Accounts as mentioned earlier is all about classifying the financial data into most convenient structure so that referring and inferring that data is easy.
For this purpose, businesses use day books and ledgers(personal accounts)
There are 4 kinds of day books
- Sales day book
- Purchase day book
- Sales return day book
- Purchase return day book
And there are 2 types of ledgers where the data of the day books is entered
- Purchase ledger
- Sales ledger
The format of the day book is :
NOTE : all of the day books have the same format so ill just combine them as one for conveniance, other wise they are not to be combined.
| SALES /PURCHASE / SALES RETURN / PURCHASE RETURN DAY BOOK | ||||
| DATE | DETAIL | Invoice# | Folio | Amount |
Ledgers are the personal accounts of debtors and creditors , data being entered with the aide of day books. Sales day book contains data for the sales ledger (debtors) where as the purchase day book contains data for purchase ledger (creditors). Ledgers are personal accounts with the balance remaining in each account . they are sometimes referred to as T accounts due to their T shape.
Take into consideration the following example.
- Sold goods to Mr.Daniyal worth $500 on credit
- Daniyal Returns some goods due to fault worth $50
- Purchased goods from Philips worth $5000
- Returned some goods $700
The above transactions will be recorded in day books as
| SALES DAY BOOK | ||||
| DATE | DETAIL | Invoice# | Folio | Amount |
| Xx yy zz | Mr. Daniyal | $500 |
| PURCHASE DAY BOOK | ||||
| DATE | DETAIL | Invoice# | Folio | Amount |
| Xx yy zz | Philips | $5000 |
| SALES RETURN DAY BOOK | ||||
| DATE | DETAIL | Invoice# | Folio | Amount |
| Xx yy zz | Mr.Daniyal | $50 |
| PURCHASE RETURN DAY BOOK | ||||
| DATE | DETAIL | Invoice# | Folio | Amount |
| Xx yy zz | Philips | $700 |
Purchase Ledger
PHILIPS
| Date | Details | Folio | Amount (Dr) | Date | Details | folio | Amount (Cr) |
| Xx yy zz | Purchase returns | $700 | Xx yy zz | purchase | $5000 | ||
Sales Ledger
Mr.Daniyal
| Date | Details | Folio | Amount (Dr) | Date | Details | folio | Amount (Cr) |
| Xx yy zz | sales | $500 | Xx yy zz | Sales return | $50 | ||
The general ledger records the total credit sales and credit purchases made in a month and the total sales returns and purchase returns of the month.