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We will suppose that Courtney decides to pay herself £180, in 'wages'. The payment of £180 is probably regarded by Courtney as a fair reward for her day's work, and she might think of the sum as being in the nature of wages. However, the £180 is not an expense to be deducted before the figure of net profit is arrived at. In other words, it would be incorrect to calculate the net profit earned by the business as follows. £ Profit on sale of herbs and spices etc 250 Less 'wages' paid to Courtney 180 Net profit earned by business (incorrect) 70 This is because any amounts paid by a business to its proprietor are treated by accountants as withdrawals of profit (the usual term is appropriations of profit), and not as expenses incurred by the business.

2 (a) (b) (c) (d) (e) (f) (g) (h) Cash book Sales day book Petty cash book Purchases day book Cash book Sales returns day book Purchase returns day book Cash book Chapter 3: ACCOUNTING FUNDAMENTALS: LEDGER ACCOUNTS AND DOUBLE ENTRY The accounting equation Why do we need ledger accounts? The nominal ledger Accounting fundamentals: ledger accounts and double entry The petty cash imprest system Double entry bookkeeping Day book analysis The journal Introduction In the previous chapter we saw how to organise transactions into lists (ie entered into books of prime entry).

Chapter 3: Accounting fundamentals: ledger accounts and double entry NOTES (ii) She persuades her Uncle Felix to lend her £500 immediately. Uncle Felix tells her that she can repay the loan whenever she likes, but in the meantime, she must pay him interest of £5 per week each week at the end of the market day. They agree that it will probably be quite a long time before the loan is eventually repaid. (b) She is very pleased with the progress of her business, and decides that she can afford to buy a second hand van to pick up herbs and spices from her supplier and bring them to her stall in the market.

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