Sales and Purchase Journals in Accounting for SS1
Financial Accounting SS1 First Term Lesson Note
Week 6: Sales and Purchase Journals
Subject: Financial Accounting
Class: SS1
Term: First Term
Week: 6
Age: 14-16 years
Duration: 40 minutes
Topic: Sales and Purchase Journals
Sub-Topics:
- Return Inwards Journal
- Return Outwards Journal
- Cashbook
Behavioral Objectives
By the end of the lesson, students should be able to:
- Outline various source documents.
- Prepare sales and purchase day books.
- Post transactions into return inward and outward journals.
Keywords
- Sales Journal: A book used to record all credit sales transactions.
- Purchase Journal: A book used to record all credit purchases.
- Return Inwards Journal: A journal used to record returns of goods previously sold on credit (also called sales returns).
- Return Outwards Journal: A journal used to record goods returned by the business to suppliers (also called purchase returns).
- Cashbook: A record used to document all cash transactions, including both cash receipts and cash payments.
Set Induction
The teacher will ask students if they have ever bought or sold something on credit and how these transactions are recorded in business accounts. This will lead into a discussion of different journals and their roles in keeping accurate business records.
Entry Behavior
Students should already be familiar with basic accounting concepts like the accounting equation, double entry principle, and source documents, as well as the idea of general ledgers.
Learning Resources and Materials
- Example source documents (e.g., invoices, receipts).
- Blank sales and purchase journals, return journals, and cashbook templates.
- Textbooks on financial accounting.
Building Background/Connection to Prior Knowledge
The teacher will connect this lesson with earlier topics on subsidiary books, explaining that the sales, purchase, and return journals are important tools used to keep track of credit sales and purchases and their related returns.
Embedded Core Skills
- Analytical Thinking
- Attention to Detail
- Record Keeping
Learning Materials
- Blank sales, purchase, and return journals.
- Whiteboard and markers to illustrate journal entries.
- Sample source documents such as sales invoices and purchase receipts.
Reference
- Lagos State Scheme of Work for Financial Accounting
- “Principles of Financial Accounting” by Jerry J. Weygandt
Content
1. Sales Journal
The sales journal is used to record credit sales of goods. It includes the date of the sale, the name of the customer, the amount of the sale, and other relevant details. For example, if a business sells goods worth ₦10,000 to a customer on credit, the transaction is recorded in the sales journal.
- Example Entry:
- Date: 15th November
- Customer: Mr. John Doe
- Amount: ₦10,000
2. Purchase Journal
The purchase journal records credit purchases of goods. When a business buys goods on credit, the transaction is entered into the purchase journal, including the supplier’s name and the amount of the purchase.
- Example Entry:
- Date: 16th November
- Supplier: XYZ Ltd.
- Amount: ₦8,000
3. Return Inwards Journal (Sales Returns)
The return inwards journal is used to record goods returned by customers. If customers return goods, these returns are recorded in the return inwards journal. This is important for reducing sales and tracking returns.
- Example Entry:
- Date: 17th November
- Customer: Mr. John Doe
- Goods Returned: ₦2,000
4. Return Outwards Journal (Purchase Returns)
The return outwards journal is used to record goods returned by the business to suppliers. If a business returns goods to a supplier, these returns are recorded in the return outwards journal.
- Example Entry:
- Date: 18th November
- Supplier: XYZ Ltd.
- Goods Returned: ₦1,000
5. Cashbook
The cashbook records all cash transactions, including receipts and payments. It helps businesses track their cash flow. Cash sales, cash purchases, and payments to suppliers are recorded here.
- Example Entry:
- Date: 19th November
- Description: Cash Sale to Mr. John Doe
- Amount: ₦5,000
Fill-in-the-Blank Questions
- The sales journal records _______ sales transactions.
a. Cash
b. Credit
c. Mixed
d. Profit - The return outwards journal is used to record _______ returns.
a. Customer
b. Business
c. Supplier
d. Sales - A cashbook records _______ transactions.
a. Credit
b. Cash
c. Return
d. Mixed
Frequently Asked Questions
Q1: What is the purpose of a sales journal?
A1: The sales journal is used to record all credit sales transactions, helping businesses track sales made on credit.
Q2: How do you record returns in the sales journal?
A2: Returns from customers are recorded in the return inwards journal, not the sales journal.
Q3: Why is a cashbook important in accounting?
A3: The cashbook is essential for tracking all cash transactions, ensuring that businesses know how much cash is coming in and going out.
Sales and Purchase Journals
Objective Questions
- Which of the following is recorded in the Sales Journal?
a) Credit purchases
b) Cash payments
c) Credit sales
d) Cash receipts
Answer: c) Credit sales - What is the purpose of the Purchases Journal?
a) To record cash sales
b) To record credit purchases
c) To record returns from customers
d) To record all cash transactions
Answer: b) To record credit purchases - In which journal would returns of goods from customers be recorded?
a) Sales Journal
b) Purchases Journal
c) Return Inwards Journal
d) Cash Book
Answer: c) Return Inwards Journal - Which journal is used to record goods returned to suppliers?
a) Sales Journal
b) Purchases Journal
c) Return Outwards Journal
d) General Journal
Answer: c) Return Outwards Journal - What is a Cash Book used for in accounting?
a) To record cash sales only
b) To record both cash receipts and cash payments
c) To record all credit transactions
d) To record depreciation on assets
Answer: b) To record both cash receipts and cash payments - Which of the following source documents is used to record sales on credit?
a) Receipt
b) Sales Invoice
c) Delivery Note
d) Cash Memo
Answer: b) Sales Invoice - Which journal would be used to record purchases made on credit?
a) Cash Book
b) Purchases Journal
c) Sales Journal
d) Return Inwards Journal
Answer: b) Purchases Journal - Which document provides evidence for a transaction recorded in the Return Outwards Journal?
a) Purchase Invoice
b) Sales Invoice
c) Credit Note from Supplier
d) Receipt
Answer: c) Credit Note from Supplier - Which of the following is TRUE regarding the Return Inwards Journal?
a) It records returns of goods to suppliers
b) It records sales returns from customers
c) It records cash purchases
d) It records payments made to creditors
Answer: b) It records sales returns from customers - What information is typically included in a sales invoice?
a) Date of payment
b) Name and address of the seller
c) List of goods returned
d) Bank details of the buyer
Answer: b) Name and address of the seller - How do you post a transaction from the Purchases Journal?
a) Debit the Purchases account, credit the Supplier’s account
b) Debit the Supplier’s account, credit the Purchases account
c) Debit the Sales account, credit the Purchases account
d) Debit the Cash account, credit the Purchases account
Answer: a) Debit the Purchases account, credit the Supplier’s account - What is the purpose of the Return Inwards Journal?
a) To record purchases of inventory
b) To record goods returned by customers
c) To record sales made on credit
d) To record payments received from customers
Answer: b) To record goods returned by customers - When posting from the Cash Book, which account is debited when cash is received?
a) Cash account
b) Bank account
c) Revenue account
d) Accounts Receivable
Answer: a) Cash account - What is recorded in the Return Outwards Journal?
a) Purchases on credit
b) Goods returned by the business to suppliers
c) Cash sales
d) Payments made to creditors
Answer: b) Goods returned by the business to suppliers - Which of the following journals would you use to record a credit sale of goods?
a) Purchases Journal
b) Sales Journal
c) Cash Book
d) Return Inwards Journal
Answer: b) Sales Journal
Class Activity Discussion (FAQs with Answers)
- What are the main types of journals used in accounting?
Answer: The main types of journals include the Sales Journal, Purchases Journal, Return Inwards Journal, Return Outwards Journal, and Cash Book. These journals are used to record specific types of transactions, making the accounting process more organized. - What is the Sales Journal, and how is it used?
Answer: The Sales Journal is used to record all sales made on credit. It helps track transactions where goods or services are sold but payment is not received immediately. Each entry in the sales journal is posted to the Accounts Receivable account and the Sales account. - How is a Purchase Journal different from a Sales Journal?
Answer: The Purchase Journal records credit purchases of goods or services, while the Sales Journal records credit sales. Both journals capture transactions where payment is not made immediately but differ in the type of transaction—one for sales and the other for purchases. - What is the Return Inwards Journal used for?
Answer: The Return Inwards Journal is used to record goods that customers return after a sale, usually due to defects or dissatisfaction. The entry in the journal reduces the Sales account and the Accounts Receivable account. - What is the significance of the Return Outwards Journal?
Answer: The Return Outwards Journal records goods that the business returns to suppliers. This journal helps reduce the Purchases account and the Accounts Payable account, reflecting the return of goods and any adjustments to outstanding liabilities. - How do you post transactions from the Sales and Purchases Journals to the General Ledger?
Answer: Transactions in the Sales and Purchases Journals are posted to the General Ledger by debiting and crediting the appropriate accounts. For example, in the Sales Journal, you debit Accounts Receivable and credit Sales Revenue; in the Purchases Journal, you debit Purchases and credit Accounts Payable. - What role does the Cash Book play in accounting?
Answer: The Cash Book records all cash transactions, including cash receipts and payments. It serves as a subsidiary book to track cash flow and is essential for ensuring that cash-related transactions are recorded accurately. - What information is included in a Sales Invoice?
Answer: A Sales Invoice includes details such as the date of the sale, the names and addresses of both the buyer and seller, a description of the goods sold, the quantity, unit price, and the total amount due. It serves as a source document for recording credit sales. - What should you do when goods are returned by customers?
Answer: When goods are returned by customers, the transaction should be recorded in the Return Inwards Journal. The goods returned reduce the sales revenue, and the customer’s outstanding debt is adjusted. - How is a credit sale posted from the Sales Journal?
Answer: A credit sale is posted by debiting the Accounts Receivable account (representing the customer’s debt) and crediting the Sales Revenue account (representing the income from the sale).
Evaluation Questions
- Explain the role of the Sales Journal in recording credit sales.
- What are the differences between the Purchases Journal and the Sales Journal?
- How is the Return Inwards Journal different from the Return Outwards Journal?
- Describe how transactions are posted from the Cash Book to the General Ledger.
- What are the key components of a Sales Invoice, and why is it important in accounting?
- How do you record a transaction involving a return of goods to a supplier?
- What impact does the Return Inwards Journal have on the accounts?
- How does the Cash Book help in tracking business transactions?
- What is the importance of using source documents like invoices and credit notes in accounting?
- Explain how the double-entry system works when posting transactions from the Purchases Journal.
Presentation
Step 1: Revision of the Previous Topic
The teacher asks students to recall the accounting equation, double entry principle, and subsidiary books to refresh their memory before introducing the new journals.
Step 2: Introduction of New Topic
The teacher explains the purpose of sales and purchase journals, return inwards and outwards journals, and the cashbook. Sample journal entries are shown on the board.
Step 3: Student Contributions and Corrections
Students provide examples of sales, purchases, returns, and cash transactions. The teacher corrects any misunderstandings and reinforces proper journal entry procedures.
Teacher’s Activities
- Introduce the concept of sales, purchase, return journals, and the cashbook.
- Demonstrate how to post transactions into each of the journals.
- Guide students in creating journal entries for real-life examples.
Learner’s Activities
- Listen and ask questions about sales, purchase, and return journals.
- Participate in exercises to prepare journal entries.
- Work in pairs to practice posting transactions into the cashbook and journals.
Assessment
- Prepare sample sales and purchase journal entries from given scenarios.
- Post transactions into the return inwards and return outwards journals.
- Record cash transactions in a cashbook.
Evaluation Questions
- What is recorded in a sales journal?
- How do you post a return to a supplier?
- What is the purpose of a cashbook?
- Why is it important to maintain separate journals for sales and purchases?
- How do you record a purchase return in the journal?
Conclusion
The teacher concludes by summarizing the importance of correctly using sales, purchase, return journals, and the cashbook for maintaining accurate records. Students are encouraged to practice by creating their own journal entries based on different business scenarios.
More Useful Links
Recommend Posts :
- Financial Accounting SS1 First Term Lesson Notes
- Advantages and Limitations of Accounting Financial Accounting SS 1 First Term Lesson
- Balancing Off Ledger Accounts Financial Accounting SS 1 First Term Lesson Notes
- Double Entry Bookkeeping Explained Financial Accounting SS 1
- Unlocking the Essentials of Subsidiary Books in Financial Accounting
- Bank Paying-in-Slip, Debit Note, Credit Note, Statement of Account, and Vouchers
- Introduction to Accounting
- History of Accounting Worldwide and in Nigeria
- Career Opportunities in Bookkeeping and Accounting Financial Accounting SS1
- Accounting Equation and Double Entry Principle Financial Accounting SS1