Introduction to Books of Prime Entry (Cambridge (CIE) O Level Accounting)

Purpose of Books of Prime Entry

What are books of prime entry?

• Books of prime entry are used to record the details of a transaction

  • Older terminology for these books includes

    • Subsidiary books

    • Books of original entry

    • Daybooks

• Information is taken from the business documents and entered into the books of prime entry

• The details are then transferred from the books of prime entry to the ledger accounts

• The seven books of prime entry are:

  • Sales journal

  • Purchases journal

  • Sales returns journal

  • Purchases returns journal

  • Cash book

  • Petty cash book

  • General journal

What are the advantages of using books of prime entry?

• Books of prime entry are another stage which can be used to check for errors

  • They can help in the preparation of control accounts to check the accuracy of the ledger accounts

• Each book of prime entry collects the same type of transaction 

  • The books allow managers to see the totals for different types of transactions easily

  • Therefore, there are fewer entries in some of the ledger accounts

• Bigger businesses may have multiple book-keepers

  • Different book-keepers can be responsible for different books of prime entry without any risk of work being duplicated or missed 

Sales Journal

What is the sales journal?

• The sales journal is a record of all credit sales

  • Cash sales are not recorded in the sales journal

    • They are recorded directly into the cash book

• It contains:

  • The dates of sales

  • The names of the credit customers

  • The amounts for each of the sales

    • The amounts should be after trade discounts have been applied to the list prices

• The book-keeper uses the sales invoices that were issued to enter the information into the sales journal

• The totals are transferred to the ledger accounts at regular intervals

  • Credit the sales account with the total

    • Call this entry “Sales journal”

  • Debit the individual trade receivables accounts

Sales Returns Journal

What is the sales returns journal?

• The sales returns journal is a record of all the returns from credit customers

• It contains:

  • The dates of the returns

  • The names of the credit customers

  • The amounts for each of the returns

• The book-keeper uses the credit notes that were issued to enter the information into the sales returns journal

• The totals are transferred to the ledger accounts at regular intervals

  • Debit the sales returns account with the total

    • Call this entry “Sales returns journal”

  • Credit the individual trade receivables accounts

Purchases Journal

What is the purchases journal?

• The purchases journal is a record of all credit purchases

  • Cash purchases are not recorded in the purchases journal

    • They are recorded directly into the cash book

  • Purchases of non-current assets are not recorded in the purchases journal

    • They are recorded directly into the cash book

• It contains:

  • The dates of the purchases

  • The names of the credit suppliers

  • The amounts for each of the purchases

• The book-keeper uses the purchases invoices that were received to enter the information into the purchases journal

• The totals are transferred to the ledger accounts at regular intervals

  • Debit the purchases account with the total

    • Call this entry “Purchases journal”

  • Credit the individual trade payables accounts

Purchases Returns Journal

What is the purchases returns journal?

• The purchases returns journal is a record of all the returns to credit suppliers

• It contains:

  • The dates of the returns

  • The names of the credit suppliers

  • The amounts for each of the returns

• The book-keeper uses the credit notes that were received to enter the information into the purchases returns journal

• The totals are transferred to the ledger accounts at regular intervals

  • Credit the purchases returns account with the total

    • Call this entry “Purchases returns journal”

  • Debit the individual trade payables accounts