Download presentation
Presentation is loading. Please wait.
1
What is a book of prime entry and how do we use it.
Books of Prime Entry What is a book of prime entry and how do we use it.
2
Books of Prime entry Any financial documentation must be entered to a book of prime entry also known as ‘a day book’, which are: Sales day book Sales Returns day book Purchase day book Purchase Returns day book Cash book for receipts Cash book for payments
3
Sales day book Sales day books records all the sales invoices issued to credit customers (Trade Receivables) After each invoice has been recorded to the day book the gross value is entered to the customer’s account on the debit side, to show the increase in the customer’s debt Date Customer Invoice no Customer code Gross VAT Net 1 June Donalds 7631 SL17 265.40 44.23 221.17 2 June West & Sons 7632 SL35 698.40 116.40 582.00
4
Sales Returns day book Sales Returns day book records all the credit notes issued to credit customers (Trade Receivables) to show the reduction in the customer’s debt Each credit note will be posted to the credit side of the customer’s account to identify the reduction/ decrease in the monies owed Date Customer Credit note no Customer code Gross VAT Net 10 June West & Sons C962 SL35 162.00 27.00 135.00
5
Analysed day books Some businesses offer more than one product or service and like to be able to record the various sales The day book will have the original 7 columns but it will have additional columns to the right allowing the breakdown of the sales types Gross VAT Net Sales Ladies Sales Gents Sales child 265.40 44.23 221.17 148.41 72.86 698.40 116.40 582.00
6
Analysed Day Books The gross will still be posted to the customer’s account and the net breakdown will be posted to the relevant nominal accounts Sales Returns day books must also be shown with the breakdown It helps the business identify which products are more viable and which need to be pushed Which products are being returned which then encourages investigation as to why?
7
Purchases Day Book The purchase day book records all the sales invoices issued to the business by its credit suppliers (Trade Payables) It has the same format as the previous day books but will have the heading supplier, and supplier code. Date Supplier Invoice no Supplier code Gross Vat Net June 3 Office Supplies 2877 PL10 184.65 30.77 153.88 June 6 Long’s Wool products L739 PL26 250.00 Telecoms plc 28430 PL16 372.90 62.15 310.75
8
Purchases day book From the previous page how can we determine the purchase types? The business will require an Analysed Purchase day book which will have the additional columns to the right of the net column with the headings for the various purchase types. Gross VAT Net Ladies Gents Childs Stationery Telecoms 184.65 30.77 153.88 250.00 370.00 372.90 62.15 310.75
9
Purchase day book After each invoice is recorded to the day books the gross value is posted to the credit side of the suppliers account in the purchase ledger. This identifies the monies owed to external businesses
10
Purchase Returns Day Book
The Purchase Returns day book records all the credit notes received from the business’s credit suppliers (Trade Payables) The day book has the same format but uses the heading ‘credit note no’ instead of invoice no Date Supplier Credit note no Supplier code Gross Vat Net
11
Purchase Returns day book
The book includes the analysed columns, which helps identify the type of purchases that are returned to the suppliers After each credit note is recorded to the day book the gross value is posted to the debit side of the suppliers account to show the decrease in monies owed to external businesses.
12
Illustration of posting to ledger accounts
West & Sons SL 35 Date Details June 2 SDB 698.40 June 10 SRDB- C692 162.00 Long’s Wool Products PL 26 June 14 PRDB- June PDB- L739
13
Cash book Any monies received or paid are recorded into the cash book this is a book of prime entry All money types are recorded to the cash book Cash Cheque Card – debit/ credit Automated payments – DD, standing orders, CHAPS & BACS Monies received are recorded as receipts Monies paid out are recorded as payments
14
Cash book – receipts Money receipts are usually for, cash sales, monies from trade receivables, interest received, other revenues & monies paid into the business by the owner. The cash book usually has 3 basic columns and then additional analysis columns After recording the receipt to the cash book, post the gross value and any discount allowed to the credit side of the customer’s account in the sales ledger to demonstrate the decrease in the debt Date Details Ref Discount allowed Cash Bank VAT Cash sales Trade receivables Sundry incomes June 25 West & Sons SL 35 10.00 526.00 June 27 7655 120.00 20.00 100.00
15
Cash book – payments Money payment are usually for cash purchases, trade payable settlement, expenses & petty cash The payment section of the cash book has a similar format to the receipt section with different headings After recording the payment to the cash book, post the gross value and any discount received to the debit side of the supplier’s account in the purchase ledger to demonstrate the decrease in the debt Date Details Ref Discount received Cash Bank VAT Cash purchases Trade payables Petty cash Sundry expenses
Similar presentations
