Accounting – 2.1 The double entry system of book-keeping | e-Consult
2.1 The double entry system of book-keeping (1 questions)
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Here's how each transaction would be recorded:
1. Sold goods on credit to Customer A for £500:
- Sales Ledger: A new account is created for Customer A with a debit of £500 (the amount owed by the customer).
- Nominal Ledger: Debit: Sales Revenue £500, Credit: Sales Ledger (Customer A) £500. This increases sales revenue and creates an amount owed by the customer.
2. Purchased raw materials on credit from Supplier X for £200:
- Purchases Ledger: A new account is created for Supplier X with a credit of £200 (the amount owed to the supplier).
- Nominal Ledger: Debit: Purchases £200, Credit: Purchases Ledger (Supplier X) £200. This increases the cost of goods sold and creates an amount owed to the supplier.
3. Received cash from Customer A for £400 (part payment of the £500 sale):
- Sales Ledger: Debit: Sales Ledger (Customer A) £400. This reduces the amount owed by the customer.
- Nominal Ledger: Debit: Cash £400, Credit: Sales Ledger (Customer A) £400. This increases the cash balance and reduces the amount owed by the customer.
4. Paid Supplier X for the raw materials (£200):
- Purchases Ledger: Debit: Purchases Ledger (Supplier X) £200. This reduces the amount owed to the supplier.
- Nominal Ledger: Credit: Purchases £200, Debit: Purchases Ledger (Supplier X) £200. This reduces the cost of goods sold and reduces the amount owed to the supplier.