Books of prime
entry
Books of prime entry
When entering transactions into the ledger accounts, the accounts could
become cluttered with a large number of entries.
A book of prime entry is a book, or journal, in which transactions are first
recorded before being posted to the double entry accounts.
Business documents provide information for the books of prime entry.
Information from the books of prime entry is then posted as entries in the
ledger accounts.
The cash book is both an account and a book of prime entry. Books of prime
entry are also known as journals or books of original entry.
Different books of prime entry
Book of prime entry
Type of transaction recorded in the book
Cash book
All cash and bank transactions
Petty cash book
All small items of cash payments
Sales journal
All credit sales of goods
Purchases journal
All credit purchases of good bought for resale
Sales returns journal
Sales returns of goods previously sold
Purchases returns journal
Purchases returns of good previously purchased
General journal
Any transaction not covered by the other journals
Advantages of using book of prime entry
• Totals are posted from the books of prime entry instead of each
individual entry. This means the double entry accounts are used less
frequently and are easier to read as a result.
• The books of prime entry provide a back-up to information contained
in the double-entry accounts. This is useful when records are missing.
• Responsibility for maintaining the financial records can be delegated
to different workers. Each person maintains a different book of prime
entry.
Electronic bank transfers
Cheques can be used to make payments from the bank account of a
business to another person or business. However, cheques are used
much less than in the past. Electronic transfers of money from one
bank account to another are possible. Some of these methods include:
• Direct debits
• Standing orders
• Bank transfers
• Credit transfers
The cash book1
A cash book is a combined cash and bank account which records all
transactions involving payments and receipts of money.
The cash book is the only book of prime entry which is also a double
entry account.
Cash discounts2
A cash discount is a reduction in the amount owing on a credit
transaction to encourage prompt payment.