BOOKS OF ORIGINAL ENTRIES

These are the books of first entry. The transactions are first recorded in these books before being
entered in the ledger books. These books are also called as books of Prime entry or Subsidiary
books. They are six in number.

1. Purchases Journal (or Purchases Book):- used to record all credit purchases of goods. It is
written up from invoice.

2. Sales Journal (or Sales Book):- is used to record all the credit sales of goods. It is written up
from the invoice.

3. Sales Returns Journal (or Return Inwards Book):- It is used to record all returns inwards.
It is written up from the copies of the credit notes send to customers.

4. Purchases Return Journal (or Returns Outwards Book):- It is used to record all purchases
returns. It is written up from the credit notes received from the suppliers.

5. Cash Book: - It is used to record all receipts and payments of cash and cheques. It is been
given the ruling in such a way that it acts both as a book of original entry and ledger account.

6. General Journal (or Journal):- This book is used to record all those items or transactions
that cannot be recorded in any other book of original entry like
i. Correction of errors
ii. Opening entries
iii. Purchase or Sale of Non-current Assets on
Credit etc.

BOOKS OF FINAL ENTRY

LEDGER BOOKS
Ledger books are the books of final entry which contains the various accounts to which the entries
made in the Books of Original entry are transferred.

DIVISION OF LEDGER BOOK

1. Purchases Ledger Book: - This book contains all the accounts of Suppliers.

2. Sales Ledger Book: - This book contains all the accounts of Customers.

3. General Ledger Book: - This book contains all the rest of the accounts like, Assets Accounts,
expenses account, losses account, etc., and also the Total purchases account, Total sales
 account, Total Sales returns account, Purchases Returns account. It is also called as Nominal
ledger.

Advantages Of Dividing The Ledger:-

1. It facilitates division of labour in the maintenance of ledger.

2. It becomes easy to locate errors in ledger accounts.
3. It helps the ledger clerks to complete their respective work in time with perfection.
4. It becomes easy to refer to any particular account.

BUSINESS DOCUMENTS
1. Invoice: - Whenever there is a credit sale, the selling business will send a document to buyer
showing full details of the goods sold. This document is called as Invoice. It is known to the
buyer as a “Purchases invoice”. And to the seller as a “Sales invoice”.
Note: - Entries in the sales book and the purchases Book are made with the help of an invoice.
2. Debit Note: - This document is prepared by the purchaser and it is sent to the supplier to report
him if any faulty goods are been sent or shortages or overcharges are been made.

3. Credit Note: - When goods are returned, or there has been an over-charge, a supplier may
issue a credit note to the buyer. This reduces the amount owed by the customer.
Note: - This document is used to make the entries in both the purchases returns Book and the
sales returns Book.
4. Statement of Account:- This document is prepared and sent to the customer by the supplier.
It is issued to remind the customer about his due amount. It is basically a summary of the
transaction of a customer during the month like sales made, Returns received and Cash
received.

5. Cheque: - is a written order to a bank to pay a stated sum of money to the person or business
named on the order.
6. Receipt: - is a written acknowledgement of money received and acts as proof of payment.

CASH BOOK
Cash book is the only book of original entry which is given ruling in such a way that it could act
at the same time as a book of original entry and as a ledger account.

1. Trade Discount: - It is an allowance or deduction given by the supplier to the retailer on the
catalogue price or list price.
i. It is given to encourage him to buy in bulk.
ii. It is given so that retailer could make some profit.

Note: - It is not recorded in the books either by the seller or the buyer.

2. Cash Discount: - It is an allowance or deduction given by the receiver of cash to the payer of
cash for prompt payment.
It is of two types discount allowed and discount received.

It is given to encourage the payer to pay on or before the due date.

i. Note: - This discount is recorded in the Cash Book. Discount allowed is recorded at the debit
side and discount received on the credit side.

ii. Note: - Discount columns are never balanced. It is just totaled.

iii. Note:- Every month the Totals of discount allowed column is transferred to debit side of
Discount allowed account in General ledger and the total of discount-received column is
transferred to the credit side of Discount received account in the General ledger.

3. Contra Entry: - When a transaction effects both cash and bank accounts at the same time,
such entries are called as Contra Entries.

PETTY CASH BOOK

Imprest System: - It is a system where a reimbursement is made of the total amount paid in a
period or it can also be called as a system where petty cashier begin each new accounting period
with the same amount of petty cash.

Advantages of Petty Cash Book:-

1. The number of entries in the main cashbook is reduced.

2. The main cashier’s burden is reduced.
3. The chances of mistakes in recording is minimized. 4. Posting become easier with the Total’s
Analysis Columns.

Advantages of using Analysis columns:-

It let us know the money spent on each different nature of small expense. The double entry for
each analysis column by transferring the totals of the analysis columns to their respective accounts
which are available in the General ledger.