Grade 10 ACCOUNTING Term 1: Week 5

Topic: CREDIT (DJ & DAJ with Debtors Ledger and General Ledger)

BASIC CONCEPTS with regards to DEBTORS

Source
Transactions Journals Ledgers Internal control
documents
Credit sales Credit Invoice Debtors Journal General Ledger Screening of debtors
(DJ ) before granting credit

Returns from OR Credit Note Debtors Allowances Debtors Ledger Credit terms based
allowances to Journal (DAJ ) on debtors' financial
debtors background
Payments received Receipt and/or Cash Receipts Debtors List Credit limit may not
from debtors Bank statement Journal (CRJ ) be exceeded

CREDIT SALES

• ISSUES a credit invoice (source document)

• Entered in the DJ (Debtors Journal) [Selling and cost price]
• Double entry in the General Ledger is: Dr Debtors Control; Cr Sales (selling price)
Dr Cost of Sales; Cr Trading stock (cost price)
• Debtors Ledger account: Dt Debtor (selling price)

Gr 10 Accounting 1
EXAMPLE 1
Feb 7, 2021: Issued credit invoice no 5 to L. Rule for goods sold on credit, R 1 240.
Transaction
EXO Traders uses a 25 % mark-up on cost.
Source
document
Credit invoice

Journal Debtors Journal of EXO Traders --- February 2021 DJ 1

Inv. no Day Details Fol Sales Cost of sales
005 7 L. Rule 1 240 992

General DR Debtors Control B6 CR

Ledger 2021
Feb 7 Sales DJ 1 240

Sales N1
2021 Debtors
Feb 7 DJ 1 240
control
Trading Stock B7
2021
Feb 7 Cost of Sales DJ 992

Cost of Sales N2
2021
Feb 7 Trading Stock DJ 992

Debtors Debtors Ledger of EXO Traders

Ledger L. Rule D1
Date Details/ Document Fol Debit Credit Balance
2021
Feb 7 Invoice no 5 DJ 1 240 1 240
Debtors
List
L. Rule R 1 240
Accounting Acc Dr Acc Cr Assets (A) Owners Equity (O) Liabilities (L)
Equation Debtors Control/L Rule Sales (income) + 1 240 + 1 240 0
Cost of Sales Trading Stock - 992 - 992 0

Debtors are Assets, which increase on Debit side;

Debtor is debited to show he/she owes MORE

ACTIVITY 1
REQUIRED:
1.1 Prepare the Debtors Journal of Nyamakazi Traders for March 2021.
1.2 Post to the General Ledger and Debtors Ledger.
1.3 Calculate the mark up % on cost that the business usually applies AND the % realised on the24th.
1.4 What is the effect for a business to reduce its % mark-up. Name ONE positive and ONE negative aspect.

Transactions for March 2021

4 Issued invoice 23 to Meaka Nomfundo, for R 1 800. Cost price of goods sold was R 1 200.
9 Sold goods on credit to Noah Fortuin for R750, cost price was R500. Invoice 24 was issued.
13 Issued invoice 25 to Meaka Nomfundo for R 3 000. Cost price of the goods amounted to R 2 000.
24 Issued invoice 26 to Michael Cronje, for R 2 700. These goods were sold at a lower mark-up as it was
out-dated.

Gr 10 Accounting 2
ACTIVITY 1: ANSWER SHEET

Debtors’ Journal of Nyamakazi Traders for March 2021 DJ 3

Invoice
no Day Details/ Debtors Fol Sales Cost of Sales

GENERAL LEDGER OF NYAMAKAZI TRADERS

BALANCE SHEET SECTION
DR DEBTORS CONTROL B1 CR

TRADING STOCK B2

NOMINAL SECTION
SALES N1

COST OF SALES N2

DEBTORS’ LEDGER OF NYAMAKAZI TRADERS

Meaka Nomfundo D1
Date Details Fol Debit Credit Balance

N. Fortuin D2

Michael Cronje D3

Debtors’ List
Meaka Nomfundo
Noah Fortuin
Debtors List total & Debtors Control
Michael Cronje a/c closing balance must be equal
Debtors' List end total at the end of each month

Debtors Control closing balance

Gr 10 Accounting 3
 1.3 Calculate:
Usual % mark-up: % mark-up applied on 24 March:

1.4 ONE positive effect: ONE negative effect:

The Consumer Protection Act allows customers to

return goods within six months if it is defective or do
RETURNS FROM / ALLOWANCES to DEBTORS not meet the required standards.
• Issues a credit note (source document)
• Entered in the DAJ (Debtors Allowances Journal) [Selling and cost price]
• Double entry in the General Ledger is: Dr Debtors Allowances; Cr Debtors Control (selling price)
Dr Trading stock; Cr Cost of Sales (cost price)
• Posted to the Debtors Ledger account:
CREDIT the Debtor with the selling price. NO ENTRY in the C.o.S column if items were not
returned OR only an allowance was granted
EXAMPLE 2
Feb 12, 2021: Goods not to specification, R240, (selling price) were returned by L. Rule.
Transaction
Credit note no 02 was issued. EXO Traders uses a 50% mark-up on cost.
Source
Credit note
document

Journal Debtors Allowances Journal of EXO Traders --- February 2021 DAJ 1
C/N no Day Details Fol Debtors Allowance Cost of sales
02 12 L. Rule 240 160

General DR Debtors Control B6 CR

Ledger 2021 12 Debtors DAJ 240
Feb allowance
Debtors Allowance N2
2021 12 Debtors control DAJ 240
Feb

Trading Stock B7
2021 12 Cost of Sales DJ 160
Feb

Cost of Sales N2
2021 12 Trading Stock DAJ 160
Feb

Debtors Debtors Ledger of EXO Traders

Ledger L. Rule D1
Date Details/ Document Fol Debit Credit Balance
2021
Feb 7 Invoice no 5 DJ 1 240 1 240

12 C/N 02 DAJ 240 1 000

Debtors
List
L. Rule R 1000
Accounting A/c Dr A/c Cr Assets (A) Owners Equity (O) Liabilities (L)
Equation Debtors Control / L Rule Sales (income) - 240 - 240 0
Cost of Sales Trading Stock + 160 + 160 0

Gr 10 Accounting 4
ACTIVITY 2
Lucky Star owns a business, Lucky Traders, that buys and sells household appliances.
They sell merchandise on credit and uses a profit mark up of 25 % on cost price.
Debtors' List on 1 March 2021:
S. Sardien R3 450
H. Harder R2 890
REQUIRED:
1. Record the following transactions in the DJ and DAJ
2. Close off the journals at the end of the month
3. Post to the Debtors Ledger
TRANSACTIONS for March 2021
7 Sold goods on credit to S. Sardien, R1 525. Issued invoice 201.
10 S. Sardien claimed an allowance for damaged items, R125. He agreed to keep the items.
Issued credit note no 54 to him.
13 Issued an invoice to H. Harder for goods sold to her on credit, R840.
30 H. Harder purchased goods for R1 800 on credit.
31 H. Harder returned damaged items, R400. Issued a credit note to her.

ACTIVITY 2: ANSWER SHEET

Debtors Journal of Lucky Traders --- March 2021 DJ 3
Inv.no Day Details/ Debtors Fol Sales Cost of Sales

Debtors Allowances Journal of Lucky Traders …. March 2021 DAJ 3

C/N Debtors
Day Details/ Debtors Fol Cost of Sales
no Allowance

Debtors’ Ledger of Lucky Traders

S. Sardien D1
Date Details/ Document no. Fol Debit Credit Balance
2021
Mar 1 Account rendered 3 450

H. Harder D2
Date Details/ Document no. Fol Debit Credit Balance
2021
Mar 1 Account rendered 2 890

Gr 10 Accounting 5
 Debtors’List on 31 March 2021
S. Sardien
H. Harder
Debtors' List total

Debtors Control account balance (?)

PAYMENTS RECEIVED FROM DEBTORS

• Issue a receipt (when debtors pay off or settle their outstanding debt with cash or cards)
• Debtors may pay via EFT; source document is the BS (Bank statement) as the payment is verified and
entered only when it shows on the bank statement (or daily transaction history) of the business.
• Entered in CRJ (Cash Receipts Journal)
NO amount in Analysis column.
EFT is a direct transfer between banks
EXAMPLE 3
Transaction Feb 25, 2021: Received an EFT from L. Rule in full settlement of her account, R1 000
Source
BS (bank statement)
document

Journal Cash Receipts Journal of EXO Traders --- February 2021 CRJ 1
Analysis of Debtors Sundry
Doc D Details Bank Details
receipts Control accounts

BS 25 L. Rule 1 000 1 000

General DR Debtors Control B6 CR

Ledger 2021
Feb 25 Bank CRJ 1 000
Bank B7
2021
Feb 25 Debtors control CRJ 1000

Debtors Debtors Ledger of EXO Traders

Ledger L. Rule D1
Date Details/ Document Fol Debit Credit Balance
2021
Feb 7 Invoice no 5 DJ 1 240 1 240

12 C/N 02 DAJ 240 1 000

25 EFT (BS) CRJ 1 000 0
Debtors
List
L. Rule R0
Accounting A/c Dr A/c Cr Assets (A) Owners Equity (O) Liabilities (L)
Equation Bank Debtors Control / L. Rule +1 000
- 1 000 0 0

Debtors decrease on Credit side

Debtor OWES LESS

Gr 10 Accounting 6
ACTIVITY 3
The Debtors Control account was prepared by an inexperienced accountant. Although the amounts are correct,
the inexperienced accountant made incorrect debit and/or credit entries. Some entries also appear on both
sides.
REQUIRED:
Prepare the CORRECT Debtors Control account on the Answer Sheet.
Balance the account at the end of the month.

General Ledger of Luzuko Traders

Balance Sheet Section
Dr Debtors Control Cr
2021 30 Bank CRJ 14 000 2021 1 Balance b/d 14 800
Apr Apr
Sales DJ 12 700 Debtors Allowance DAJ 1 780
Debtors Allowance DAJ 1 780

ACTIVITY 3 : ANSWER SHEET

General Ledger of Luzuko Traders

Balance Sheet Section
Dr Debtors Control Cr
2021 2021
Apr Apr

Gr 10 Accounting 7