Purpose of Books of Prime Entry
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1932godfreyPurpose of Books of Prime Entry
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1932godfreyPurpose of Books of Prime Entry
What are books of prime entry?
Books of prime entry are used to record the details of a transaction
o 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:
o Sales journal
o Purchases journal
o Sales returns journal
o Purchases returns journal
o Cash book
o Petty cash book
o General journal
The accounting process
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
o 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
o The books allow managers to see the totals for different types of transactions
easily
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o Therefore, there are fewer entries in some of the ledger accounts
Bigger businesses may have multiple book-keepers
o 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
o Cash sales are not recorded in the sales journal
They are recorded directly into the cash book
It contains:
o The dates of sales
o The names of the credit customers
o 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
o Credit the sales account with the total
Call this entry “Sales journal”
o Debit the individual trade receivables accounts
Examiner Tips and Tricks
If a sales journal is used, only one entry is made to the sales account at the end of a given
period rather than separate entries for each individual sale.
If a question does not mention a sales journal, enter the individual transactions into the sales
account and label them with the names of the trade receivables.
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:
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o The dates of the returns
o The names of the credit customers
o 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
o Debit the sales returns account with the total
Call this entry “Sales returns journal”
o Credit the individual trade receivables accounts
Examiner Tips and Tricks
If a sales returns journal is used, only one entry is made to the sales returns account at the
end of a given period rather than separate entries for each individual return.
Purchases Journal
What is the purchases journal?
The purchases journal is a record of all credit purchases
o Cash purchases are not recorded in the purchases journal
They are recorded directly into the cash book
o Purchases of non-current assets are not recorded in the purchases journal
They are recorded directly into the cash book
It contains:
o The dates of the purchases
o The names of the credit suppliers
o 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
o Debit the purchases account with the total
Call this entry “Purchases journal”
o Credit the individual trade payables accounts
Examiner Tips and Tricks
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If a purchases journal is used, only one entry is made to the purchases account at the end of
a given period rather than separate entries for each individual purchase.
If a question does not mention a purchases journal, enter the individual transactions into the
purchases account and label them with the names of the trade payables.
Purchases Returns Journal
What is the purchases returns journal?
The purchases return journal is a record of all the returns to credit suppliers
It contains:
o The dates of the returns
o The names of the credit suppliers
o 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
o Credit the purchases returns account with the total
Call this entry “Purchases returns journal”
o Debit the individual trade payables accounts
Examiner Tips and Tricks
If a purchases returns journal is used, only one entry is made to the purchases returns account
at the end of a given period rather than separate entries for each individual return.
Worked Example
Jeff is a sole trader. In February 2024, the following transactions took place.
Feb 1 Bought goods on credit from Samson, $500
3 Bought goods on credit from Helina with a 10% trade discount, list price $300
6 Returned goods to Samson, $50
7 Paid $250 to Samson by credit transfer
10 Bought goods using cash from Jimmy, $70
15 Bought goods on credit from Samson, $400
18 Sold goods on credit to Jasper, $180
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28 Returned goods to Samson, $100
Prepare the purchases journal and the purchases returns journal for February 2024. Total the
journals on 29 February 2024, and indicate the ledger account to which the total would be
posted.