Recording Other Transactions | Accounting for GCSE/IGCSE - Year 11 PDF Download

Purchase of a Non-Current Asset

How to Record the Purchase of a Non-Current Asset in Ledger Accounts?

• Debit the non-current asset account in the nominal ledger
  • Credit the cash, bank, or a liability account in the nominal ledger. Use the cash or bank account if the business pays upfront. Use a liability account if the business buys the asset on credit. The name will be the name of the lender.
• Note that acquisitions of non-current assets aren't entered in the purchases account, as this account solely covers goods for trading purposes.

What other transactions are included in a non-current asset account?

• The non-current asset account also incorporates sales or disposals. The account is credited with the original asset cost.
• For any sale, a disposal account is necessary to indicate profit or loss.
• When a non-current asset is sold, the disposal account should reflect the original cost of the asset.
• A separate entry crediting the original cost of the non-current asset is necessary.
• Additionally, a disposal account must be established to ascertain the profit or loss from the sale transaction.
• Depreciation expenses should be documented in a provision for depreciation account as part of the process.

Taking Out a Loan

How do I record taking out a loan in the ledger accounts?

• Debit the bank account to signify an increase in assets.
• Credit a loan account to indicate a rise in liabilities.

How do I record interest on a loan in the ledger accounts?

• Recognize loan interest as an expense in the financial records.
• Credit the bank account as the asset decreases.
• Debit the loan interest account without altering the loan amount borrowed.
• Credit the bank account signifies a decrease in the asset.
• Debit the loan interest account.
• No entries are necessary in the loan account when the amount borrowed remains unchanged.

Receiving Incomes & Paying Expenses

What types of income could a business receive?

• Business income primarily stems from the sales of goods or services.
• Additional sources of income include rent, commission, and discounts received.

How do I record the receipt of an income in the ledger accounts?

• When receiving income, debit the cash or bank account to increase the asset and credit the income account.

What types of expenses could a business pay?

• The purchase of goods is an expense to a business
• A business can also incur other expenses such as:
  • Rent
  • Commission
  • Rates
  • Wages
  • Discount allowed
  • General expenses
• If a business receives income from rent and also pays rent then separate accounts are used. Rent payable is the expense account, and Rent receivable is the income account.

How do I record the payment of an expense in the ledger accounts?

When paying an expense:

• Credit the cash or bank account.
• Decrease the asset.
• Debit the expense account.

Taking Drawings & Introducing Capital

How do I record the owner taking drawings in the ledger accounts?

• Owners sometimes withdraw assets from the business for personal use, including money, goods, and non-current assets like vehicles.
• To account for this:
  • Credit the relevant account:
    • Bank account if money is withdrawn
    • Purchases account if goods are taken
    • Non-current asset account if a vehicle or machinery is withdrawn
  • Debit the drawings account.

How do I record the owner introducing capital in the ledger accounts?

When the owner injects personal funds into the business:

• Debit the cash or bank account to increase the asset.
• Credit the capital account to reflect the increase in owner's equity.