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Prepare Financial Statements Accounting Cycle Source Documents Prepare Financial Statements Record in Daybooks/Journals Extract Trial Balance Post to Ledgers

Books of Prime Entry The Recording Process The transactions Evidencing the transactions in the form of documents Entering the details of each transaction in a Primary book or Journal. Entering the details of each transaction in the double entry accounts

Lecture Notes 3 Books of Prime Entry

Books of Prime Entry Why do we Need BOPE? While a firm is small all double entry accounts can be kept in one book. As the firm grows it will be impossible to just keep one book. Also if we have several bookkeepers, they could not all use the same ledger. The answer to the problem is for us to use more books Books of Prime Entry was created to record and summarize similar types of transactions in the same book before entering them in the ledgers.

Books of Prime Entry Definition Books of Prime Entry are the books where the first entry of a transaction is made. There is a separate book for each different kind of transaction depending on its nature. These books give the following details: Date – The transactions should be shown in in chronological order. Details column Folio Column – for cross-referencing purposes Money Column

Books of Prime Entry Types of Books of Original Entry Sales Day Book/Journal – for credits sales Sales Return Day Book/Journal – for sales returns inwards Purchases Day Book/Journal – for credit purchases Purchase Return Day Book – for purchases returns Cash Book (and discount columns) – for receipts and payments of cash and cheques Petty Cash Book – For petty cash transactions General Journal – For all other items

Books of Prime Entry Books of Original Entry & The Double Entry Accounts Sales Day Book Sales Return Day Book Purchases Return Day Book Purchases Day Book Cash Books General Journal Sales Ledger Purchases Ledger General Ledger

The General Journal as Books of Prime Entry Lecture Notes 3 The General Journal as Books of Prime Entry

Books of Prime Entry [Kieso & Weygandt, 1992:66, 71] - Journal The book of original entry is where transactions and selected other events are initially recorded. Various amounts are transferred to the ledger from the book of original entry. In practice, transactions and selected other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.

Books of Prime Entry [Kieso & Weygandt, 1992:66, 71] – General Journal To circumvent this problem and to have a complete record of each transaction or other event in one place, a journal [the book of original entry] is employed. [Millichamp 1992: 142,144] The Journal is used as a book of prime entry for any sequence of transactions, which are non-routine. The Journal entries form a connected story and thus items, which might properly be included in other books of prime entry are included for the sake of completeness.

Books of Prime Entry General Journal Today the journal, if used at all is used for the following transactions:- The purchase and sale of assets on credit Opening and closing entries The correction of errors Transfer between accounts Any other items not recorded in another book of original entry

Books of Prime Entry General Journal All credit entries [those in which no cash changed hand] – into the journal first. Unusual Cash Entries – all such cash transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first. Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.

Books of Prime Entry Function of the General Journal The function of the General Journal in bookkeeping can be described as: Acting as a Diary – Business events are recorded; Acting as a Book of Explanation - Brief Explanatory note or narration is given; and Acting as a Book of Instruction – States which accounts to be debited and credited In Ledger [Favell, A.J. 1977:49]

Books of Prime Entry Format of the General Journal Date Particulars Folio Debit Credit Jan 5 Office Equipment LB.17 CB1 $650,000 Bank Account $650,000 Being purchase of computer 123 for use in the Admin Office

The General Journal Exercises Lecture Notes 3 The General Journal Exercises

Books of Prime Entry General Journal - Exercises Nov. 1 - Buys a new delivery truck on account from Auto Sales Ltd. $22,400 Nov. 3 - Received an invoice from Evening Graphic for advertising $280. Carl, a dealer in antiques, acquired the assets of a rival business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:-  Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650

Lecture Notes 3 Purchases Day Book

Books of Prime Entry Purchases Day Book It is also known as the Purchases Journal, Bought Journal, Purchases Book and Bought Day Book.  It is used record Purchases on credit for resale. A separate ledger called the Bought or Purchases Ledger is kept for the accounts of suppliers of these goods. Aggregate amount of purchase invoices are debited to the Purchases Account in the General Ledger.

Books of Prime Entry Purchases Day Book The source document used to write up the purchases day book is the invoice. An invoice is a document, which is made out whenever one person sells goods to the other. It is made out by the seller, and at least one copy is sent to the buyer. [Whitehead 1074:97]

Purchases Return Day Book Lecture Notes 3 Purchases Return Day Book

Books of Prime Entry Purchases Return Day Book A record of the return of goods purchased on credit is kept in a Returns Outwards Day Book. The information to record these transactions is obtained from a source document called the credit note. A credit note is a business document, which made out whenever one person returns goods to another. The credit note is made out by the original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]

Books of Prime Entry Purchases Return Day Book The functions of a credit note are:- To evidence the acceptance of the return of goods by the seller from the buyer. To evidence to a buyer that he need not pay for goods invoiced to him because the goods have been lost in transit. To correct errors on invoices, such errors may be over pricing or inclusion of goods not actually sent [Millichamp 1992:7]

Lecture Notes 3 Sales Day Book

Books of Prime Entry Sales Day Book It is also referred to as the Sales Journal or Sales Book, It records the sale of goods on credit A separate ledger called the Sales Ledger is kept for the accounts of customer of these goods. The aggregate amount in the Sales Day book is credited to the Sales Account in the General Ledger. A record of the return of goods sold on credit is kept in a Returns Inwards Day book. It is important to note that the day books do not form part of the double entry system.