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Our Confession. ACT 110 Is EASY POP!. Because, We encourage, study with, share with & pray for each other!. Accounting Cycle. Source Documents. Prepare Financial Statements. Record in Daybooks/Journals. Extract Trial Balance. Post to Ledgers. Books of Prime Entry.

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act 110 is easy pop

Our Confession

ACT 110

Is EASY POP!

Because, We encourage, study with, share with & pray for each other!

accounting cycle
Accounting Cycle

Source Documents

Prepare Financial Statements

Record in

Daybooks/Journals

Extract

Trial Balance

Post to Ledgers

books of prime entry
Books of Prime Entry

The Recording Process

  • The transactions
  • Evidencing the transactions in the form of documents
  • Entering the details of each transaction in a Primary book or Journal.
  • Entering the details of each transaction in the double entry accounts
books of prime entry2
Books of Prime Entry

Why do we Need BOPE?

  • While a firm is small all double entry accounts can be kept in one book.
  • As the firm grows it will be impossible to just keep one book.
  • Also if we have several bookkeepers, they could not all use the same ledger.
  • The answer to the problem is for us to use more books
  • Books of Prime Entry was created to record and summarize similar types of transactions in the same book before entering them in the ledgers.
books of prime entry3
Books of Prime Entry

Definition

  • Books of Prime Entry are the books where the first entry of a transaction is made.
  • There is a separate book for each different kind of transaction depending on its nature.
  • These books give the following details:
    • Date – The transactions should be shown in in chronological order.
    • Details column
    • Folio Column – for cross-referencing purposes
    • Money Column
books of prime entry4
Books of Prime Entry

Types of Books of Original Entry

  • Sales Day Book/Journal – for credits sales
  • Sales Return Day Book/Journal – for sales returns inwards
  • Purchases Day Book/Journal – for credit purchases
  • Purchase Return Day Book – for purchases returns
  • Cash Book (and discount columns) – for receipts and payments of cash and cheques
  • Petty Cash Book – For petty cash transactions
  • General Journal – For all other items
books of prime entry5
Books of Prime Entry

Books of Original Entry & The Double Entry Accounts

Sales Return Day Book

Sales Day Book

Purchases

Return Day Book

Purchases Day Book

General Journal

Cash Books

Sales Ledger

Purchases Ledger

General Ledger

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Books of Prime Entry

[Kieso & Weygandt, 1992:66, 71] - Journal

  • Thebook of original entry is where transactions and selected other events are initially recorded.
  • Various amounts are transferred to the ledger from the book of original entry.
  • In practice, transactions and selected other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.
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Books of Prime Entry

[Kieso & Weygandt, 1992:66, 71] – General Journal

  • To circumvent this problem and to have a complete record of each transaction or other event in one place, a journal [the book of original entry] is employed.

[Millichamp 1992: 142,144]

  • The Journal is used as a book of prime entry for any sequence of transactions, which are non-routine.
  • The Journal entries form a connected story and thus items, which might properly be included in other books of prime entry are included for the sake of completeness.
books of prime entry8
Books of Prime Entry

General Journal

Today the journal, if used at all is used for the following transactions:-

  • The purchase and sale of assets on credit
  • Opening and closing entries
  • The correction of errors
  • Transfer between accounts
  • Any other items not recorded in another book of original entry
books of prime entry9
Books of Prime Entry

General Journal

  • All credit entries [those in which no cash changed hand] – into the journal first.
  • Unusual Cash Entries – all such cash transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first.
  • Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.
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Books of Prime Entry

Function of the General Journal

The function of the General Journal in bookkeeping can be described as:

  • Acting as a Diary – Business events are recorded;
  • Acting as a Book of Explanation - Brief Explanatory note or narration is given; and
  • Acting as a Book of Instruction – States which accounts to be debited and credited In Ledger

[Favell, A.J. 1977:49]

books of prime entry11
Books of Prime Entry

Format of the General Journal

Date

Particulars

Folio

Debit

Credit

Jan 5

Office Equipment

LB.17 CB1

$650,000

Bank Account

$650,000

Being purchase of computer 123 for use in the Admin Office

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Books of Prime Entry

General Journal - Exercises

  • Nov. 1 - Buys a new delivery truck on account from Auto Sales Ltd. $22,400
  • Nov. 3 - Received an invoice from Evening Graphic for advertising $280.
  • Carl, a dealer in antiques, acquired the assets of a rival business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:- 
  • Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650
books of prime entry13
Books of Prime Entry

Purchases Day Book

  • It is also known as the Purchases Journal, Bought Journal, Purchases Book and Bought Day Book.
  •  It is used record Purchases on credit for resale.
  • A separate ledger called the Bought or Purchases Ledger is kept for the accounts of suppliers of these goods.
  • Aggregate amount of purchase invoices are debited to the Purchases Account in the General Ledger.
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Books of Prime Entry

Purchases Day Book

  • The source document used to write up the purchases day book is the invoice.
  • An invoice is a document, which is made out whenever one person sells goods to the other.
  • It is made out by the seller, and at least one copy is sent to the buyer. [Whitehead 1074:97]
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Books of Prime Entry

Purchases Return Day Book

  • A record of the return of goods purchased on credit is kept in a Returns Outwards Day Book.
  • The information to record these transactions is obtained from a source document called the credit note.
  • A credit note is a business document, which made out whenever one person returns goods to another.
  • The credit note is made out by the original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]
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Books of Prime Entry

Purchases Return Day Book

  • The functions of a credit note are:-
  • To evidence the acceptance of the return of goods by the seller from the buyer.
  • To evidence to a buyer that he need not pay for goods invoiced to him because the goods have been lost in transit.
  • To correct errors on invoices, such errors may be over pricing or inclusion of goods not actually sent [Millichamp 1992:7]
books of prime entry17
Books of Prime Entry

Sales Day Book

  • It is also referred to as the Sales Journal or Sales Book,
  • It records the sale of goods on credit
  • A separate ledger called the Sales Ledger is kept for the accounts of customer of these goods.
  • The aggregate amount in the Sales Day book is credited to the Sales Account in the General Ledger.
  • A record of the return of goods sold on credit is kept in a Returns Inwards Day book.
  • It is important to note that the day books do not form part of the double entry system.