EDUSEEDS

IGCSE Accounting 902

Sou r ce s of D at a

Teach e r ’s G uid e an d An sw e r K e ys
 IGCSE ACCOUNTING
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IGACC0902 TG B1 Page 2 © EDUSEEDS 2015

Section 1

1.1 “T” Account Vs Running Balance Format

Exercise

1) What are the 2 types of account format normally used?

A. Running Balance Format

B. “T” Account Format

2) The advantage of using the Running Balance format is that it shows the balance of the account
after every transaction, thus making it easier to detect errors.

1.2 Posting Transactions to Ledger Accounts

Exercise

1. In your own words, explain what the books below are used to record :

Name of Book Used to Record

Sales Journal Credit Sales

Purchase Journal Credit Purchases
Sales Return Journal Goods return by customer
Purchase Return Journal Goods return to supplier
Cash Book Receipts & Payments
General Journal Other items

2. What is the general rule of entering transactions in ledger accounts;

Debit the Account that has received value (goods, services or money)
Credit the Account that has given value (goods, services or money)

3. What are the rules of entering transaction in “real accounts”

increases in value of the asset (the asset concerned

Debit
has received a larger share of the resources of the business.
decrease in value of the asset (the asset concerned
Credit has given up some of its value in the service of the business
– this is called “depreciation”).

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1.3 Balance Ledgers & Perform Posting to Final Accounts
Exercise

1) What are the rules of entering transactions in Nominal accounts?

Debit Expenses, i.e. losses, in the appropriate nominal account.

Credit Gains, i.e. profits, in the appropriate nominal account.

2) What are the rules of entering transactions in Asset accounts?

Debit the Asset Account when the asset increases in value

Credit the Asset Account when it decreases in value, either by
depreciation or sale of asset

3)

Sales Journal

Date Trade Debtor Debit Note Folio Details of Amount

2012 Debit Note $

Mar 1 Gordon PL 42 187

Mar 3 Abrahams PL 81 166

Mar 6 White PL 82 12

Mar 10 Gordon PL 81 55

Mar 17 Williams PL 86 289

Mar 19 Richards PL 87 66

Mar 27 Wood PL 88 28

Mar 31 Simes PL 89 78

Transferred to Sales Ledger GL 23 881

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 Entries in relevant sales ledger is as follows:

Gordon
2011 $ 2011 $
1 Mar Sales 187
10 Mar Sales 55

Abrahams
2011 $ 2011 $
3 Mar Sales 166

White
2011 $ 2011 $
6 Mar Sales 12

Williams
2011 $ 2011 $
17 Mar Sales 289

Richards
2011 $ 2011 $
19 Mar Sales 66

Wood
2011 $ 2011 $
27 Mar Sales 28

Simes
2011 $ 2011 $
31 Mar Sales 78

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Section Review 1

Format 1

Date Details $ Date Details $

Debit Credit
Side Side

Format 2

Date Details Folio Debit Credit Balance

$ $ $

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Section 2
2.1 Introduction to Books of Prime Entry

Exercise
1) Name the 7 main books of prime entry:

i.) Cash Books

ii.) Petty Cash Books

iii.) Sales Journal

iv.) Sales Returns Journal

v.) Purchase Journal

vi.) Purchase Returns Journal

vii.) General Journal

2) Explain in your own words what the books / journals below are used to record

Books / Journals Used to record :

are used to record transactions involving cash payments
and receipts. Cash & petty cash will be covered in detail
i.) Cash books
in a later section.

are used to record transaction of the same nature,

ii.) Specialised Journals involving the same accounts and occurring frequently.

are used to record any other transactions not recorded in

cash books and Specialised journals. These transactions
iii.) General Journal do not occur frequently and involve accounts which vary in
nature.

3) Provide 4 examples of specialised journals :

Examples of Specialised Journals

i.) Sales Journal
ii.) Sales Returns Journal
iii.) Purchase Journal
iv.) Purchase Returns Journal

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2.2 Specialised Journals
Exercise

1) Sales Journal is used to record credit sales which give rise to trade debtors.

2) List the details which are available in the Sales Journal

i.) Date
ii.) Name of customer
iii.) Invoice no
iv.) Trade discounts (if applicable)
v.) Amount owing by each debtor

3) At the end of the period when posting entries from the Sales returns Journal to the ledger
account, provide the correct double entry to be made:

Debit Sales Returns Account

Credit Debtor Account

4) Explain the use of the journals below :

Name of Journal Used to Record :

Purchase Journal credit purchases which give rise to trade creditors.

Sales Journal credit sales which give rise to trade debtors.

Purchase Returns Journal record the return of goods purchased on credit to
suppliers.
Sales Returns Journal Record goods returned by a customer due to
some reason (e.g. faulty goods, wrong color etc).

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5)

Purchase Journal

Date Trade Creditor Invoice No. Folio Details of Amount

2012 Credit Note $

Mar 1 Smith Stores PL 42 90

(120*75%)

Mar 23 Kelly PL 81 105

(88+52)*75%
Mar 31 Hamilton PL43 180
(270*66.6%)

GL 23 375
Transferred to Purchases a/c

Sales Journal

Date Trade Debtor Invoice No. Folio Details of Amount

2012 Debit Note $

Mar 8 Grantley PL 42 72
(28+44)
Mar 15 Henry PL 81 240
(36+144+120)*80%
May 23 Sangster PL 62 81
(42+48)x90%

GL 23 393
Transferred to Sales a/c

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2.3 Trade & Cash Discounts
Exercise

1) Cash and trade discount are each different from the other in the following:
A. Purpose
B. Treatment in the accounts

2) A trade discount is given when the buyer buys goods in bulk from the seller. It is also given
when the seller wants to encourage repeat orders from the buyer. Trade discounts are not
recorded in the accounts i.e. there is no double entry that shows the trade discount amount.

3) Cash discounts are given to reward prompt payment when the buyer pays before the due
date. To the seller, cash discounts are known as “discount allowed” and is treated as a
business expense. The cash discount is recorded in a column in the cash book and this
means that cash discounts will reduce the profits of the seller.

4) Cr Discount Allowed, Dr Debtor

5)
a) $8,400 (80%*10,500)
b) No, the trade discount is not recorded in Melvin’s books
c) Since James paid within 14 days, he would be given a cash discount of 840(10%*$8,400).
James payment would be $7,560
d) Debit bank $7,560, debit Discount allowed $840 and credit Debtor James $8,400

6)
a) Sales recorded is $18,000 (90%*20,000)
b) The trade discount is not recorded in any account

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Section Review 2
1)

Date Source Documents Book of Original Entry

Nov 9 Invoice Purchase Journal

Nov 17 Invoice (cash disc) & Official Cash Book

receipt or Cheque
counterfoil (payment)

Nov 25 Credit Note Purchases Returns Journal

2)
a) $6,895
b) Sales ledger
3)

a) i) Sales journal
ii) Cash book
iii) Cash book (cash discount column)
iv) Sales returns journal

b) i) Invoice
ii) Receipts
iii) Invoice
iv) Credit note

c) Sales Ledger

d) Balance carried forward, which represents the amount owed by Samuel as at 31 Mar 2011.

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Specimen Answers to Past Year Questions (refer to Activity Book)

1. June 2014, Paper 1, Variant 3, Q.2(a), Q.2(b) and Q.2(c)

Answer Q.2(a):

General or Nominal ledger

General or Nominal ledger
General or Nominal ledger
Purchases ledger
Sales ledger
General or Nominal ledger

Explanation:

The personal accounts i.e. creditors and debtors accounts are found in the purchases and
sales ledger respectively. Lottie is a creditor so Lottie a/c is found in the purchases ledger.
Matthew who is a debtor will have his Matthew a/c listed in the sales ledger.

All other accounts are found in the general or nominal ledger.

Answer Q.2(b):

Cash book (or petty cash book)

Explanation:

The cash book and petty cash book are also books of prime entry

Answer Q.2(c):

To keep a record of credit sales and to reduce the number of entries in the sales a/c

Explanation:

The sales journal is where credit sales transactions are recorded daily.
At the end of the month, the credit sales are added up and this total is entered once into
the sales a/c.

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2. November 2011, Paper 1 Variant 3, Q.1(a), Q.1(b) and Q.1(c)

Answer Q.1(a): A

Explanation:

The payment will be recorded as Debit (DR) bank a/c and Credit (CR) Hassan a/c. The
bank a/c is found in the cash book and Hassan a/c is in the sales ledger (because Hassan
is a debtor).

Answer Q.1(b): A

Explanation:

The petty cash book contains the petty cash a/c which is part of double entry (any account
is part of double entry). But a journal is a list of transactions and is not part of double
entry. Similarly, the trial balance is a list of balances of accounts, so not part of double
entry.

Answer Q.1(c): D

Explanation:

A gift to be used in the business is considered part of capital. So the transaction must be
recorded in the capital a/c. The other part of the double entry would be to the asset a/c,
which in this case is machinery a/c.

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3. June 2011, Paper 1 Variant 3, Q.1(a) and Q.1(b)

Answer Q.1(a): A

Explanation:

The sales returns journal is a list of all customers’ returns (usually because the goods they
bought is faulty, of the wrong colour etc). Once the goods are returned, you (the seller)
issue a Credit Note and it is this business (source) document that you refer to when
making the entry into the sales returns journal.

Answer Q.1(b): B

Explanation:

A cash discount is given to reward a customer when they pay before the due date (i.e.
they pay promptly).

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Section Test 1

1) Name the 3 main books of Prime Entry and explain their functions:

Name of Book Functions

i) Cash Book # Used to record transactions pertaining to receipts &
payments ##
ii) Specialised are used to record transaction of the same nature,
Journals # involving the same accounts and occurring frequently
##
iii) General Journal # are used to record any other transactions not recorded
in cash books
and specialised journals. ##
9# *1 =9m

2) Provide 4 examples of specialised journals (4 marks)

Sales Journal #
Purchase Journal #
Sales Returns Journal #
Purchase Returns Journal #
4# *1 =4m

3) Name the 2 types of discounts given / received? (6 marks)

Trade Discounts ##
Cash Discounts ##
4# *1 =4m

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 4) (9 marks)

Purchase Journal

Date Trade Creditor Credit Note No. Folio Details of Amount

2012 Credit Note $

May 9 # Clarke # 2568 PL 42 240 #

May 16 # Charles # 4379 PL 81 160 #

May 31 Nelson 1243 PL 23 50 #

GL 23 450 #
Transferred to Purchase Ledger

Sales Journal

Date Trade Debtor Debit Note No. Folio Details of Amount

2012 Debit Note $

May 1 # Marshall # PL 42 51
(24+27) #

May 7 # Richard # PL 81 200

(70+230)66.66%
#
May 23 # Young # PL 62 160
(50+70+80)x80%
#

Transferred to Sales Ledger GL 23 411 #

17 # *1 = 17 m

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Section Test 2

1) State the advantage of using the Running Balance format (3 marks)

The advantage of the running balance format shows the balance after each transaction, thus making
it easier to detect errors.

2) List the 3 main types of ledgers used (3 marks)

 Sales Ledger
 Purchase Ledger
 General Ledger

3) Name 2 types of accounts classified under Personal Accounts and 2 types of accounts classified
under Impersonal Accounts (3 marks)

Personal Accounts – Debtor Accounts & Creditor Accounts

Impersonal Accounts – Real Accounts & Nominal Accounts

4) State the use of Nominal Accounts (3 marks)

Nominal Accounts are used to record profit & loss

5) (13 marks)

Purchase Journal

Date Trade Creditor # Credit Note Folio Details of Amount

2012 # No. Credit $
Note

May 1 # King # 25 PL 44 450

(120+480)*75% ##

May 3 # Bell # 75 PL 82 800 ##

(400+300+300)*80%

May 15 # Kelly # 84 PL45 600 ##

(300+500)*75%

May 20 # Powell # 15 PL65 280 ##

(420)*66.66%

May 30 # Lewis # 85 PL43 640 ##

(800)*80%

GL 23 2,770 #
Transferred to Purchase Ledger

31# *1 =21m

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Module Test (A)

1)
Format 1 – this is a T- Account format and the account itself looks like a the letter “T” ##

Date # Details # $# Date # Details # $#

Debit Credit
Side # Side #

Format 2 -This form of presentation uses a column each for the date, details, folio or reference and one
column each for debit, credit and balance, after each transaction 

Date # Details Folio # Debit # Credit # Balance

# $ $ #
$

18# *1 =18m
2) (10 marks)

Name of Book Used to Record

Sales Journal Credit Sales ##

Purchase Journal Credit Purchases ##
Sales Return Journal Goods return by customer ##
Purchase Return Journal Goods return to supplier ##
Cash Book Receipts & Payments ##
General Journal Other items ##

12 # *1 =12m

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 3)

Cash
2011 $ 2011 $
19 June Sales  25

Purchases
2011 $ 2011 $
1 June Blake 72 5 June Returns- Blake 15
3 June Foster 90
30 June Price 145

Blake
2011 $ 2011 $
5 June Return outward 15 1 June Purchases 72

Foster
2011 $ 2011 $
3 June Purchases  90

Sales
2011 $ 2011 $
19 June Cash  25
21 June Rose 64

Rose
2011 $ 2011 $
21 June Sales 64

Price
2011 $ 2011 $
30 June Purchases 145

Purchase Returns
2011 $ 2011 $
5 June Purchases 15 5 June Blake 15

13# *1 =13m

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Alternate Test (B)

1) C 7) D
2) D 8) D
3) C 9) A
4) A 10) A
5) C 11) B
6) A (11 marks)

12)
Books / Journals Used to record :
are used to record transactions pertaining to cash
payments and receipts. Cash & petty cash will be covered
i.) Cash books
in detail in a later section.

are used to record transaction of the same nature,

involving the same accounts and occurring frequently. As
similar account names, narration and accounting posting
ii.) Specialised Journals reference numbers are used, repetition is reduced by
using 1pecialized journals. Information on transactions are
also readily available for control and monitoring purposes.

are used to record any other transactions not recorded in

cash books and 1pecialized journals. These transactions
iii.) General Journal do not occur frequently and involve accounts which vary in
nature.

2 marks each =6 marks

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13)
Cash
2010 $ 2010 $
1July Capital # 500 3 July Purchases # 85
10 July Cash # 42 25 July Morgan # 88
31 July Knight # 55
Purchases
2010 $ 2010 $
3 July Cash # 85 14 July Returns- Morgan # 28
7 July Morgan # 116 21July Returns - Moses # 19
18 July Moses # 98

Capital
2010 $ 2010 $
1July Capital # 500

Morgan
2010 $ 2010 $
14 July Returns # 28 7 July Purchases #116
25 July Cash # 88

Sales
2010 $ 2010 $
10 July Cash  42
24 July Knight # 55

Moses
2010 $ 2010 $
21 July Returns #19 18 July Moses # 98

Knight
2010 $ 2010 $
24 July Sales # 55 31 July Cash # 55

Return Outwards
2010 $ 2010 $
14 July Purchases # 28 14 July Morgan # 28
21July Purchases # 19 21July Moses # 19

27# *1 =27m

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