesale B48 590
28 Total returns outwards 870

The following balances appeared in the personal accounts on

1 February 2018:
Purchases ledger Alissa Stores $4 400
Tyrell Wholesale $2 800
Sales ledger Brittney Ltd $960
Sameer Retail Ltd $1 680

a. Prepare the personal accounts in the purchases and sales ledgers.

(Note: you will also use these accounts to answer Question 9.)
b. Prepare the purchases, sales and returns accounts in the general
ledger.

216
 4 Ledgers and the trial balance

8. Posting purchases, sales and returns books to

ledger accounts
Dominique has prepared some books of original entry for transactions
in January 2018.
Purchases book (Page 25)
Date Supplier Invoice number Folio $
Jan 7 BPQ Wholesale 6843 12 500
15 City Stores Ltd 4523 9 200
31 Total purchases 21 700

Sales book (Page 37)

Date Customer Invoice number Folio $
Jan 6 Island Retail Ltd 4782 2 940
18 WPZ Ltd 4783 3 130
31 Total sales 6 070

Returns inwards book (Page 6)

Date Customer Credit note number Folio $
Jan 11 Island Retail Ltd 449 210
25 WPZ Ltd 450 80
31 Total returns inwards 290

Returns outwards book (Page 5)

Date Supplier Credit note number Folio $
Jan 10 BPQ Wholesale K441 840
21 City Stores Ltd 7821 390
31 Total returns outwards 1 230

The following balances appeared in the personal accounts on

1 January 2018:
Purchases ledger BPQ Wholesale $8 400
City Stores Ltd $5 200
Sales ledger Island Retail Ltd $3 020
WPZ Ltd $1 240

a. Prepare the personal accounts in the purchases and sales

ledgers. (Note: you will also use these accounts to answer
Question 10.)
b. Prepare the purchases, sales and returns accounts in the general
ledger.

217
4.2 Review – posting from books of original entry

9. Posting the cash book and general journal

to ledger accounts
Dewain (see Question 7) has also prepared a cash book and a general
journal. Extracts from these books of original entry are as follows.

Dr Cash book (Page 17) Cr

Folio Disc Cash Bank Folio Disc Cash Bank
All Rec
$ $ $ $ $ $
Feb 9 Brittney Ltd 24 936 Feb 5 Alissa Stores 88 4 312
25 Sameer 42 1 638 12 Tyrell 56 2 744
Retail Ltd Wholesale

66 144

General journal (Page 3)

Folio Dr Cr
$ $
Feb 28 Sameer Retail ltd 42
Discount allowed 42
Cancellation of discount as payment
made after date limit

a. Make further entries in the purchases and sales ledger accounts

(see Question 7) posting from the cash book and general journal.
b. Prepare the discount accounts in the general ledger.
c. Balance the personal accounts on 31 May 2018.

10. Posting the cash book and general journal

to ledger accounts
Dominique (see Question 8) has also prepared a cash book and a
general journal. Extracts from these books of original entry are as
follows.

Dr Cash book (Page 12) Cr

Folio Disc Cash Bank Folio Disc Cash Bank
All Rec
$ $ $ $ $ $
Jan 3 Island Retail 40 1 560 Jan 9 BPQ Wholesale 210 8 190
Ltd
8 WPZ Ltd 30 1 210 28 City Stores Ltd 260 4 940

70 470

218
 4 Ledgers and the trial balance

General journal (Page 2)

Folio Dr Cr
$ $
Jan 30 Discounts received 130
City Stores Ltd 130 Tip
Reduction in discount as payment
made after date limit Once you have
completed these
a. Make further entries in the purchases and sales ledger accounts questions you can check
posting from the cash book and general journal (see Question 9). your answers online at:
b. Prepare the discount accounts in the general ledger. www.oxfordsecondary.
c. Balance the personal accounts on 31 January 2018. com/9780198437260

219
 Develop your exam skills

PAPER 1 PAPER 2
1. Which of the following is a real account in Case study: Dwight Scott
the accounts of a shoe retailer? This case study involves the preparation of a
A Bank loan full accounting system including end-of-year
B Capital financial statements based on completed books
C Equipment of original entry.
D Account payable: QR Wholesale
Dwight Scott owns a wholesale business, Scott
2. Which of the following is a nominal account Wholesale Supplies, which provides local hotels
in the accounts of a supermarket? and restaurants with fresh produce. May is the last
A Cash at bank month of the business’s financial year. On 1 May
B Discounts received the business’s trial balance was as follows.
C Drawings
Trial balance at 1 May 2018
D Premises
Dr Cr
3. Which of the following is the correct $ $
treatment of the totals of the sales book Accounts payable: KPZ Ltd 12 400
and returns outwards book? Accounts receivable:
5 200
XTY Retail
Debit Credit
Bank 3 500
A Returns out-
wards account Capital 64 900
Sales account Cash 2 180
B Returns outwards account Discounts allowed 660
Sales account Discounts received 1 280
C Returns out- Sales account Drawings 39 480
wards account Non-current assets 98 000
D Sales account Returns outwards account Office expenses 480
Operating expenses 112 500
4. Which of the following is the correct Petty cash in hand 40
treatment of the totals of the purchases Purchases 484 720
book and returns inwards book? Returns inwards 2 830
Debit Credit Returns outwards 4 850
A Purchases account Sales 668 780
Returns inwards Stationery 440
account Vehicle expenses 2 180
B Purchases account 752 210 752 210
Returns inwards account
Dwight’s bookkeeper has already prepared the
C Returns inwards Purchases account
account business’s books of original entry for May 2018.
D Purchases account Returns inwards account The transactions have yet to be posted to the
purchases, sales and general ledgers.

220
 4 Ledgers and the trial balance

Journal Page 5
Date Details Folio Dr Cr
$ $
May  20 Equipment and fittings 4 600
PTP Offices Ltd  
4 600
Purchase of fittings for business use on credit, invoice number 10742

Petty cash book Page 8

Receipts Date Details Folio/ Payments Vehicle Office Stationery
voucher expenses expenses
$       $ $ $ $
40.00 May 1 Balance b/d
120.00 1 Cheque CB9
4 Vehicle fuel 473 30.30 30.30
12 Stationery 474 18.73 18.73
14 Office expenses 475 9.42 9.42
17 Stationery 476 11.50 11.50
18 Vehicle fuel 477 24.22 24.22
21 Office expenses 478 10.10 10.10
24 Vehicle fuel 479 25.48 25.48
29 Stationery 480 9.77 9.77
30 Office expenses 481 10.48 10.48
          150.00 80.00 30.00 40.00
    31 Balance c/d 10.00
160.00         160.00      
10.00 June 1 Balance b/d        

Dr Cash book Page 9 Cr

Discounts Cash Bank Discounts Cash Bank
allowed received
$ $ $ $ $ $
May 1 Balances b/d 2 180 3 500 May 1 Petty cash PCB8 120
4 XTY Retail 260 4 940 11 KPZ Ltd 310 12 090
10 Sales 5 850 12 Bank C 7 500
15 Operating
12 Cash C 7 500 1 250
expenses
31 Balances c/d 530 2 480
260 8 030 15 940 310 8 030 15 940
June 1 Balance b/d 530 2 480

221
Develop your exam skills

Purchases book Page 6 b. a trial balance at 31 May 2018

Date Details Invoice no Folio $ c. an income statement (trading and profit
May 16 KPZ Ltd 2723 7 350 and loss accounts) for the year ended
Total purchases 7 350 31 May 2018
d. statement of financial position (balance
Sales book Page 7
sheet) (classified) at 31 May 2018.
Date Details Invoice no Folio $
May 21 XTY Retail 0783 3 360
Total sales 3 360 Note:
Returns outwards book Page 2 • Remember that “returns outwards” is
Date Details Credit note no Folio $
another name for “purchases returns”
and “returns inwards” is another name
May 19 KPZ Ltd 1019 440
for “sales returns”.
Total returns outwards 440

Returns inwards book Page 4

Date Details Credit note no Folio $
May 26 XTY Retail 084 290
Total returns inwards 290
Tip
Prepare:
Once you have completed these questions
a. all the accounts in the purchases, sales you can check your answers online at www.
and general ledgers, showing folio oxfordsecondary.com/9780198437260
references after posting entries

222
Extend and review with the Workbook

4 Ledgers and the trial balance

Introduction Online support

In this chapter there are questions to test your understanding of: provides extra
• real, nominal and personal accounts
• general, sales and purchases ledgers
practice questions
• posting from books of original entry for each section of
• balancing and closing accounts
• interpreting entries and balances the syllabus, as well
• trial balances.
as answers for the Student
Paper 1 questions Book activities.
1. Which of the following is a real account?
A cash B drawings
C sales D wages

2. Which of the following is a nominal account?

A account receivable
B delivery vehicle
C insurance
D inventory

3. A bookkeeper is posting the totals of a purchases returns book and a sales book. Which of
the following entries is correct?
Debit Credit
A Purchases returns 4 Ledgers and the trial balance
Sales
B Purchases returns Sales
C Purchases returns 5. Elsa returned goods sold on credit to her by Marva. How should this transaction be recorded
Sales in the books of Marva?
D Sales Purchases returns Debit Credit
A Elsa Sales returns
4. A bookkeeper is posting the total of the purchases book and sales returns book. Which
B ofElsa
the Purchases returns
following entries is correct? C Sales returns Elsa
Debit Credit D Purchases returns Elsa
A Purchases
Sales returns 6. The following is an extract from a business’s cash book.
B Purchases Sales returns Dr Cash book (extract)
C Sales returns Discounts Cash Bank
Purchases $ $ $
D Sales returns Purchases Total 364

How should the discounts total of $364 be posted to the general ledger?
Debit 23 Credit
A Discounts allowed
B Discounts received
843730_POA_WB_SEC_4.indd 23 12/14/18 1:43 PM
C Discounts allowed
D Discounts received

7. The following account appeared in Judith’s purchases ledger

Dr Gareth Kenton Cr
$ $
Returns 400 Balance b/d 3 400
Multiple-choice and problem
Bank 2 850
questions, tips and guidance in the Discounts 150
Workbook reinforce what students
Which of the following statements is correct about the transactions recorded
have learnt in class.
in this account?
A there were discounts allowed and sales returns
B there were discounts allowed and purchases returns
C there were discounts received and sales returns
D there were discounts received and purchases returns

8. Calvin’s account in Anika’s sales ledger has a credit balance.

Which of the following statements is true?
A Anika is in debt to Calvin
B Anika has sold goods to Calvin
C Calvin is in debt to Anika
D Calvin has sold goods to Anika

24

843730_POA_WB_SEC_4.indd 24 12/14/18 1:43 PM

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