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Financial and Banking Processes (13932)

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A cash disbursements journal is where you record your cash (or cheque) paid-out transactions. It can also be called a purchases journal or an expense journal. If you use the accrual basis of accounting, you’ll record expenses at the time you purchase goods or services, even if you purchase on credit. You own a variety store. You purchase from your main supplier on account items totalling R7 800. Most of the purchase is stock for resale but also included are R100 of office supplies. Make the following entry in your purchases journal:

Next month, after receiving a statement from your supplier, you write a cheque to settle your account. Make the following entry in your purchases journal:

Assume that your business is a retail store that sells merchandise for resale. Here is an example of a few entries in a purchases journal.

The following transactions occurred:

Note: All amounts have been rounded off to the nearest Rand.

  • On 2 February you paid your electricity account of R177.
  • Also on 2 February you bought merchandise on account from Ash Wholesale at a cost of R9 500.
  • On 5 February you spent R82 at Atkins Service Station to fill up your delivery vehicles with gas. You charge it all to the account you maintain with Atkins.
  • On 8 February you write a cheque for R9 500 in payment of the account you receive from Ash.
  • On 10 February you write a cheque for R82 to Atkins Service Station to settle your account there.
  • Upon completing this journal page, you should foot all seven amount columns. Since you are using a double-entry accounting system, you can see if all entries were recorded correctly. Check to see if the sum of the debits equals the sum of the credits. Total debits: 0 + 9 582 + 9 500 + 82 + 177 = 19 341. Total credits: 9 759 + 9 582 = 19 341.

If the sum of the debit columns doesn’t equal the sum of the credit columns, you have a problem that you should track down right away. You may have entered one of the amounts in the wrong column. You might have simply added incorrectly when computing the totals. It is usually easy to pinpoint the error because the debits should equal the credits for each transaction.

Your purchases journal may have many more columns than this sample because you probably will have more expense classifications.