FINANCIAL ACCOUNTING

BOOKS OF FIRST ENTRY / SUBSIDIARY JOURNALS

Source documents capture the transactions between a business and those with whom it
trades. The books of first entry, also known as subsidiary journals, consist of multiple
journals used to record information provided by the source documents. Each journal is
dedicated to the recording of specific transactions.
When recording transactions in the journals the Double Entry Principle must be
applied.

For each transaction recorded:

1. Identify the two accounts affected.

2. Determine which account will be debited and which account will be credited.

The following is a summary of the Books of First entry and the transactions specific to
each:

Book of First Entry Transaction

Cash Receipts Journal Records all incoming money subsequently
deposited into the business’s banking
account.
Cash Payments Journal Records all outgoing money paid out of the
business’s banking account.
Purchases Journal Records all goods and services purchased
by the business on credit.
Sales Journal Records all goods and services sold by the
business on credit
Purchases Returns Journal Records all goods and services previously
bought on credit that are returned by the
business or claims for a reduction in the
price at which goods and services were
originally purchased..
Sales Returns Journal Records all goods and services previously
sold on credit that are returned to the
business or claims for a reduction in the
price at which goods and services were
originally sold..
Petty Cash Journal Records all incoming money paid into petty
cash and all outgoing money paid out of
petty cash.
General Journal Records any transaction that cannot be
recorded in any one of the above journals.

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FINANCIAL ACCOUNTING

Cash Receipts Journal

The Cash Receipts Journal records all money received by a business that is
subsequently deposited into the business’s banking account. Customers will pay for
their purchases or pay their accounts with cash, cheques, postal orders and credit card
vouchers. The business will deposit the cash, cheques, postal orders and credit card
vouchers into its banking account. At the end of each trading month the bank provides
the business with a bank statement which the business compares with the Cash
Receipts Journal to ensure that all deposits are recorded and accounted for.

The format for the Cash Receipts Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of each.
The following is an example of a typical Cash Receipts Journal. An explanation of each
column follows:

Blue Bull Traders

Cash Receipts Journal for the month ending …March 2020………… CRJxx
Sundries
Doc
No. Date Details Fol Bank Sales VAT Accounts Amount Details
. Receivab
le
201 1 Cash 8050 7000 1050 4500 Cost of
Sales:Materials
101 5 B 3000 3000
Habana
102 15 V 360 (34.79) (5.21) 400
Matfield
103 17 F du 10000 10000 Capital
Preez
202 25 Cash 8280 7200 1080 6000 Cost of
Sales:Materials

Totals

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 Document Number
This column records the source document number that initially captured the transaction.
As stated before source documents are filed after they have been recorded in the
journals for future reference.
 Date
This column records the date of the source document.
 Details
This column records the name of the other party involved in the transaction.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Cash Receipts Journal.
 Sales
This column represents the sales account in the accounting records and records the
amount received for cash sales.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of cash sales i.e. output vat.
 Accounts Receivable
This column represents the debtors account in the accounting records and records the
amount received for account payments.
 Bank
This column represents the bank account in the accounting records and records the
amount deposited into the business’s banking account. The totals of the sundries,
sales, vat and debtors column equals the total of the bank column.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the Cash Receipts Journal above to record the following
transactions, which occurred during the March 2020 trading month of Blue Bull Traders.
Vat at 15% is applicable to all relevant transactions.

1. On the 1st trading goods to the value of R7000.00 (excl. vat) were sold for cash, cash
sale 201, cost of sales R4500.

2. On the 5th a debtor, Mr. B Habana paid R3000.00 in part settlement of his account,
receipt 101.

3. On the 15th a debtor, Mr. V. Matfield paid R360.00 in settlement of his account,
receipt 102. R40 discount was allowed.

4. On the 17th the owner, Mr. F. du Preez contributed R10 000.00 capital to the
business, receipt 103.

5. On the 25th trading goods to the value of R8000.00 (excl vat) less 10% discount were
sold for cash, cash sale 202. Mark up is 20% on Cost Price

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Cash Payments Journal

The Cash Payments Journal records all money paid by a business out of its banking
account. A business will issue cheques when paying for goods or services or when
paying its supplier accounts. The recipients will submit the cheques to the business’s
bank in exchange for cash. At the end of each trading month the bank provides the
business with a bank statement which the business compares with the Cash Payments
Journal to ensure that all issued cheques are recorded and have been submitted.

The format for the Cash Payments Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of each.
The following is an example of a typical Cash Payments Journal. An explanation of
each column follows:

Blue Bull Traders

Cash Payments Journal for the month ending …March 2020…….. CPJxx
Sundries
Doc
No. Date Details Fol Bank Building VAT Accoun Amount Details
. Material ts
Payabl
e
0011 2 S Burger 3220 420 2800 Rent Expense
0012 7 Telkom 920 100 800 Telephone
0013 7 NMMM 460 60 400 Water and
electricity
0014 15 Small 9000 (869.57) (130 10000
Wholes. .43)
0015 20 Best 4600 4000 600
Suppl
0016 31 Cash 1000 1000 Petty Cash

Totals

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Document Number
This column records the cheque number issued. As stated before source documents
are filed after they have been recorded in the journals for future reference.
 Date
This column records the date the cheque was issued.
 Details
This column records the name of the party to whom the cheque was issued.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Cash Payments Journal.
 Building Material
This column represents the purchase of inventory account (purchases = goods for
resale) in the accounting records and records the amount paid for cash purchases.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of cash purchases and other expenses i.e. input vat.
 Accounts Payable
This column represents the creditors account in the accounting records and records the
amount paid towards supplier accounts.
 Bank
This column represents the bank account in the accounting records and records the
amount paid out of the business’s banking account. The totals of the sundries,
purchases, vat and creditor’s column equals the total of the bank column.

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Class Example

Use the example of the Cash Payments Journal above to record the following
transactions that occurred during the March 2020 trading month of Blue Bull Traders.
Vat at 15% is applicable to all relevant transactions:

1. On the 2nd cheque no. 0011 was issued to Mr. S. Burger for the rental of business
premises, R3220.00 (incl. vat).

2. On the 7th cheque no. 0012 was issued to Telkom for the rental and usage of
telephone, R920.00 (incl. vat) and cheque no. 0013 was issued to the Nelson
Mandela Metropolitan Municipality for water and lights, R460.00 (incl. vat).

3. On the 15th cheque no. 0014 was issued to Small Wholesalers in full settlement of
the account balance, R9000.00. R1000.00 discount was received.

4. On the 20th cheque no. 0015 was issued to The Best Suppliers for the purchase of
trading goods for resale, R4600.00 (incl. vat).

5. On the 31st cheque no. 0016 was issued to replenish petty cash, R1000.00.

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Purchases Journal

The Purchases Journal records all goods and services purchased by the business on
credit. The supplier from whom the business obtains goods or services on credit will
issue an invoice to the business. The business will record all supplier invoices in its
Purchases Journal.

The format for the Purchases Journal is not exactly the same for each business. It varies
from one business to another depending on the needs and preferences of each. The
following is an example of a typical Purchases Journal. An explanation of each column
follows:

Blue Bull Traders

Purchases Journal for the month ending ……March 2020…… PJxx
Sundries
Doc
No. Date Details Fol Accounts Vat Building Amount Details
. Payable Material
731 1 Small 12075 1575 10500
Wholes.
12 8 Just Stop 1380 180 1200 Stationery
Stationers
62 19 Smart 2990 390 2600 Office
Furnishers Furniture
1259 21 Weekly 575 75 500 Advertising
Advertiser
829 29 Pink 345 45 300 Repairs/
Plumbers Maintenance

Totals

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 Document Number
This column records the invoice number issued by the supplier. As stated before source
documents are filed after they have been recorded in the journals for future reference.
 Date
This column records the date the invoice was issued by the supplier.
 Details
This column records the name of the supplier.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Accounts Payable
This column represents the creditors account in the accounting records and records the
total amount appearing on each supplier invoice. The total of vat, purchases and
sundries columns equals the total of the accounts payable column.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of credit purchases and other expenses i.e. input vat.
 Inventory
This column represents the purchase of inventory account (purchases = goods for
resale) in the accounting records and records the amount for goods for resale
purchased.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Purchases Journal.

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Class Example

Use the example of the Purchases Journal above to record the following transactions
which occurred during the March 2020 trading month of Blue Bull Traders. Vat at 15%
is applicable to all relevant transactions:

1. On the 1st trading goods for resale to the value of R12 075.00 (incl. vat) was
purchased on credit from Small Wholesalers, supplier invoice 731.

2. On the 8th stationery to the value of R1380.00 (incl. vat) was purchased from Just
Stop Stationers on credit, supplier invoice 012.

3. On the 19th a new desk and chair for the office to the value of R2990.00 (incl. vat)
was purchased from Smart Furnishers, supplier invoice 62.

4. On the 21st an advertisement was placed in The Weekly Advertiser at a cost of

R575.00 (incl. vat), supplier invoice 1259.

5. On the 29th Pink Plumbers provided plumbing services costing R345.00 (incl. vat),
supplier invoice 829.

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FINANCIAL ACCOUNTING

Purchases Returns Journal

The Purchases Returns Journal records all goods and services previously bought on
credit that are returned by the business or claims for a reduction in the price at which
goods and services were originally purchased. The supplier will issue a credit note to the
business. The business will record all supplier credit notes in its Purchases Returns
Journal.

The format for the Purchases Returns Journal is not exactly the same for each business.
It varies from one business to another depending on the needs and preferences of each.
The following is an example of a typical Purchases Returns Journal. An explanation of
each column follows:

Blue Bull Traders

Purchases Returns Journal for the month ending …………………… PRJxx
Sundries
Doc
No. Date Details Fol Accounts Vat Building Amount Details
. Payable Material
241 2 Small 2070 270 1800
Wholesalers
03 8 Just Stop 100 13.04 86.96 Stationery
Stationers
141 21 Weekly 529 69 460 Advertising
Advertiser

Totals

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FINANCIAL ACCOUNTING

 Document Number
This column records the credit note number issued by the supplier. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
 Date
This column records the date the credit note was issued by the supplier.
 Details
This column records the name of the supplier.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Accounts Payable
This column represents the creditors account in the accounting records and records the
total amount appearing on each supplier credit note. The totals of the vat, purchases
and sundries column equals the creditor’s column.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of credit purchases returned to suppliers or the vat portion of the price reduction
claimed from suppliers i.e. output vat.
 Inventory
This column represents the purchase of inventory account (purchases = trading goods
for resale) in the accounting records and records the amount for trading goods returned
to suppliers or the amount of the price reduction claimed from the supplier.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Purchases Returns Journal.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the Purchases Returns Journal above to record the following
transactions which occurred during the March 2020 trading month of Blue Bull Traders.
Vat at 15% is applicable to all relevant transactions:

1. On the 2nd damaged trading goods to the value of R2070.00 (incl. vat) was returned
to Small Wholesalers, supplier credit note 241.

2. On the 8th Just Stop Stationers overcharged by R100.00 (incl. vat) for stationery
supplied on credit, supplier credit note 03.

3. On the 21st The Weekly Advertiser misspelled the Business’s name in the
advertisement and agreed to a full refund, supplier credit note 141, R529 (incl. VAT).

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FINANCIAL ACCOUNTING

Sales Journal

The Sales Journal records all goods and services sold by the business on credit to
customers. The business will issue an invoice to the customers who buy goods and
services on credit. The business will record all customer invoices in its Sales Journal.

The format for the Sales Journal is not exactly the same for each business. It varies
from one business to another depending on the needs and preferences of each. The
following is an example of a typical Sales Journal. An explanation of each column
follows:

Blue Bull Traders

Sales Journal for the month ending …March 2020………………… SJxx
Sundries
Doc
No. Date Details Fol Accounts Vat Sales Amount Details
Receivable
101 3 Pink 3450 450 3000 2000 Cost of Sales:
Panther Materials
102 25 B Botha 5175 675 4500 3000 Cost of Sales:
Materials
103 31 A Smith 2300 300 2000 Office Furniture

Totals

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FINANCIAL ACCOUNTING

 Document Number
This column records the invoice number issued to the customer. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
 Date
This column records the date the invoice was issued to the customer.
 Details
This column records the name of the customer.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Accounts Receivable
This column represents the debtors account in the accounting records and records the
total amount appearing on each customer invoice. The totals of the vat, sales and
sundries column equals the debtor’s column.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of credit sales i.e. output vat.
 Sales
This column represents the sales account in the accounting records and records the
amount for trading goods and services sold to customers on credit..
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Sales Journal.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the Sales Journal above to record the following transactions which
occurred during the March 2020 trading month of Blue Bull Traders. Vat at 15% is
applicable to all relevant transactions:

1. On the 3rd trading goods to the value of R3000.00 (excl. vat) were sold on credit to
Pink Panther and Partners, customer invoice 101.

2. On the 25th trading goods to the value of R4500.00 (excl vat) were sold on credit to
Mr. B. Botha, customer invoice 102.

3. On the 31st the old desk and chair was sold at their book value of R2000.00 (excl.
vat) and sold on credit to Mrs. A. Smith, customer invoice 103.

NB: Use a mark-up of 50% on Cost Price

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FINANCIAL ACCOUNTING

Sales Returns Journal

The Sales Returns Journal records all goods and services previously sold on credit that
are returned to the business or claims for a reduction in the price at which goods and
services were originally sold. The business will issue a credit note to the customer. The
business will record all customer credit notes in its Sales Returns Journal.

The format for the Sales Returns Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of each.
The following is an example of a typical Sales Returns Journal. An explanation of each
column follows:

Blue Bull Traders

Sales Returns Journal for the month ending …March 2020…………… SRJxx
Sundries
Doc
No. Date Details Fol Accounts Vat Sales Amount Details
. Receivable
51 4 Pink Panther 345 45 300

Totals

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FINANCIAL ACCOUNTING

 Document Number
This column records the credit note number issued to the customer. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
 Date
This column records the date the credit note was issued to the customer.
 Details
This column records the name of the customer.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Accounts Receivable
This column represents the debtors account in the accounting records and records the
total amount appearing on each customer credit note. The totals of the vat, sales and
sundries column equals the debtor’s column.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of credit sales returned by customers or the vat portion of the price reduction
claimed by the customer i.e. input vat.
 Sales
This column represents the sales account in the accounting records and records the
amount for trading goods and services returned by customers or the price reduction
claimed by the customer.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Sales Journal.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the Sales Returns Journal above to record the following transactions
which occurred during the March 2020 trading month of Blue Bull Traders:

1. On the 4th Pink Panther and Partners claimed a price reduction of R300.00 (excl. vat)
for goods sold on credit to them on the 3 rd as the original quote was for R2700.00,
customer credit note 51.

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FINANCIAL ACCOUNTING

Petty Cash Journal

The Petty Cash Journal records all incoming money paid into petty cash and all outgoing
money paid out of petty cash. Petty cash is a small amount of cash kept by the
business on the business premises, which it uses to pay for small petty items e.g.
postage stamps, tea, coffee. As and when required a cash cheque is issued by the
business and paid into petty cash. When petty cash is paid out a petty cash voucher is
completed by the business. The business records the petty cash vouchers in the Petty
Cash Journal. Petty cash which is on hand at the beginning of each month will always
be the same. This is called the imprest system, the amount which is restored every
month (at the end of the month) is known as the imprest amount.

The format for the Petty Cash Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of each.
The following is an example of a typical Petty Cash Journal. An explanation of each
column follows:

Blue Bull Traders

Petty Cash Journal for the month ending …March 2020………PCJxx
Sundries
Doc Petty
No. Date Details Fol. Cash Vat Amount Details
98 3 Coffee, tea and 130 130 Refreshment
milk s
99 13 Scissors 80.50 10.50 70 Stationery
100 23 Stamps 34.50 4.50 30 Postage
101 31 Casual Wages 500 500 Wages

Totals

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FINANCIAL ACCOUNTING

 Document Number
This column records the petty cash voucher completed when petty cash is paid out. As
stated before source documents are filed after they have been recorded in the journals
for future reference.
 Date
This column records the date the petty cash voucher was completed
 Details
This column records the items paid for with petty cash.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Petty Cash
This column represents the petty cash account in the accounting records and records
the amount paid out of petty cash. The total of the vat and sundries column will equal
the total of the petty cash column.
 Vat
This column represents the vat account in the accounting records and records the vat
portion of petty cash expenses.
 Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Petty Cash Journal.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the Petty Cash Journal above to record the following transactions
which occurred during the March 2020 trading month of Blue Bull Traders. Vat at 15% is
applicable to all relevant transactions:

1. On the 3rd used R130.00 petty cash to buy tea. Coffee and milk, petty cash voucher
98.

2. On the 13th used R70.00 petty cash to buy a new scissors from CNA, petty cash
voucher 99. (Incl. VAT)

3. On the 23rd used R30.00 petty cash to buy postage stamps, petty cash voucher 100.
(Incl. VAT)

4. On the 31st used R500.00 petty cash to pay casual wages, petty cash voucher 101.

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General Journal

The General Journal is used to record any transaction that cannot be recorded in any
one of the other journals and for year end adjustments. Such transactions are usually
not captured on source documents and can include the following:

 Bad debts written off

A debtor may be unable to pay the business what it owes, in such cases the business
must write the amount owing by the debtor off.

 Depreciation of assets

The values of the business’s assets are reduced at the end of each year so that they are
more representative of market values.

 Discount Allowed – Can also be recorded in the CRJ

A debtor may settle the amount it owes to the business sooner than agreed; in such
cases the business will allow the debtor a discount. Although discount allowed is not a
cash transaction it is associated with cash received from a debtor and can be recorded
in the Cash Receipts Journal. For the purposes of this course discount allowed will be
recorded in the General Journal.

 Discount Received – Can also be recorded in the CPJ

The business may settle the amount it owes to a creditor sooner than agreed; in such
cases the business will receive a discount from the creditor. Although discount received
is not a cash transaction it is associated with cash paid to a creditor and can be

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FINANCIAL ACCOUNTING

recorded in the Cash Payments Journal. For the purposes of this course discount
received will be recorded in the General Journal.

 Drawings of material

If the owner withdraws inventory instead of cash, this must be recorded in the General
Journal.

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FINANCIAL ACCOUNTING

The format for the General Journal is not exactly the same for each business. It varies
from one business to another depending on the needs and preferences of each. The
following is an example of a typical General Journal. An explanation of each column
follows:

Blue Bull Traders

General Journal for the month ending …March 2020………… GJxx

Date Details Fol. Debit Credit

15 Drawings 2875
VAT Control 375
Building Materials 2500
(Owner took materials for
personal use)

31 Bad Debts 700

VAT Control 105
Accounts Receivable 805
(P Peter’s debt has been written
of)

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FINANCIAL ACCOUNTING

 Date
This column records the date the general journal transaction is occurs.
 Details
This column records the name of the accounts affected by the transaction. The account
to be debited is shown first followed by the account to be credited.
 Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
 Debit
The amount to be debited is shown here.
 Credit
The amount to be credited is shown here.

N.B

Every transaction must be in balance i.e. the amount debited must equal the amount
credited.
Every transaction must be followed by a narration that explains the reason for the
transaction.
Every transaction must be ruled off before the next transaction is recorded.

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FINANCIAL ACCOUNTING

Class Example

Use the example of the General Journal above to record the following transactions
which occurred during the March 2020 trading month of Blue Bull Traders. Vat at 15% is
applicable to all relevant transactions:

1. On the 15th the owner took building material with a cost price of R2500 (excluding
VAT) for use at his home.

2. On the 31st a long outstanding amount of R700.00 (excl VAT) owed to the business
by Mr. P. Peter was written off as bad debt.

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