UNIT 5:CREATION OF JOURNAL CODES
Key Unit competence: Apply the entry of journal codes in SAGE 100
Introductory activity
You are an intern in AGACIRO ltd Company in the department of
accounting and your direct supervisor is the accountant of that company.
The company has recently started to use accounting software in business
record keeping, but the company’s accountant has not yet got enough
skills to run Sage line 100software especially in creation of books of
prime entry in digital form and use them to record day to day business
transactions by using sage line 100 software. As a student who is studying
computerised accounting:
1. What are the books of prime entry are you going to tell him/her
to create?
2. What are the steps he/she is going to follow in creating thosebooks?
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5.1 Use of data entry form and wizard to create the
purchase journal.
Learning Activity 5.1
The following are credit purchases made by TURWUBAKE ltd Company in
July 2015.
3rd July, bought goods of 450,000 FRW from SHAMI on credit
5th July, purchased office supplies worth 430000 FRW on credit from Jeff
stationery store
8th July, Bookshelves are purchased for 250,000 FRW on credit
11th July, Inventory was purchased for 700,000 FRW by cash
15th July, Credit purchases for 180, 000 FRW from Claude
24th July, bought goods from the vendor RUGAMBA for 300,000 FRW on credit
Required:
1. Identify the types of accounts affected by the transactions above
2. Create purchase journal code in Sage line 100 accounting software
Learning Activity 5.1
5.1.1 Purchase journal asa book of prime entry
The commonly used books of prime entry are sales daybook (or sales journal), Purchases daybook (purchases journal), sales returns daybook/ Returns inwards daybook(or sales returns/returns inwards journal), purchases returns daybook/returns
outwards daybook (purchases returns journal/ returns outwards journal), Cashbook
or cash journal and general journal.
• Sales journal records credit sales made by the business
• Purchase journal records credit purchases made by the business
• Sales returns journal records returns inwards i.e goods returned by the
customer to the business
• Purchases returns journal records returns outwards i.e. goods returned
by the business to the suppliers.
• Cash book records receipts and payments of cash and cheques and
• General journal which records transactions which may not be recordedelsewhere in the previously mentioned types of journals
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5.1.2 Creation of Purchase journal codes in sage line 100
For established businesses that have been operating for some time, it can be
common for their suppliers to allow them to purchase items on credit. That is,
they order and receive the goods now, and pay for them later. When are they
paid for? It could be the end of the week, the end of the month, or a certain
number of days (like 30) after the goods were delivered to the business. The
contract between the business and the supplier will determine the payment
terms.
To create purchase journal codes in Sage line 100, click on structure, journalcodes. The following window appears:
Figure 5. 1 Journal codes window
In the code field, type the code of purchase journal (It may be a numeric,
alphanumeric or label (letter)
In the type field, select “Purch” meaning purchase
In name field write purchase journal
In Number vouchers, there is “cont numb by journal” by default, which means
continuous number by journal. If this option is selected, we allow the voucher
number to change according to the transaction in purchase journal entry. If
voucher number is “1” for the first transaction, it becomes “2” when you record
the second transaction in the same journal and so on.
Other options are cont numb for file and monthly. “Cont numb for file” means
continuous number for file which means that, if selected, the voucher number
will change depending on accounting file created whereas when we select
monthly option, the voucher number will change as the month of transactionchanges
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After doing the above exercise, click “add” icon on navigation bar or Right clickadd new element in order to have space for creating other journal codes.
Application activity 5.1
1. State the types of journals existing in accounting
2. Explain the type of information which is included in each of the
books of prime entry3. Create purchase journal code in Sage line 100
5.2 Create Sales Journal
Learning Activity 5.2
1. What is meant by sales journal
2. Identify the transactions that may be recorded in sales journal from the
following:
– Sale of land for 2000,000 FRW by cheque
– Sold inventory for 600,000 FRW on credit
– Purchased new piece of office equipment for 300,000FRW by cash
– Sold goods worth 150,000 to Kanyana on credit
– Sale of personal car for 5000,000 FRW
– Paid insurance for 200,000 FRW by cheque– A credit sale of 600,000 FRW to Emmy
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5.2.1. Meaning of Sales journal
A sales Journal is a type of journal used to record credit sale transactions of
the company and is used for maintenance and tracking the account receivable
and inventory account. It is the Principal book of Credit Sale Transactions, and
the information recorded in it depends on the nature and requirement of each
business.
A sales journal is a specialized accounting journal and it is also a prime entry
book used in an accounting system to keep track of the sales of items that
customers have purchased on account by charging a receivable on the debit
side of an accounts receivable account and crediting revenue on the credit side.
For example, a company completes a sale on credit for $1,000,000 with an
associated 5% sales tax. The goods sold have a cost of 740,000 FRW. The
sales journal entry is:
Debit Accounts receivable for 1,000,000 FRW
DebitCost of goods sold for 600,000 FRW
CreditRevenue for 1,000,000 FRW
CreditInventory for 650, 000 FRW
CreditSales tax liability for 60,000 FRW
5.2.2. Creating sales journal code in Sage line 100
The creation of sales journal code follows the same procedure as it was done
for purchase journal in previous section. Below are the steps taken to create it:
• Once accounting file is opened, click on structure menu
• Click on journal codes
• Right click-add new element or click on “Add” icon on navigation bar
Since the purchase journal has been already created, the following window willappear:
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Figure 5. 4: Creation of sales journal code
After finishing creating sales journal, clicks on add icon or right click and add
new element to find space for creating another journal code or otherwise, closeit.
Application activity 5.3
1. What is meant by sales journal
2. Identify the steps taken to create sales journal code
3. In already created accounting file, create sales journal code asrequired
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5.3. Create returns inwards and returns outwards journal
Learning Activity 5.3
1. Distinguish between returns inwards and returns outwards
2. In which journals are sales returns and purchase returns are recorded?
3. How can you create returns inwards and returns outwards journal in
Sage line 100 software?
Learning Activity 5.3
5.3.1 Description of returns inwards and returns outwards
Return inwards are goods returned to a business by its customer(s). They are
goods which were once sold to external third parties, however, because of being
unsatisfactory, they were returned by the customer. They are also called “Sales
Returns”. Inward returns reduce the total accounts receivable for the business.
It is a sales return and on the other, it is a purchase return. The transaction
in both cases is reversed and the related sale or purchase is nullified. This
reversal reduces the total sales of a company and the deduction is shown in
the trading account. A subsidiary book called Sales returns book is prepared torecord all such entries.
Purchase returns are also called returns outward and an
appropriate purchase returns/returns outward book is maintained. At times
it may be necessary to return few goods back to a supplier when an order is
received, this may be due to poor quality, inaccurate quantity, untimely delivery
or other reasons.
All returns are primarily recorded in the purchase returns book unless the
returns are not that frequent, in which case they are recorded in the general
journal. After the purchase returns book is properly updated and all transactions
are entered into it, the total of the items is transferred to the ledger in an account
called the “Purchase returns account”.
1. At the end of the day, each entry is posted to the debit side of the
appropriate individual’s account in the creditor’s ledger as this helps the
account to stay up to date.
2. At the end of the month, the total of the “Amount” column is posted tothe general ledger with the help of the below-mentioned journal entry.
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Journal entry for purchase returns
5.3.2 Creation of Returns inwards and Returns Outwards
journals
To create returns inwards and returns outwards journal, the same process
is followed as the other journals like sales and purchase journals. The only
difference lies in the change of account type. Both journals are classified as
type general. As we have done previously for the journals created, first click on
structure menu-journal codes-right click, add new elements.The following window will be displayed:
Figure 4. 5: Display of sales and purchase journal codes
In the code field type 03 and in the name field type returns inwards, in journal
type, select type general then click “add” or close and right click-add newelement create the returns outwards journal. The following will be the results:
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Display of sales, purchase, sales returns and purchase returns journal codes created
Application activity 5.3
1. Distinguish between returns inwards journal and returns outwards
journal
2. In journal code, which type of journal are returns inwards and
returns outwards journal
3. Write down the steps followed to create returns inwards and
returns outwards journal in Sage line 100
4. In Sage line accounting file, create returns inwards and returnsoutwards journal codes
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5.4. Creation of cash Journal
Learning Activity 5.4
1. Define the term cash journal
2. What types of transactions are recorded in cash journal?
3. From the following transactions, indicate which ones may be recorded
in cash journal
– Borrowed 5000,000 FRW from local bank
– Collected 600,000 FRW in cash sale
– Paid salaries of 400,000 FRW by cheque
– Sold old motor vehicle for 5000,000 by cash
– Paid utilities for 120,000 FRW by cash
– Purchased office supplies worth 500,000Frw on credit
4. How can you create cash journal in sage line accounting software?
5.4.1 Description of cash journal
A cash journal is a simple hard copy or electronic document that is used to
make immediate accounting entries of both receipts and expenditures.
Transactions that are entered into this journal are usually recorded daily or
at least in chronological order. Part of the document’s charm is that financial
transactions entered as line items can be reviewed quickly when necessary, and
it provides a quick reference when entering the transactions into other sections
of the accounting books.
Businesses can use a cash journal for keeping up with a broad range of receipts
and payments, or it may be used to track one area of activity. Many businesses
choose to maintain a simple journal as a means of keeping a record of income
and disbursements associated with a petty cash fund. This can allow authorized
employees to handle a transaction out of petty cash and make a quick entry with
the basic information. At a later time, the transaction can be fully documented
in the balance sheet ledger or other appropriate record.
Larger organizations usually divide the cash book into two parts: the cash
disbursement journal, which records all cash payments, and the cash receipts
journal, which records all cash received into the business. Cash receipts are
money received from consumers for the sale of goods or services. In accounting,
a cash disbursement is a payment made by one party to another. Also called cash
payments or disbursements, they can be made by check, e-check, Automated
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Clearing House (ACH), digital payment, and all formats of payments recorded
with an immediate deduction.
Cash disbursements are used to purchase inventory, pay for office supplies,
make business loan payments, pay dividends, cover accounts payables and
salaries, and make any other kind of payout that’s not handled with a credit
account or credit card.
5.4.2 Creation of cash journal code
To create cash journal code, the user goes through the same process as for
other journals. There is a quiet difference especially in the fields to be filled in
the cash journal window.
After clicking structure-journal codes-Right click-Add new element. We findthe following window:
Figure 5. 7: Space to create cash journal
Obviously, the previously created journals are displayed, but there is a space to
create cash journal. Follow these steps
• In the code field, fill the code of “05” (or another code different from the
ones created for other journals before).
• In the name field, type cash journal and in the journal type select cash.After performing the steps above, the following results are displayed:
Once the cash type is selected, “contra for each line” and “cash account”
fields which were inactive before become active and tick on “contra for
each line”, click on cash account then the created chart of account appears
and select cash.
• For reconciliation select cash
Finally, cash journal creation is completed and we can add another journal orclose if there is no other journal to be created
Figure 5. 9: Creation of cash journal codes
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Application activity 5.4
1. What is meant by cash journal?
2. Give the two types of transactions to be recorded in cash journal
5.5. Creation of general journal
Learning Activity 5.5
1. What is meant by general journal in accounting?
2. Give two examples of the transactions that may not be recorded in
subsidiary journals but in general journal only
3. How can you create general journal code in sage line 100?
5.5.1 Description of general journal
A general journal is a journal recording all of the transactions of a business. As
soon as a business transaction takes place, it is recorded in the general journal.
Transactions are recorded in either the general journal or a special journal, but
not in both.
In general journal, the entity (company) also records other non-financial
transactions that occur in the business into this book also. That non-financial
transaction included depreciation, adjustments as well as an accrual. Those
financial transactions including sales transactions purchase transactions, cash
receipts, cash payments, and many other important financial transactions.
5.5.2 Create general journal code
The creation of general journal code involves the steps, similar to the steps
followed in creating other types of journals as seen in previous sections,
especially returns inwards and returns outwards journals, since all of them are
of type general. The small difference lies in journal name and code. Therefore,
you follow the steps below:
• Click on structure menu
• Click on journal code
• Right click• Add new element
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Figure 5. 10: Display of created subsidiary journals
As it is seen, the previously created journals are displayed in the above window,
since they are still kept in the database.
At this stage, the user fills the required information in the fields. In code field,
fill (06) or any other code separate from the one used for the journals created
before. In name field, fill general journal, and select general in journal type.After doing this, the following results will be obtained:
Figure 5. 11: Creation of general journal
After creating all types of journals, the next step is to record transactions in the
created books, this will be viewed in next sections.
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Application activity 5.5
1. What is general journal?2. Identify the steps taken to create general journal code in Sage Line 100
End unit assessment
1. State and explain the types of journals that exist in accounting
2. What is the difference between returns inwards and returns
outwards?
3. Give three examples of credit purchase transactions
4. Give two examples of transactions that may be recorded in sales
journal
5. Explain the meaning of cash disbursement
6. 6Outline the steps followed to create cash and sales journals in
journal codes
Practice
In SAGE line 100, create:
1. File name under your proper names
2. Company profile
– Company name: AMANI Ltd
– Activity: Manufacturing
– Address: Rulindo
– Phone: 9999988899
– Operating period. 2019, account length 4 digits
– Reporting currency: Rwandan francs
3. Journal codes for sales journal, purchase journal, cash journal,returns inwards
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