The Books of Original Entry
Sales Journal – This book is used to record credit sales. It is a book in which the names
of customers to whom stock of goods have been sold on credit is entered. The source
document used for writing up the sales journal is known as a sales invoice.
The following steps should be followed when preparing the sales journal
Sales Invoice
Sales Journal
Sales Ledger
(Dr Customers account)
General Ledger
(Cr. Sales account)
1. Prepare the sales invoice to send to the customer. The sales invoice must show
description of goods, quantities, cost and discounts given, if any.
2. The information is taken from the sales invoice and entered in the sales journal
3. Open ledger accounts in sales ledger for all the customers whose names are in
the sales journal. (Dr. the customer’s account)
4. The sales journal is totaled at the end of the month and this total is transferred
to the sales account which is found in the general ledger. (Cr. The sales account)
NB
Steps 3 and 4 is simple the recording of double entry. When goods are
sold on credit, the double entry is:
Debit the customer’s account
Credit sales account
Returns Inwards Journal – This book is used to record the names of customers who
return stock of goods to the business. The source document used for writing up the
returns inwards journal is known as a credit note.
The following steps should be followed when preparing the returns inwards journal
Credit Note
Returns Inwards Journal
Sales Ledger
(Cr Customer’s account)
General Ledger
(Dr. Returns inwards
account)
1. Prepare the Credit Note to send to the customer. The credit note must show
description of goods returned by the customers, quantities, cost and the amount
of discount that was given, if any.
2. The information is taken from the credit note and entered in the returns inwards
journal
3. Find the customer’s account in the sales ledger and post the information from
the returns inwards journal to the account. (Cr. The customer’s account)
NB.
An account for the customer who returns goods would have already
been created in the sales ledger. Therefore, no new account is to be
opened upon the return of goods by the customers. The amount for the
goods returned is entered in the customer’s account which is already
created.
4. The returns inwards journal is totaled at the end of the month and this total is
transferred to the returns inwards account which is found in the general ledger.
(Dr. the returns inwards account)
NB.
Steps 3 and 4 is simple the recording of double entry. When goods are
returned to the business by customers, the double entry is:
Debit returns inwards account
Credit the customer’s account
The Purchases Journal and Returns Outwards Journal
Purchases Journal – This is a book of original entry which used to record credit
purchases. It is a book in which the names of suppliers from whom stock of goods have
been bought on credit is entered. The source document used for writing up the
purchases journal is known as a purchases invoice.
The following steps should be followed when preparing the purchases journal
Purchases Invoice
Purchases Journal
Purchases Ledger
(CR suppliers’ account)
General Ledger
(DR. Purchases account)
1. The purchases invoice is not prepared by the business. It is received from the
various suppliers of the business.
2. The information is taken from the purchases invoice and entered in the
purchases journal
3. Open ledger accounts in purchases ledger for all the suppliers whose names are
in the purchases journal. (Cr. the suppliers’ account)
4. The purchases journal is totaled at the end of the month and this total is
transferred to the purchases account which is found in the general ledger. (Dr.
the purchases account)
NB
Steps 3 and 4 is the recording of double entry. When goods are
purchased on credit, the double entry is:
Dr. Purchases account
Cr. Suppliers’ account
Returns Outwards Journal – This book is used to record the names of suppliers to whom
the business returns stock of goods. The source document used for writing up the
returns Outwards journal is known as a credit note received or debit note.
The following steps should be followed when preparing the returns inwards journal
Debit Note
Returns Outwards Journal
Purchases Ledger
(Dr Supplier’s account)
General Ledger
(Cr. Returns Outwards A/C
A/C)account)
1. Credit Note is received from suppliers showing description of goods that were
returned by the business, quantities, cost, etc.
2. The information is taken from the credit note received and entered in the
returns Outwards journal
3. Find the supplier’s account in the purchases ledger and post the information
from the returns outwards journal to the account. (Dr. The supplier’s account)
NB.
An account for the supplier to whom the business returns goods would
have already been created in the purchases ledger. Therefore, no new
account is to be opened. The amount for the goods returned is entered
in the supplier’s account which is already created.
4. The returns Outwards journal is totaled at the end of the month and this total is
transferred to the returns outwards account which is found in the general
ledger. (Cr. the returns outwards account)
NB.
Steps 3 and 4 is simple the recording of double entry. When goods are
returned to suppliers, the double entry is:
Debit supplier’s account
Credit the returns outwards account