Principles of Basic accounting

Basic Principles of Accounting

Task 1

Books of primary entry

In general accounts are recorded in two main set of books such as books of original entry or prime entry or the book of final entry of the ledger (Bebbigton, 2001). Books of prime entry are formed in order to record the transactions in a framework from where it is easy to prepare final accounts. The entries are initially depicted in the books of prime entry and to the ledger and financial statements (Rajasekaran, 2011). There are different types of books of prime entry and these are discussed henceforth along with the preparation of books of prime entry of the business of Hudson and Hudson. The books of prime entry are as follows:

1. a) Sales Day book (SDB): The sales day book depicts the transactions have taken place with respect to sales. In this book of accounts, the company elaborates the volume and amount of sales that have taken place (Rajasekaran, 2011). The following table highlights the sales day book of Hudson and Hudson.

From the above sales day book it can be concluded that the company has earned a revenue of £ 28,073 after 3 months.

1. Purchase Day Book (PDB): The purchase day book highlights the transactions that are made by the company in order to operate the business. According to accounting policies, purchase day book depicts the amount of purchase that has been made by the company (Henry and Piekarski, 2005, Hoofman, 2009, Ingram, 2007, Kimuda, 2008, Milad, 2009). The following purchase day book is prepared for Hudson and Hudson:

From the above table it can be stated that Hudson and Hudson has to spend £ 22, 292 in order to buy material and assets for the company. It is observed that the sales revenue is higher than that of the total purchase of the 3 months. This indicates the fact that the company has the opportunity to earn profit in the business.

1. Cash Book (Payments): Cash books are prepared in order to evaluate the amount of money that have either gone out of the business or received from sales. Hence, cash books can be prepared both for payments and receipts of the business.  

From the above table it can be depicted that the business has to make a payment of £ 13,928 to continue their business by paying insurance premium, payment for petty cash and payments to various creditors, who has once provided cash to the owner of Hudson and Hudson for operation of the business.

1. Cash Book (Receipts): Cash book receipts consist the financial data have taken place in the company during the tenure of its business. The following table elaborates the cash book receipts of Hudson and Hudson.

From the above table it can be stated that the company have received adequate amount of receipts from the customers and business as a result it has the possibility to sustain in the long run. The cash book receipts of Hudson and Hudson have taken into account sales receipts and accounts receivables from the debtors of the business (Bebbigton, 2001, Edwards, 2008, Elmaleh, 2005, Francis, 2010, Grant, 2001, Harrison, 2008).

1. Petty Cash Book: Petty cash book is the cash book, which depicts all the small payments that are made during the course of a business with the help of petty cash funds (Albrecht, 2011). This type of petty cash book is prepared by petty cashier and it is maintained in a very simple or analytical way.

From the above table, it can be depicted that the petty cash amounts are negligible for the business.