Books of prime entry & ledgers

THERE ARE six books of prime entry, also known as books of original entry, in which transactions are recorded first.

Books of prime entry:

CASH BOOK

The cash book is used to record cash and bank transactions.

SALES JOURNAL

The sales journal records credit sales.

PURCHASES JOURNAL

The purchases journal records credit purchases.

RETURNS INWARDS JOURNAL

Returns inwards journal records goods returned by customers/debtors.

RETURNS OUTWARDS JOURNAL

Returns outwards journal records goods returned to suppliers/creditors.

GENERAL JOURNAL

The general journal records transactions that are not recorded in the special journals.

Understanding source documents:

INVOICE

An invoice is required to make entries in the sales book.

CREDIT NOTE RECEIVED

This is used to prepare the purchases returns book.

TILL ROLLS/RECEIPTS

This is used to make debit entries in the cash column of the cash book.

Types of ledgers:

SALES LEDGER

This is kept to record customers’ personal accounts.

PURCHASES LEDGER

This is kept to record suppliers’ personal accounts.

GENERAL LEDGER

Other remaining double-entry accounts, including, expenses, fixed assets, capital, are recorded in the general ledger.

NOMINAL LEDGER

This is another name for general ledger.

PRIVATE LEDGER

This is the ledger for capital and drawings accounts.

TYPES OF ACCOUNTS

Accounts are described as either personal accounts or impersonal accounts.

PERSONAL

These are accounts for debtors and creditors.

IMPERSONAL

This is divided between real accounts and nominal accounts.

REAL

These accounts record property, such as buildings, computers, machinery, and stocks.

NOMINAL

These record expenses, income and capital.

Books of original entry are used for posting transactions to the double-entry accounts. Transactions must be classified and listed in the appropriate book of original entry.

SALES JOURNAL & SALES LEDGER CASH

■ This is the case where the goods or services are paid for immediately.

■ This is never recorded in the sales journal.

CREDIT

■ This is the case where goods or services will be paid for at a later agreed date(s).

■ The seller sends the buyer a document, known as an invoice, detailing the:

1. Amount of goods sold

2. Price of goods.

EXAMPLE OF AN INVOICE

This is all we have time for this week. Always bear in mind that you must get up each morning with renewed determination if you want to go to bed with full satisfaction. Never let what you cannot do stand in the way of what you can do.