By S. Hall and N. Skene Smith (Auth.)
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It is a preliminary record, not an account and not part of the Double Entry system. On the other hand, as all transactions recorded in the Journal are later entered in the accounts, it is convenient to use a debit and credit presentation. The records must be informa tive but brief. The following entries show the pattern we adopt: Date 1962 Jan. 3 14 23 Details Ledger Dr. Folio £ s. d. Dr. 31 241 13 4 20 J. Baron To Sales being credit sale, see Invoice No. 1613. Bad Debts Dr. To G. Hardtimes being amount written off.
L. A/c 244 Various dates By Sundry Creditors Dec. 31 „ Amount Receivable c/d £244 1963 Jan. 1 To Amount Receivable b/d Dr. 1962 Various dates Dec. 31 220 24 £244 24 Discount Allowed Account £ 1962 To Sundry Debtors „ Amount Allowable c/d Cr. £ 640 Dec. 31 Cr. £ By P. <& L. A/c 710 70 £710 £710 1963 Jan. 1 By Amount Allowable b/d 70 The principle involved is the same as that in the previous example but there is a difference in the presentation in the Balance Sheet. Discounts do not appear separately but as deductions.
The Net Profit figure is transferred to the credit of Capital Account. The owner of the business is entitled to receive the profits of the business and consequently the value of the business to him is increased by the amount of Net Profit. If a loss is made, it reduces the balance of capital in the business. The Loss is debited to Capital Account after appearing on the credit side of the Profit & Loss Account. The Balance Sheet By transferring the balances of the Nominal Accounts to the Trading and Profit & Loss Account we derive a figure of Net Profit.
Accounting Principles and Practice by S. Hall and N. Skene Smith (Auth.)