Business ConsultantWhile the general turnover threshold for the supply of goods is €75,000, persons supplying goods liable at the reduced or standard rates which they have manufactured or produced from zero-rated materials must register if their turnover is €37,500 or more. While the general turnover threshold for the supply of services is €37,500, for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to in the above paragraph) then the threshold for Goods applies6 years ago
These are the first books in which we record business transactions. There is a separate book for each kind of transaction:
1.Sales Day Book 2.Purchases Day Book 3.Sales Returns Book 4.Purchases Returns Book
Sales Day Book & Sales Returns Book
The Sales Day Book records goods sold by the business and the Sales Returns Book records the return of goods originally sold by the business.
The Sales Day Book will show the following: 1.Date of Sales Invoice 2.Name of Customer (detail column) 3.Invoice Number (Unique number) 4.Folio ( Ledger posting reference) 5.Net Amount of Sales Invoice 6.Vat element of Invoice 7.Total amount on Invoice including VAT.
For each sale the business will give a document to the buyer showing all details of the goods sold and the prices of the goods. This document is known as a Sales Invoice. The business will normally keep one or more copies of each sales invoice for their own uses – eg to complete the sales daybook.
From the copies of the Sales Invoices the seller then enters up his Sales Day Book.
Purchases Day Book & Purchases Returns Book
The Purchase Day Book records all goods purchased by the business and the Purchases Returns Book records the return of goods previously purchased.
The Purchase Day Book gives details similar to Sales Day Book above.
For each purchase the business will receive a document from the seller which is either a receipt (usually when paying cash) or an Invoice which is now know as a Purchase Invoice when it is entered in the book of the buyer. [The same invoice would be a Sales Invoice in the books of the seller.
(In many business the sales & purchases day books only records goods sold on credit but for training purposes we will include all sales & purchases [cash & credit] in our day books in order to explain how these are later posted to the ledger)
Documents required for Day Books:
•Invoice This is the business equivalent of a bill like an ESB or Telephone bill. It details goods purchased. When you purchase / sell goods, you receive / send an invoice detailing the:
Seller’s and Buyer’s name Invoice Reference Number The date of the transaction The amount before VAT The VAT amount & The total amount including VAT.
Invoices are received by a business when it buys on credit (can also be received when paying cash) and invoices are sent by a business when it sells on credits (& sometimes issued with cash sales).
•Credit Note This is used when goods received are faulty or are being returned for other reasons. The goods are returned to the seller who then issues a Credit Note for the value of the goods. The following details are included on the Credit Note:
Seller’s & Buyer’s name Credit Note Reference Number The date of the transaction The amount before VAT The VAT amount & The total amount including VAT.
VAT – Value Added Tax
This is a tax charged by the Government to the consumer or end user (you and me) on many goods & services. This tax, know as VAT, is collected by businesses on behalf of the Government. When we buy something only part of what we pay actually goes to the seller the balance is VAT, which the seller is obliged to hand over the Revenue Commissioners. The issue of VAT will be dealt with at a later date but for the moment it is necessary to state that the VAT element of all purchases and sales by a business is recorded separately in the daybooks of the business.
This is a reduction (a discount) given to your customers or received from your suppliers when selling or purchasing goods. It is usually given when goods are sold or purchased (a) large quantities or (b) very regularly. A percentage (%) of the selling or purchasing price is given to the customer or received from the supplier.
EG. You are selling a book. The retail price of the book is €45. Customers 1 (lecturers) are given a 25% discount, customers 2 (registered students) a 20% discount and the general public pay the full price.
The prices paid by each type would be as follows:
Customer 1 Customer 2 General Public Retail price€ 45 € 45 € 45 Less Trade Disc. €(11.25) €(9) 0
Price Paid by Cust € 33.75 € 36 € 45
Trade Discounts are shown on the invoice & are not entered on the Day Books (as this information is not required for posting to the ledger as we will later discover).
A cash discount is the amount of the reduction of a sum to be paid on an invoice or a bill when the bill is being settled or paid. EG a business will sometimes accept a smaller sum in full settlement of an invoice if payment is made within a certain time. It is an allowance given for quick payment. Unlike a trade discount a cash discount will need to be recorded in the ledgers of the business & these discounts are know as •Discount Allowed: Given by a business to its customers on prompt payment of outstanding bills. •Discount Received: Received by a business from its suppliers when it pays the supplier quickly.
ACCOUNTING TERMS & DEFINITIONS
Assets are resources owned by the business. Assets consist of property of all kinds such as Buildings, Machinery, Motor Vehicles, Furniture & Fittings, Stock & Debtors (customers owing money to the business).
Assets are divided into Fixed and Current Assets:
Fixed Assets are Assets of the business that have •A long life •Are used in the business. •Are not bought for the purposes of resale. E.g. Buildings, Machinery, Motor Vehicles
Current Assets are Assets of the business that are •Consistently changing in value •Generally have a short life •Are held for resale. E.g. Cash, Stock, Debtors
Liabilities are the total of money owed (outstanding) for assets, goods & expenses supplied to the business. E.g. Creditors, Loans, Bank Overdraft.
The Rule for Assets & Liabilities is Rule No 2
DEBIT ASSETS CREDIT LIABILITIES
Liabilities are usually separated into two types in the balance sheet:
Current Liabilities & Long Term Liabilities:
Current Liabilities are items such as Creditors, Bank Overdraft, Vat & PAYE/PRSI Liabilities & Accruals. Again current liabilities as such change on a day-to-day basis and are for use in the daily running of the business. Long Term Liabilities are as the name suggests more Long Term. They are usually payable by some date in the future rather than constantly changing e.g. Long Term Leases, Term Loans etc.6 years ago
Business ConsultantReminder - 15th November 2015 is the last date for submitting Self Assessed Accounts online6 years ago
Business ConsultantTheory sample Questions - what is the difference between a debtor and a creditor - what is meant by the double entry system and when does it start - how do you transfer money from the current account to the Petty cash - what is meant by books of prime entry and name 4 of them - what are source documents and name 4 of them - how is vat calculated - what does an ongoing vat refund indicate - explain what the imprest system is - what is owners capital - how is stock for resale treated differently from services or items not for resale5 years ago