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Book of prime entry

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 Book of Prime Entry
Purpose
Record individual transaction which are summarized into total for posting to
general ledger (nominal account)
In manual system: totals are post to general ledger
Individual amounts are post to memorandum ledger
Day books : sale day book , sale return day book, purchases day
book.bpurchase return day book, cash book , petty cash book ,
journal.
Ledger
Transaction recorded day book are totaled on monthly post to general ledger.
Sale ledger maintain the personal account of individual customer
Purchase ledger maintain the personal account of individual supplier
General ledger record all double entry.

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 Sales day book
• Sales day book
The sales day book is one of the books of prime entry. It is used to
make an initial record of sales on credit. Credit sales transactions are
entered in the sales day book as a list.
• Posting
General ledger account ( receivable ledger and sale ledger)
Control account receivable ledger (individual customer accounts)

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Example

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 Recording sales returns
• Sales returns day book is a book of prime entry that records goods
returned by customers (perhaps because they are damaged or of
unacceptable quality).
• When goods are returned, a credit note is issued to the customer.
• Posting
General ledger account ( receivable ledger and sale return ledger)
Control account receivable ledger (individual customer accounts)

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Example

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 Discount allow
Businesses sometimes give discounts to customers . There are two
main types of discount:
• Trade discount :This is price reduction given to a customer. The
invoice is issued at the reduced amount so there are no double entry
problems caused by this type of discount.

• Settlement discount (or cash discount):A settlement discount might

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Receivables Control account

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 Accounting for purchase
• Document to the purchase cycle:
Purchase order
Goods received note
Purchase in voice
Statement

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Example Accounting for purchase

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ExampleAccounting for purchase return

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 Discount received
Discounts received are settlement discounts that a business has been
offered by its suppliers and which it takes up. The business pays earlier
but pays less .

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Payable control account

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Accounting for Cash

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Example

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Example

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 Petty Cash Book
• Records when real cash(currency) is used for making sundry
payments of petty nature. Ex postage, stamps , coffee, taxi fares)
• Double entry received cash from bank to till petty cash .
Dr. petty cash xxx
Cr. Bank xxx
• Every payment out of the cash has to supported with a voucher. The
voucher will be authorized by the cashier.
• At the end of each month, the petty cash book is totaled and the
expense totals posted to the general ledger accounts
• At the end of each week , the cash tin is reimbursed for amount of
petty cash expenditure.
 The journal
Purpose
The journal is used to record transaction which are not recorded in other day
books.
Journal entries should always be recorded because all adjustment , must be
entered .
Format

Date Narrative PR Dr Cr
 Sales Tax
General principle
Apply a sale tax to the purchase and sale of goods(and service) by entities such as
value added tax (VAT).
Business must be record this tax and make a settlement with the government agency
of the next sale tax figure ( base on purchase and sales)
Operation
Purchase day book:
date supplier invoice(gross) purchase (net) sale tax
1/1 Kim $345 $300 $45
Sale day book
date Customer invoice(gross) Sales (net) sale tax
31/1 Chung $575 $500 $75
General ledger sales tax a/c
Balance c/d on debit $30 is amount owe authorities tax (sale tax payable)
 Control Account
Function
All transaction with customer and supplier are recorded in two places.
In total in the control accounts
Individually in the receivables and payables ledger
Importance
At the end of each month a list of balance will be extracted from the
individual ledger and agreed to balance on control account.
In practice this will usually be done before the trial balance extracted.
Manual system
End