Debtors Journal (Grade 10 NSC Matric Accounting): Revision Notes
Debtors journal
What is a debtors journal?
A debtors journal is a subsidiary book used to record all credit sales made by a business. When a business sells goods on credit (meaning the customer will pay later), this transaction is recorded in the debtors journal. This journal helps the business keep track of who owes them money and how much is owed.
Key term: A debtor is a person or business that owes money to your business because they bought goods on credit.
Purpose of the debtors journal
The debtors journal serves several important purposes:
- It records all credit sales transactions in one place, making it easier to track
- It shows which customers owe money to the business
- It records both the selling price and the cost price of goods sold on credit
- It helps prevent errors by organising credit sales separately from cash sales
- It provides a summary of total credit sales for a specific period (usually a month)
Structure of a debtors journal
A typical debtors journal has the following columns:
| Column | What it records |
|---|---|
| Doc | The invoice number issued to the customer |
| Day | The date when the sale took place |
| Debtors | The name of the customer who bought goods on credit |
| Fol | The folio (page) reference in the debtors ledger where this customer's account is kept |
| Sales | The selling price of goods sold on credit |
| Cost of sales | The cost price of the goods that were sold |
Understanding the structure of the debtors journal is essential for recording credit sales correctly. Each column serves a specific purpose in tracking customer transactions and maintaining accurate business records.
Understanding each column in detail
Let's break down what information goes into each column:
1. Document number (Doc)
This is the invoice number given to the customer. Invoices must be numbered in sequence (for example: 51, 52, 53, 54). This helps the business track each sale and makes it easier to find records later.
2. Day
Record the specific day of the month when the transaction happened. You don't need to write the full date—just the day number is sufficient.
3. Debtors
Write the full name of the customer who purchased goods on credit. This could be an individual's name (like "S. Moila") or a business name (like "M. Nelson").
4. Folio reference (Fol)
This shows where the customer's personal account can be found in the debtors ledger. Each customer has their own page in the debtors ledger, and this reference helps you find it quickly. Posting from the debtors journal to individual debtor accounts happens daily.
5. Sales
Record the selling price (the amount the customer will pay) for the goods sold on credit. This is the income the business will receive when the customer pays.
6. Cost of sales
Record the cost price (what the business originally paid for the goods). This helps the business track profit because:
Example of a debtors journal
Here's how a completed debtors journal looks:
Worked Example: Debtors Journal
Debtors Journal of Enough Traders (1) - May
| Doc | Day | Debtors | Fol | Sales | Cost of sales |
|---|---|---|---|---|---|
| 48 | 2 | S. Moila | D1 | R2 100 | R1 050 |
| R14 400 | R7 200 | ||||
| B4/N1 | B3/N2 |
Understanding the totals:
- The total sales of R14 400 will be posted to the Sales account in the General Ledger (referenced as B4/N1)
- The total cost of sales of R7 200 will be posted to the Cost of Sales account in the General Ledger (referenced as B3/N2)
- The difference represents the gross profit on these credit sales:
Working with mark-ups
When calculating sales prices from cost prices, you may need to apply a mark-up. A mark-up is the percentage added to the cost price to determine the selling price.
Worked Example: Calculating with Mark-up
If a business uses a mark-up of 66⅔% on cost price:
Given:
- Cost price: R1 200
- Mark-up: 66⅔%
Step 1: Calculate the mark-up amount
Step 2: Calculate the selling price
Alternative method:
Worked example: preparing a debtors journal
Let's prepare a debtors journal for Lonely Traders for June 2010. The business uses a mark-up of 66⅔% on cost price.
Transactions:
- 5 June: Sold goods on credit to M. Nelson for R1 800 (Invoice 51)
- 12 June: Sold goods on credit to J. Abrahams; cost price was R1 200 (Invoice 52)
- 17 June: Sold goods on credit to N. Rossouw for R4 800 (Invoice 53)
- 22 June: Sold goods on credit to J. Abrahams for R1 500 (Invoice 54)
- 28 June: Sold goods on credit to M. Nelson for R480 (Invoice 55)
Worked Example: Complete Debtors Journal
Step 1: Calculate missing values using the mark-up formula
For the 12 June transaction:
- Cost price given: R1 200
- Selling price calculation:
For other transactions where selling price is given:
For example (5 June transaction):
Step 2: Complete the journal
| Doc | Day | Debtors | Fol | Sales | Cost of sales |
|---|---|---|---|---|---|
| 51 | 5 | M. Nelson | D1 | R1 800 | R1 080 |
| 52 | 12 | J. Abrahams | D2 | R2 000 | R1 200 |
| 53 | 17 | N. Rossouw | D3 | R4 800 | R2 880 |
| 54 | 22 | J. Abrahams | D2 | R1 500 | R900 |
| 55 | 28 | M. Nelson | D1 | R480 | R288 |
| R10 580 | R6 348 |
Debtors allowances journal
A debtors allowances journal records transactions when customers return goods or receive allowances (discounts after the sale). This journal is also called the "returns inwards journal" or "sales returns journal."
When do you use a debtors allowances journal?
You use this journal when:
- A customer returns goods that were purchased on credit
- A customer is given an allowance (reduction in price) after discovering damaged or incorrect goods
- The business issues a credit note to reduce the amount the customer owes
Structure of a debtors allowances journal
The debtors allowances journal looks very similar to the debtors journal, but with one key difference:
| Column | What it records |
|---|---|
| Doc | The credit note number issued to the customer |
| Day | The date when the return or allowance took place |
| Debtors | The name of the customer returning goods or receiving an allowance |
| Fol | The folio reference in the debtors ledger |
| Debtors allowances | The value of goods returned or allowance granted |
| Cost of sales | The cost price of the goods that were returned |
Key difference from the debtors journal: Instead of "Sales," this journal has a Debtors Allowances column. This column records the selling price of goods being returned or the value of the allowance granted. This amount will reduce what the customer owes.
Example of a debtors allowances journal
Worked Example: Debtors Allowances Journal
Debtors Allowances Journal of Enough Traders (1) - May 2010
| Doc | Day | Debtors | Fol | Debtors Allowances | Cost of sales |
|---|---|---|---|---|---|
| 33 | 8 | S. Moila | D1 | R500 | R250 |
| R1 800 | R900 | ||||
| B4/N2 | B3/N3 |
Understanding the entry:
- Credit note number 33 was issued on the 8th of May
- Customer S. Moila returned goods worth R500 (selling price)
- The cost price of these returned goods was R250
- The total allowances of R1 800 will be posted to reduce the Sales account in the General Ledger
- The total cost of R900 will be posted to reduce the Cost of Sales account in the General Ledger
How debtors allowances affect accounts
When goods are returned or allowances are granted:
Three key effects on accounts:
- The customer's debt decreases - They now owe less money to the business
- Sales decrease - The business reduces its total sales figure
- Cost of sales decreases - Since goods were returned, the cost of goods sold also reduces
This is the opposite effect of the original credit sale recorded in the debtors journal.
Posting from journals to ledgers
Understanding when to post information from journals to ledgers is crucial for maintaining accurate records:
Daily posting: Information about individual debtors is posted from the journals to the debtors ledger every day. This keeps customer accounts up to date.
Monthly posting: The totals from the journals are posted to the General Ledger at the end of each month. This updates the business's overall financial records.
Exam tips
Essential exam guidelines:
- Always write the journal heading with the business name and month
- Invoice numbers in the debtors journal must be in numerical order
- Credit note numbers in the debtors allowances journal must be in numerical order
- Make sure you calculate cost of sales correctly using the given mark-up percentage
- Remember: Debtors journal records sales on credit; Debtors allowances journal records returns and allowances
- Check that your totals are correct—add up each column carefully
- The folio references for General Ledger posting appear at the bottom of each column
- When given a cost price, use the mark-up to calculate selling price
- When given a selling price, divide by to find cost price
Remember!
Key Points to Remember:
- The debtors journal records all credit sales transactions, showing both the selling price and cost price of goods sold
- A debtor is a customer who owes money to the business because they bought goods on credit
- The journal must include: document number, day, debtor's name, folio reference, sales amount, and cost of sales
- The debtors allowances journal records returns from customers and allowances granted, reducing what customers owe
- Mark-up is added to cost price to calculate selling price (e.g., 66⅔% mark-up means selling price = cost × 1.66⅔)
- Individual debtor accounts are updated daily, while totals are posted to the General Ledger monthly