![Ledger Accounts
Nominal Ledger
The nominal ledger is the accounting record which analyses all the entity’s financial
records. e.g. Receivables Control, Payables Control etc.
Nominal Ledger Vs Personal Ledger
Individual ledger accounts for each credit customer / supplier are maintained in the
receivables / payables ledger.
These are the personal accounts; a total receivables / payables account is held in the
nominal ledger, called the receivables / payables control account.
These are memorandum accounts only; they are not part of the double entry system.
But double entry rules applied here.
Personal / Receivables / Payables
Ledger Accounts
[MEMORANDUM ACCOUNTS]
Nominal Ledger](https://image.slidesharecdn.com/02-250427122752-8027a36a/85/02-Chapter-4-Presentation-on-Ledger-Accounting-and-Double-Enrty-4-ppt-9-320.jpg)
![QUIZ ANSWER of CHAPTER 3
1) Employees Gross Wages would be [ 12,450 + 2,480 + 1,350 (employee’s Pension) ] = 16,280
Total Payroll Cost to the Company [ 12,450 + 2,480 + 1,350 (employee’s Pension) + 1,500 (employee’s
Pension)] = 17,780
Waged Expense in the Income Statement of the Company = 17,780
2) False. Cash Book is the book of original entry for discount allowed to customers.
2) Wages Expenses = [ 2,480 + 1,350 + 1,500 + 50,000 ] = 55,330
3) Credit Note of BDT 100.
4) Cash Book. As the purchase is from a Non-Credit Suppliers.
5) A petty cash voucher of BDT 10 is missing.](https://image.slidesharecdn.com/02-250427122752-8027a36a/85/02-Chapter-4-Presentation-on-Ledger-Accounting-and-Double-Enrty-4-ppt-17-320.jpg)
02. Chapter-4 (Presentation on Ledger Accounting and Double Enrty) (4).ppt
- 1. Ledger accounting and double entry Prepared By: Muhammad Gaus Samdani FCA
- 2. Transaction Flow to Financial Statements 2
- 3. Computerized accounting systems An accounting system is the system in place within a business to allow it to record, process and store financial information. An accounting system enables a business to satisfy the requirement for businesses to maintain records of their financial transactions and allows it to produce relevant and reliable information for stakeholders. In Accounting, we refer to traditional way of recording transactions, using books, as manual accounting system. The vast majority of accounting systems are now computerised.
- 4. Accounting software packages Accounting software packages are commonly used computerised accounting systems. Accounting software packages range from simple ‘off-the-shelf’ programmes that meet the requirements of a small business, to systems that are fully integrated with businesses other systems such as inventory management and human resource management systems that are used in large and complex organisations. Computerised accounting system is a software package which contains several different modules such as for payroll, for managing balances owed by credit customers or for maintaining a record of non-current assets. The modules interact with each other in such a way that information entered into one module will automatically update other relevant modules, for example, recording a credit sale will update both the sales module and the module that manages the balances owed by credit customers.
- 5. Cloud accounting Benefits The main benefit of cloud accounting is that a business can access its accounting records from any computer (or tablet or phone) that has an internet connection the business does not need to purchase expensive, sophisticated IT equipment in order to run specialised software or store large amounts of data. As the software is maintained by the service provider, the business may also be able to reduce IT support costs within its own business. Drawbacks Cloud accounting requires access to the internet. Server outages on the cloud that would mean that there were temporary restrictions on the ability to access data. Potential data security issues, such as an increased risk of data being hacked and loss or damage to data. Reliant on the service provider to provide adequate security.
- 6. Source documents for recording financial transactions
- 7. Source documents for recording financial transactions
- 8. Ledger Accounts Why do we need ledger accounts? Ledger accounts summarise all the individual transactions listed in the books of original entry. Records should be kept in ledger accounts in chronological order, with cumulative totals built up. Types: General Ledger, Receivables / Sales and Payables / Purchase Ledger. Source Documents (Invoice, Credit Notes) Books of Original Entry Sales day book Purchases day book Cash book Petty cash book The payroll The journal Ledger accounting and double entry
- 9. Ledger Accounts Nominal Ledger The nominal ledger is the accounting record which analyses all the entity’s financial records. e.g. Receivables Control, Payables Control etc. Nominal Ledger Vs Personal Ledger Individual ledger accounts for each credit customer / supplier are maintained in the receivables / payables ledger. These are the personal accounts; a total receivables / payables account is held in the nominal ledger, called the receivables / payables control account. These are memorandum accounts only; they are not part of the double entry system. But double entry rules applied here. Personal / Receivables / Payables Ledger Accounts [MEMORANDUM ACCOUNTS] Nominal Ledger
- 10. Double entry book-keeping Dual effect (duality concept) The principle of double entry book-keeping is that each transaction has two equal but opposite effects in the ledger accounts of an entity: the dual effect. Asset Debit Increase Credit Decrease Liability Credit Increase Debit Decrease Capital Credit Increase Debit Decrease Income Credit Increase Debit Decrease Expense Debit Increase Credit Decrease Source Documents (Invoice, Credit Notes) Books of Original Entry Sales day book Purchases day book Cash book Petty cash book The payroll The journal Ledger accounting and double entry
- 11. Journal Journals can be used to record any type of financial transaction, in which case the journal acts as the book of original entry for that transaction. What are Journal Entries used for? The journal records transactions not recorded in any other book of original entry, such as purchases of non-current assets. In particular the journal keeps a record of unusual movements between ledger accounts. It is used to record any double entries made which do not arise from the other books of original entry, such as when errors are discovered and need to be corrected.
- 12. Petty Cash Imprest System The double entry for transactions recorded in the petty cash book works in the same way as the cash book. When Petty Cash A/C is topped up: Account Name Debit Credit Petty Cash XXX Cash at Bank XXX When expense is made from Petty Cash: Account Name Debit Credit Postage XXX Travel XXX Petty Cash XXX
- 13. Accounting for Discounts A reduction in the price of goods below the amount at which those goods would normally be sold to other customers. Types Trade Discount: A reduction in the cost of goods, owing to the nature of the trading transaction. It usually results from buying goods in bulk. It is deducted from the list price of goods sold, to arrive at a final sales figure. There is no separate ledger account for trade discount. No Journal Required. •Cash Discount: A reduction in the amount payable in return for immediate payment in cash, or for payment within an agreed period. There are separate ledger accounts for cash discounts: one for discount allowed to customers, and one for discount received from suppliers. When Discount Allowed Account Name Debit Credit Discount Allowed XXX Trade Receivables XXX When Discount Received Account Name Debit Credit Accounts Payable XXX Discount Received XXX
- 14. Accounting for VAT VAT is an indirect tax on the supply of goods and services. Tax is collected at each transfer point in the chain from prime producer to final consumer. Eventually, the consumer bears the tax in full and any tax paid earlier in the chain can be recovered by a registered trader who paid it. Types of VAT? VAT on Irrecoverable debt recoverable / not? What is Zero Rate, Reduced Rate, Standard Rate? Registered and non-registered person: Traders whose sales (outputs) are below a certain level need not register for VAT although they may do so voluntarily. Unregistered traders neither charge VAT on their outputs nor are entitled to reclaim VAT on their inputs. They are in the same position as a final consumer. Traders of Exempt Activities: cannot charge VAT on their outputs and consequently cannot reclaim VAT paid on their inputs. Traders of Taxable / Exempt Activities: need to apportion the VAT suffered on inputs and can usually only reclaim the proportion of input tax that relates to taxable outputs.
- 15. Accounting for VAT VAT should not be included in income or in expenses (but), whether of a capital or of a revenue nature. Irrecoverable VAT: Persons not registered for VAT will suffer VAT on inputs as a cost. Registered persons who also carry on exempted activities may have a residue of input VAT which falls directly on them. Non-deductible inputs will be borne by all traders. E.g. VAT on Car Purchase, Entertainment for business purpose. VAT and discounts VAT is charged on the goods or services total on an invoice (or credit note) net of Trade Discount. VAT on Credit Sales Account Name Debit Credit Accounts Receivable XXX Sales XXX VAT Current Account XXX VAT on Credit Purchase Account Name Debit Credit Purchase XXX VAT Current Account XXX Accounts Payable XXX
- 16. QUIZ 1) The VAT account in Atomic Ltd.’s nominal ledger currently shows output tax and input tax for the quarter at Tk. 228,196 and Tk. 176,949 respectively. A detailed review of the account highlights the following: Tk. 8,301 of VAT on invoices received has been posted on output tax VAT of Tk. 3,606 on sales has been posted to the debit of the VAT accounts What is the correct amount of the VAT payable? 2) A debit balance of Tk. 3,000 brought down on A Ltd.’s Account in B Ltd.’s books means that. A / B Ltd. owes A / B Ltd. 3) A business which is registered for VAT received the following invoice from on eof its VAT registered suppliers: Invoice no: XXX Date: 20 June 2016 Goods of qty 100@BDT 10 = 1,000 Less: Trade Discount = (50) = 950 A further discount of BDT 50 will be allowed if payment is received within 14 days. What amount of VAT should have been charged on the invoice? What amount will be deposited to Govt. Treasury. 4) IQ – 3 / 5 / 6 / 7
- 17. QUIZ ANSWER of CHAPTER 3 1) Employees Gross Wages would be [ 12,450 + 2,480 + 1,350 (employee’s Pension) ] = 16,280 Total Payroll Cost to the Company [ 12,450 + 2,480 + 1,350 (employee’s Pension) + 1,500 (employee’s Pension)] = 17,780 Waged Expense in the Income Statement of the Company = 17,780 2) False. Cash Book is the book of original entry for discount allowed to customers. 2) Wages Expenses = [ 2,480 + 1,350 + 1,500 + 50,000 ] = 55,330 3) Credit Note of BDT 100. 4) Cash Book. As the purchase is from a Non-Credit Suppliers. 5) A petty cash voucher of BDT 10 is missing.