Financial Literacy

Teacher Guide

Term 2 - 2021
Grade 9
 Olympia Sport and
Trade
Hello Accountant!
Do you still remember me? I am Olympia
Winnings and I am the owner of Olympia
Sport and Trade. I am so glad that you
are going to assist me with my
bookkeeping again. I am sure you know
that we should keep my financial records
safe, so please take care of this booklet,
as you will also need it in Term 3.
Thank you for assisting me with your
Accounting skills.

Term 2
 Topic: Accounting Equation: Credit sales transaction
Ms. Olympia Winnings allows customers to buy on credit from Olympia Sport and
Trade. She has appointed a new sales person and asked you to explain to him what
credit sales entails:
Credit sales are when items received immediately but the money will be paid at a
later stage with more interest.
Businesses sell mainly on credit to increase their sales and till cash flow in the
business is improved.

ACCOUNTING CONCEPTS
No
Accounting Concepts Definition/ Description/Examples
.
When goods are sold on credit with the aim of increasing clientele
1 Credit Sales
and turnover
2 Debtors Customers who owe money to the business

3 Credit Agreements Specifies the credit limit, payment terms and penalties
4 Invoice Document issued to customers when goods are sold for credit

5 Credit Bureau Private business which collects the credit records of customers

6 Repayments Money owed is paid back

7 National Credit Act Aims at preventing people from spending money they do not have.

8 Creditworthiness Having a good credit record and affordability

Process conducted by businesses when a customer wants to buy
9 Credit reference goods on credit to make sure that they are trustworthy and can pay
the debt.
10 Term of Credit The time or the period that the debtor must pay their account.

Great! Thank you for educating her sales team on credit sales. Ms. Olympia
Winnings also wants to learn something new and asked you to show her how credit
sale transactions effect the Accounting Equation of her business. Let us work
through the following notes:

Effect of credit sales on the accounting equation:

When we sell goods on credit we do not get any money, the client who bought goods
owe our business money.
Someone or another business enterprise that owes money to the business is called
a Debtor.
When we sell goods, we use the term Sales regardless of whether the goods were
sold for cash or on credit. The difference between cash and credit sales are the
accounts affected.
When we sell goods for cash money is received therefore the accounts affected will
be Bank and Sales.

When we sell goods on credit we do not get any money therefore an account is
opened called Debtors control. Therefor the accounts affected will be:

Sales and Debtors control

Sales Income Owner’s Equity increases Credited

Debtors control an asset assets increase Debited

Remember every time you sell goods, your trading stock account decreases,
therefore a double entry is made for the cost of the goods sold. The accounts
affected will be:
Trading Stock and Cost of Sales

Trading stock an asset assets decrease Credited

Cost of sales an expense Owner’s equity decreases Debited

Activity 1: Effect of credit sales on the Accounting Equation Term 2

Date: _________________

1. Sold sport gear on credit to B. Botha for R520 (R260 Cost price)
2. Sold stock on credit to Acorn Sports Academy for R1 300 (CP = R650)
3. Issued an invoice to Planet Fitness for sales, R1040 and a cost price of R520.

Effect of credit sales on the accounting equation:

 + Dr ASSETS - Cr -Dr OWNERS EQUITY +Cr -Dr LIABILITIES +Cr
Day Effect Reason Effect Reason Effect Reason
1 +520 Debtors control +520 Sales increases
increases owners’ equity
assets
-260 Trading stock -260 Cost of sales
decreases decreases owners’
assets equity
2 +1 300 Debtors control +1 300 Sales increases
increases owners’ equity
assets
-650 Trading stock -650 Cost of sales
decreases decreases owners’
assets equity
3 +1 040 Debtors control +1 040 Sales increases
increases owners’ equity
assets
-520 Trading stock -520 Cost of sales
decreases decreases owners’
assets equity

Activity 2: Effect of credit sales on the Accounting Equation Term 2

Date: ______________

Show the effect of the following transactions of Olympia Sport and Trade on the
Accounting Equation.

1. Mr. V. Fitness buys trading stock on credit for R550. The business makes
use of a 10% mark-up.

2. All Stars High School buys water bottles for the hockey team for R440. Issue
invoice 3.

3. T. Woods bought goods from Olympia Sport and Trade. The cost price was
R100. Issue an invoice to him.

4. The local gym owner buys merchandise on credit for R1500. The Cost of
sales: R1 000

5. Silver Sandy buys goods on credit for R400. Cost of sales is R360.

+ Dr ASSETS - Cr -Dr OWNERS EQUITY +Cr -Dr LIABILITIES +Cr

Day Effect Reason Effect Reason Effect Reason
1 +550 Debtors control +550 Sales increases 0
increases owners’ equity
assets
-500 Trading stock -500 Cost of sales 0
decreases decreases owners’
assets equity
2 +440 Debtors control +440 Sales increases 0
increases owners’ equity
assets
-400 Trading stock -400 Cost of sales 0
decreases decreases owners’
assets equity
3 +110 Debtors control +110 Sales increases 0
increases owners’ equity
assets
100 Trading stock -100 Cost of sales 0
decreases decreases owners’
assets equity
4 +1500 Debtors control +1500 Sales increases 0
increases owners’ equity
assets
-1000 Trading stock -1000 Cost of sales 0
decreases decreases owners’
assets equity
5 +400 Debtors control +400 Sales increases 0
increases owners’ equity
assets
-360 Trading stock -360 Cost of sales 0
decreases decreases owners’
assets equity

Well done! Thank you for explaining the Accounting Equation to Ms. Olympia
Winnings so well!

Activity 3: Concept of a Debtor’s Journal Date: ______________

1. What does the acronym DJ stand for?

Debtor’s Journal

2. Olympia Sport and Trade is an example of a (service / trade) business.

3. Name the source document that are used to complete a Debtor’s Journal.

Duplicate invoice

How to record credit sales of goods:

 Under Doc No. -write the number of the invoice given; if there is no invoice
number given on the question provide your own numbers.
 Record the day in which the transaction took place
 Under the column Debtors write the name of a person to whom goods were
sold.
 Do not write anything under FOL; this column will be completed when you
post to the ledgers.
 Record the selling price under the column Sales.
 If the amount of cost of sales is given record it under cost of sales, if it is not
given, calculate and record it.
 Close off the journal at the end of the month. (Closing off the journal means
adding the following columns: Sales and Cost of sales)

Ready for the next hurdle?

Activity 4: Entering transactions in the Debtor’s Journal

Date: ______________

Olympia Sport and Trade

Month: January 2021
Complete the Debtor’s Journal of Olympia Sport and Trade.
The business uses a mark-up of 20% on cost price.
Close off the journal.

Transactions:

4 Sporting Goods were sold to Adelaide Mashigo for R4 800 on credit. Issued
invoice no. 01.

8 Sold merchandise on credit for R3 600 to Phephi Vilakazi.

12 Merchandise sold on credit to Madoda Mzangwa for R900.
18 Issued an invoice to Nonceba Ntuta for sport clothes delivered to him on
credit, R1 200.

Debtors journal of Olympia Sport and Trade – January 2021 DJ1

Doc/no Day Debtor Fo Sales Cost of Sales

l
01 4 Adelaide Mashigo 4 800 00 4 000 00
02 8 Phephi Vilakazi 3 600 00 3 000 00
03 12 Madoda Mzangwa 900 00 750 00
04 18. Nonceba Ntuta 1 200 00 1 000 00
10 500 00 8 750 00

*REMEMBER:
Doc no – Invoice numbers in the debtor’s journal will follow in numerical
order, the first invoice number is given as 01 therefore the next will be 02
and so forth.
Activity 5: Entering transactions in the Debtor’s Journal

Date: ______________

Olympia Sport and Trade

Month: February 2021
Complete the Debtor’s Journal of Olympia Sport and Trade.
This month, the business uses a mark-up of 10% on cost price.
Close off the journal.
Transactions:

1. Mr. V. Fitness buys trading stock on credit for R550. The business makes
use of a 10% mark-up. Issue invoice 5.

2. All Stars High School buys water bottles for the hockey team for R440. Issue
invoice 6.

3. T. Woods bought goods from Olympia Sport and Trade. The cost price was
R100. Issue an invoice to him.

4. The local gym owner buys merchandise on credit for R1500. The Cost of
sales: R1 000

5. Silver Sandy buys goods on credit for R400. Cost of sales is R360.

Debtors journal of Olympia Sport and Trade for February 2021 DJ 2

Doc/no Day Debtor Fol Sales Cost of Sales

05 1 V. Fitness 550 500

06 2 All Star High School 440 400

07 3 T. Woods 110 100

08 4 Gym Owner 1500 1000

 09 5 Silver Sandy 400 360

3000 2360

Activity 6: Entering transactions in the Debtor’s Journal

Date: ______________

Olympia Sport and Trade

Month: March 2021
Complete the Debtor’s Journal of Olympia Sport and Trade.
This month, the business uses a mark-up of 25% on cost price.
Close off the journal.

Duplicate invoices:

Doc Day Description

010 4 To M. Radue for credit sales, R1 360
011 7 To G. Pillay for credit sales, R2 040
012 14 To S. January for credit sales, R1 530
013 21 To G. Pillay for credit sales, R680
014 25 To S. January for credit sales, R4 250

Debtors journal of Olympia Sport and Trade for March 2021 DJ3

Doc/no Day Debtor Fol Sales Cost of Sales

001 4 M. Radue 1 360 1 088

002 7 G. Pillar 2 040 1632

003 14 S. January 1 530 1224

004 21 G. Pillay 680 544

005 25 S. January 4 250 3400

9 860 7 888
Activity 7: Recording of receipts from debtors in the CRJ

Date: ______________

1. When a debtor comes and pays their outstanding balance, in which journal do
you record the transaction?
Cash Receipt Journal

2. What is the name of the account/column that records money received from
debtors?

Debtor’s Control

3. Record the following transaction in the given Cash Receipt Journal.

S. Kolisi owes Olympia Sport and Trade R2 100 on 1 February 2021.

Receive R1 500 on 2 February 2021 from S. Kolisi as partial payment on his

account. Issue receipt 34.

Cash Receipt Journal of Olympia Sport and Trade for February 2021
Doc Day Details Fol Analysis of Bank Debtors
receipts control

34 2 S. Kolisi 1 500 1500 1500

Well done!
Activity 8: Entering transactions in the Debtor’s Journal and CRJ

Date: ______________

Olympia Sport and Trade

Month: March 2021
Complete the Debtor’s Journal and Cash Receipts Journal of Olympia
Sport and Trade.
This month, the business uses a mark-up of 20% on cost price.
Close off the journals.

Transactions:
1. Receive a cheque for R2 100 from H. Harmse (a debtor) in payment of his
account. Issue receipt 28.

Cash sales according to cash register roll, R18 000.

4. The following are sold on credit to:

L. Naidoo, R4 200 (Issue invoice 15)
G. Marais, R1 200

8. Issue receipt to G, Marais for R800 (a debtor) as partial payment on his

account.
Part of the building is rented to Mokoena Traders from 1 January 2021.
Receive a cheque for R4 000 for rent for March 2021.

12. Sold goods on credit to G. Marais, R5 400.

14. Supply the following on credit to:

S. Lesedi, R6 600
L. Naidoo, R600

21. Receive a cheque for R2 000 from L. Naidoo (a debtor).

Cash sales according to cash register roll, R7 200.

24. Supply goods on credit to H. Harmse, R4 800.

 Activity 8
Debtors Journal of Olympia Sport and Trade for March 2021 DJ3
Doc Day Debtors Fol Sales Cost of Sales

15 4 L. Naidoo 4 200 3 500

16 G. Marais 1 200 1 000
17 12 G. Marais 5 400 4 500
18 14 S. Lesedi 6 600 5 500
19 L. Naidoo 600 500
20 24 H. Harmse 4 800 4 000
22 800 19 000

Cash Receipts Journal of Olympia Sport and Trade for March 2021 CRJ 3
Doc Day Details Fol Analysis Bank Sales Cost of Debtors Sundry accounts
of Sales control Amount Fol Details
Receipts
28 1 H. Harmse 2 100 2 100
CRR Sales 18 000 20 100 18 000 15 000
28 8 G. Marais 800 800
28 Mokoena Traders 4 000 4 800 4 000 Rent
income
28 21 L. Naidoo 2 000 2 000
CRR Sales 7 200 9 200 7 200 6 000
34 100 25 200 21 000 4 900 4 000
 Posting to the General Ledger

Worked example:
*Your educator will work through this example with you.

Use the information in the DJ and CRJ to post to the general ledger of Olympia Sport
and Trade for April 2021.

The following balances appeared in the General Ledger on 1 April 2021:

Trading stock, R48 000 (is an asset and will have a debit balance)
Debtors control, R8 400 (is an asset and will have a debit balance)
Sales, R34 000 (is an income and will have a credit balance)
Cost of sales, R21 250 (is an expense and will have a debit balance)

Debtors Journal of Olympia Sport and Trade – April 2021 DJ4

Doc Da Name of Debtor Fol. Sales Cost of
y Sales
34 4 M Mamba 1 500 900
35 7 P Phenduka 2 800 1 680
36 18 R Radebe 2 400 1 440
6 700 4 020
B4/N1 B3/N2

Posting to the General ledger:

General ledger
Account Debited Account Credited
Sales column of R6 700 Debtors Control (Assets+) Sales (Income +)
Cost of sales column of R4 020 Cost of sales (Expense -) Trading stock (Assets -)
Cash Receipts Journal of Olympia Sport and Trade – April 2021 CRJ4
Sundry Accounts
Doc Day Details Fol Analysis Bank Sales Cost of Debtors Amount Fol Details
of Sales Control
Receipts
18 1 N Nkosi 16 000 16 000 Capital
CRR 5 Cash sales 18 500 18 500 18 500 11 100
19 9 R Radebe 1 000 1 000 1 000
CRR 14 Cash Sales 15 800 15 800 15 800 9 480
EFT 15 M Montsho 5 000 5 000 5 000 Rent Income
21 26 R Radebe 4 160 4 160
CRR Cash Sales 4 800 8 960 4 800 2 880
65 260 39 100 23 460 5 160 21 000
N1 B3/N2 B4

Posting to the General ledger:

General ledger
Account debited Account credited
Debtors control column of R5 160 Bank (Assets +) Debtors control (Assets -)
 General Ledger of Olympia Sport and Trade
Balance Sheet Accounts Section
Dr Trading Stock B3 Cr
2021 1 Balance b/d 48 000 2021 30 Cost of Sales CRJ 23 460
April April
Cost of sales DJ 4 020
Balance c/d 20 520
48 000 48 000
2021 1 Balance b/d 20 520
May

2021 1 Balance b/d 8 400 2021 3 Bank CRJ 5 160

April April 0
3 Sales DJ 6 700 Balance c/d 9 940
0
15 100 15 100
2021 1 Balance b/d 9 940
May
Dr Debtors Control B4 Cr

Nominal Accounts Section

Dr Sales N1 Cr
2021 1 Balance b/d 34 000
April
3 Bank CRJ 39 100
0
Debtors control DJ 6 700
79 800

Dr Cost of Sales N2 Cr
2021 1 Balance b/d 21 250
April
3 Trading Stock CRJ 23 460
0
Trading Stock DJ 4 020
48 730
Explanation of entries in Ledger:

General Ledger of Olympia Sport and Trade

Balance Sheet Accounts Section
Dr Trading Stock B3 Cr
2021 1 Balance b/d 48 000 2021 3 Cost of Sales CRJ 23 460
April Opening stock April 0 Cost of goods sold for
cash
Cost of sales DJ 4 020
Cost of goods sold
on credit
Balance c/d 20 520
Closing stock
48 000 48 000
2021 1 Balance b/d 20 520
May Opening stock for the
next month

Dr Debtors Control B4 Cr
2021 1 Balance b/d 8 400 2021 3 Bank CRJ 5 160
April Amount owed by April 0 Payment received from
debtors at the debtors
beginning of the
month
3 Sales DJ 6 700 Balance c/d 9 940
0 Credit sales to
debtors

15 100 15 100
2021 1 Balance b/d 9 940
May Amount owed by
debtors at the
beginning of next
month

Nominal Accounts Section

Dr Sales N1 Cr
2021 1 Balance b/d 34 000
April Total sales carried over
from previous month
3 Bank CRJ 39 100
0 Cash sales to
costumers
Debtors control DJ 6 700
Credit sales to
costumers
79 800
Total sales

2021 1 Balance b/d 21 250

April Total cost carried over
from previous month
3 Trading Stock CRJ 23 460
0 Cost of goods solf for
cash
Trading Stock DJ 4 020
Cost of goods sold for
credit
48 730
Total cost of
sales
Dr Cost of Sales N2 Cr
 Activity 9: Posting to the General Ledger Date: ______________

Posting DJ and CRJ to General Ledger

Use the following information in the DJ and CRJ to post to the general ledger of Olympia Sport
and Trade for June 2021.

The following balances appeared in the General Ledger on 1 June 2021:

Trading stock, R58 200
Debtors control, R10 600
Sales, R60 000
Cost of sales, R30 000
Debtors allowances, R1 260

Debtors Journal of Olympia Sport and Trade – June 2021 DJ6

Doc Day Details Fol. Sales Cost of
Sales
28 2 M Baloyi 2 000 1 000
29 7 G Janjies 1 800 900
30 18 M Baloyi 2 400 1 200
30 25 G Janjies 4 000 2 000
10 200 5 100

Cash Receipts Journal of Olympia Sport and Trade – June 2021 CRJ6
Sundry Accounts
Day Fol Fol
Doc Details Analysis Bank Sales Cost of Debtors Amount Details
of Sales Control
Receipts
12 1 M Mahlangu 22 000 22 000 Capital
CRR 5 Cash sales 28 500 28 500 28 500 14 250
13 9 M Baloyi 3 200 3 200 3 200
CRR 14 Cash Sales 16 800 16 800 8 400
14 M Marais 6 000 22 800 6 000 Rent
Income
15 26 G Jantjies 4 000 4 000
CRR Cash Sales 14 800 18 800 14 800 7 400
95 300 60 100 30 050 7 200 28 000
 General Ledger of Olympia Sport and Trade
Balance Sheet Accounts Section

Dr Trading Stock B3 Cr
2021 1 Balance b/d 58 200 2021 3 Cost of sales CRJ 30 050
Jun Jun
0
Cost of sales DJ 5 100
Balance c/d 23 050
58 200 58 200
2021 1 Balance b/d 23 050
Jul

Dr Debtors Control B4 Cr
2021 1 Balance b/d 10 600 202 30 Bank CRJ 7 200
Jun 1
Jun
30 Sales DJ 10 200 Balance c/d 13 600
20 800 20 800
2021 1 Balance b/d 13 600
Jul

Nominal Accounts Section

Dr Sales N1 Cr
2021 1 Balance b/d 60 000
Jun
3 Bank CRJ 60 100
0
Debtors control DJ 10 200
130 300

Dr Cost of Sales N2 Cr
202 1 Balance b/d 30 000
1
Jun
30 Cost of sales CRJ 30 050
Cost of sales DJ 5 100
65 150
 Ms. Olympia Winnings wants to ensure that all the debtors are held accountable for their
outstanding balances. As her Accountant, you open a Debtor’s Ledger for each individual debtor.

Posting to the Debtor’s Ledger:

You have already learnt about the double-entry principle where each transaction is recorded in two General
ledger accounts

When we post credit transactions, we also need to post the information to the individual debtors account in
the Debtors ledger.

The Debtors ledger is a record of all the transactions that effect each individual customer.

At the end of the month, a copy of the customer’s account from the Debtors ledger is posted to the
debtor/customer to remind them that they must pay their debt.

Therefor, the Debtors ledger, has a dual purpose:

o to keep an accurate record of all transactions relating to a specific customer

o to create a statement of account, which is posted to the customer.

At the end of the month, after all transactions are posted to the individual debtors account, a list of debtors
needs to be compiled.

A Debtors list is a summary of all the amounts owed by debtors at the end of the month.

The balance of the Debtors control account in the General ledger at the end of the month, must be the
same as the total of the list of debtors – if it is the same, all transactions were recorded correctly, if it is not
the same, the business must investigate and correct errors.
Worked example:
Use the information in the DJ and CRJ to post to the individual debtor’s accounts in the Debtors
ledger for November 2021. Post to debtor M Mamba’s account and let the learners do the other
two debtors.

Debtors list on 1 November 2021:

M Mamba, R2 400
P Phenduka, R2 680
R Radebe, R3 320

Debtors Journal of Olympia Sport ans Trade – November 2021 DJ6

Doc Day Details Fol. Sales Cost of
Sales
34 4 M Mamba D1 1 500 900
35 7 P Phenduka D2 2 800 1 680
36 18 R Radebe D3 2 400 1 440
6 700 4 020
B4/N1 B3/N2

Cash Receipts Journal of Olympia Sport and Trade – November 2021 CRJ6
Sundry Accounts
Doc Day Details Fol Analysis Bank Sales Cost of Debtors Amount Fol Details
of Sales Control
Receipts
18 1 N Nkosi 16 000 16 000 Capital
CRR 5 Cash sales 18 500 18 500 18 500 11 100
19 9 M Mamba D1 1 000 1 000 1 000
CRR 14 Cash Sales 15 800 15 800 15 800 9 480
EFT 15 M Montsho 5 000 5 000 5 000 Rent
Income
20 26 R Radebe D2 4 160 4 160
CRR Cash Sales 4 800 8 960 4 800 2 880
65 260 39 100 23 460 5 160 21 000
N1 B3/N2 B4

Explanations:
 Record the balance owed by the debtor at the beginning of the month
 Remember, a debtor is an asset and increase (+) on the debit side and decrease (-) on the
credit side.
 Credit sales, the debtors’ account will increase on the debit side.
 Payments made by debtors, the debtors’ account will decrease on the credit side.
 Debtors Ledger of Olympia Sport and Trade

M Mamba D1
Date Details Fol Debit (+) Credit (-) Balance
2021 1 Account rendered 2 400 00
Nov
4 Invoice 34 DJ 1 500 0 3 900 00
0
9 Receipt 19 CR 1 000 00 2 900 00
J

P Phenduka D2
Date Details Fol Debit (+) Credit (-) Balance
2021 1 Account rendered 2 680 00
Nov
7 Invoice 35 DJ 2 800 0 5 480 00
0

R Radebe D3
Date Details Fol Debit (+) Credit (-) Balance
2021 1 Account rendered 2 400 00
Nov
18 Invoice 36 DJ 2 400 00 4 800 00
26 Receipt 20 CRJ 4 160 00 640 00

Debtors List
Debtors Fol Amount
M Mamba D1 2 900
P Phemduka D2 5 480
R Radebe D3 640
9 020
 Activity 10: Posting to the Debtor’s Ledger Date: ______________

Use the following information in the DJ and CRJ to post to the Debtor’s Ledger of
Olympia Sport and Trade for July 2021.

Debtors list on 30 June 2021:

M Baloyi, R6 200
J Jantjies, R4 400

Debtors Journal of Olympia Sport and Trade – July 2021 DJ7

Doc Day Details Fol. Sales Cost of
Sales
28 2 M Baloyi 2 000 1 000
29 7 G Janjies 1 800 900
30 18 M Baloyi 2 400 1 200
31 25 G Janjies 4 000 2 000
10 200 5 100

Cash Receipts Journal of Olympia Sport and Trade – July 2021 CRJ7
Sundry Accounts
Doc Day Details Fo Analysi Bank Sales Cost Debtor Amou Fo Details
l s of of s nt l
Receipt Sales Contro
s l
12 1 M 22 000 22 000 Capital
Mahlangu
CR 5 Cash sales 28 500 28 500 28 14 250
R 500
13 9 M Baloyi 3 200 3 200 3 200
CR 14 Cash Sales 16 800 16 8 400
R 800
14 M Marais 6 000 22 6 000 Rent
800 Income
15 26 G Jantjies 4 000 4 000
CR Cash Sales 14 800 18 800 14 7 400
R 800
95 300 60 30 050 7 200 28 000
100
 Debtors Ledger of Olympia Sport and Trade

M Baloyi D1
Date Details Fol Debit Credit Balance
2021 1 Account rendered 6 200
July
2 Invoice 28 DJ 2 000 8 200
9 Receipt 13 CRJ 3 200 5 000
18 Invoice 30 DJ 2 400 7 400

G Jantjies D2
Date Details Fol Debit Credit Balance
2021 1 Account rendered 4 400
July
7 Invoice 29 DJ 1 800 6 200
25 Invoice 31 DJ 4 000 10 200
26 Receipt 15 CR 4 000 6 200
J

Debtors List
Debtors Fol Amount
M Baloyi D1 7 400
G Jantjies D2 6 200
13 600

Thank you for assisting Ms. Olympia Winnings

with her bookkeeping. Your Accounting skills are
impressive!