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9706 · 1.2.1

The accounting system — practice questions

Practice and worked examples for 9706 The accounting system. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

A business makes a credit sale of goods for $800 to Customer X. State the book of prime entry used and the double-entry in the ledgers.

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Book of prime entry: Sales Day Book — an entry is made to record the invoice of $800 to Customer X.

Ledger entries (Double Entry):

  • Debit (DR) Customer X Account (in Sales Ledger): **800∗∗800**
  • Credit (CR) Sales Revenue Account (in General Ledger): **800∗∗800**

At the end of the period, the total of the Sales Day Book is also posted as: DR Sales Ledger Control Account, CR Sales Account.

Effect: An asset (trade receivable) increases, and income (sales revenue) increases, keeping the accounting equation balanced.

Worked example 2

Alpha Traders purchased goods on credit for $1,500 from Beta Suppliers on 5 May (Invoice 789). On 20 May, Alpha Traders paid the full amount by bank transfer. Show the entries in the books of prime entry and the subsequent double entries.

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1. Credit Purchase (5 May)

Book of Prime Entry: Purchases Day Book An entry is made listing the transaction: | Date | Supplier | Invoice No. | Amount ()∣) | |---|---|---|---| | May 5 | Beta Suppliers | 789 | 1,500 |

Ledger Posting (Double Entry): The individual transaction is posted to the subsidiary ledger, and totals are posted to the general ledger.

  • Debit (DR) Purchases Account: $1,500 (Increase in an expense)
  • Credit (CR) Beta Suppliers Account (in Purchases Ledger): $1,500 (Increase in a liability)

2. Payment to Supplier (20 May)

Book of Prime Entry: Cash Book (Payments/Credit side) An entry is made recording the bank payment: | Date | Details | Bank ()∣) | |---|---|---| | May 20 | Beta Suppliers | 1,500 |

Ledger Posting (Double Entry):

  • Debit (DR) Beta Suppliers Account (in Purchases Ledger): $1,500 (Decrease in a liability)
  • Credit (CR) Bank Account: $1,500 (Decrease in an asset)

Final Answer: The purchase is first recorded in the Purchases Day Book and the payment in the Cash Book. The double entries result in a $1,500 debit to Purchases, a $1,500 credit to the Bank, and the Beta Suppliers account being created and then cleared, showing the liability has been settled.

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