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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:
| 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:
| In-voice | Day | Creditor | Creditors control | Trading inventory | Statio-nery |
| Sundries accounts | ||
| Amount | Fol. | Details |
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%.
| 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
| 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. |
ACTIVITY1
ASSIGNMENT 1
| 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
| In-voice | Day | Creditors | Fol | Creditors control | Trading inventory | Stationery | Packaging material |
| Sundries account | ||
| Amount | Fol | Details |
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