Accounting Business Reporting for Decision Making

CHAPTER 4 Business transactions 133

Advantage Tennis Coaching

Balance sheet as at 30 September 2016

Assets

Current assets

Cash

Accounts receivable

$71 270

6 800 $78 070

Non-current assets

Office furniture

Office equipment

3 200

6 500 9 700

Total assets $87 770

Liabilities

Current liabilities

Accounts payable 1 400

Non-current liabilities

Loan 50 000

Total liabilities 51 400

Net assets $36 370

Owner’s equity

Capital — N Cash

Profit

20 000

16 370

Total equity $36 370

4.6 Capturing accounting information: journals

and ledger accounts

LEARNING OBJECTIVE 4.6 Discuss how journals and ledger accounts can help in capturing accounting
information efficiently and effectively.

Earlier in the chapter we discussed the concept of duality and how every transaction has a dual effect.

Analysing each transaction by using the accounting equation is not appropriate for a large number of

transactions. Instead, we can use the journal or ledger.

The journal

A journal is a book that records each business transaction shown on the source documents in chrono-

logical order. The journal entry will consist of the transaction date, the name of the two accounts affected

by the transaction, and whether each account is debited or credited. Transactions that occur frequently

can be recorded in separate journals. For example, businesses that deal mainly in cash will have a cash

receipts journal and a cash payments journal. A business dealing with credit will also have a credit sales

journal and a credit purchases journal.

Let us now use the journal to record the first transaction for Advantage Tennis Coaching for the month

of September 2016 (see illustrative example 4.6).