Lecture 4

Books of Prime Entry

(Recap and Continued)

Required Reading: BPP Chapter 3

Activity 1

2
Accounting Cycle
Transactions

Source documents

Books of prime entry

General Ledger

Trial Balance

Financial Statements
Books of prime entry
• In order for business transactions to be reflected in the financial statements,
they must first be recorded by the business in its books of prime entry:

Book of prime entry Source documents recorded

Sales day book Sales invoices
Sales returns day book Credit notes sent
Purchase day book Purchase invoices
Purchase returns day book Credit notes received
Cash received day book Cash received
Cheque payments day book Cheques, direct debits, standing orders
Petty cash book Notes and coins paid and received
Journal Adjustments and unusual transactions

• Information collected in the books of prime entry then feed into the ledger
accounts of the business and ultimately the financial statements.
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Sales day book

• The sales day book is used to keep a list of all invoices sent out to
credit customers each day.

SALES DAY BOOK

Date Invoice numberCustomer Rec'bles ledger ref. Total invoiced

$
3.3.X9 207 ABC & Co SL 12 4,000
208 XYZ Co SL 59 1,200
5,200

• There is also sales returns day book, which is used to record any
credit notes issued to customers.
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Purchases day book
• This is used to keep a record of invoices which a business receives
for credit purchases.

PURCHASES DAY BOOK

Date Supplier Payables ledger ref. Total invoiced

$
3.4.X9 RST Co PL31 215
10.4.X9 JMU Inc PL19 1,804
15.4.X.9 DDT & Co PL24 758
2,777

• There is also purchase returns day book, which is used to record

any credit notes received from suppliers.
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Cash received day book

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Cash payments day book

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Petty cash book
Petty cash payments and receipts are recorded in a petty cash book.

Most businesses keep a small amount of cash on the premises for

small payments, eg stamps, coffee.

PETTY CASH BOOK

RECEIPTS PAYMENTS
Date Narrative Total Date Narrative Total Stationery Coffee etc
$ $ $ $ $ $
3.3.X9 Bank 50 3.3.X9 Paper 10 10
Coffee 5 5
50 15 10 5
Petty cash imprest system

1. Set a limit and top up the petty cash, say $50

2. A voucher is filled in when money is taken out to pay an expense

3. At the end of the week/month, the petty cash book is filled

in from the vouchers

4. The amount needed to bring the balance back up to the

pre-set imprest amount = money spent
 Petty Cash Box

Cash Vouchers

+ = Imprest
Discussion question
DEF operates an imprest system for petty cash. During February 20X9, the
following petty cash transactions took place:

$
2.2.X9 Stamps
12.00
3.2.X9 Milk
25.00
8.2.X9 Taxi fare
15.00
17.2.X9 Stamps
5.00
28.2.X9 Stationery
7.50
The amount remaining in petty cash at the end of the month was $93.50. What is
Discussion question
Vouchers 64.50 + Cash 93.50 = Imprest 158

Opening balance (imprest amount) 158 = 93.50 + 64.50

Less: expenditure vouchers (64.50) (12 + 25 + 15 + 5

+7.50)

Cash in hand at end of month 93.50

Question - Petty Cash
Petty cash is controlled under an imprest system. The imprest
amount is $100. During a period, payments totalling $53 have
been made. How much needs to be reimbursed at the end of
the period to restore petty cash to the imprest account?

A. $47
B. $50
C. $53
D. $100
 Journal
Journal is a book of prime entry used to record unusual transactions
such adjustments of errors or purchase of non-current assets.

Journal

Date Narrative Tota

l
$
3.3.X9 Printer 150
purchase

50
 Journal
Journal is a book of prime entry used to record unusual transactions
such adjustments of errors or purchase of non-current assets.

Journal
Date Narrative Total
$
3.4.X9 Printer 150

Journal voucher is a source document used to record unusual

transactions.
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Books of prime entry Recap
• In order for business transactions to be reflected in the financial statements,
they must first be recorded by the business in its books of prime entry:

Book of prime entry Source documents recorded

Sales day book Sales invoices
Sales returns day book Credit notes sent
Purchase day book Purchase invoices
Purchase returns day book Credit notes received
Cash received day book Cash received
Cheque payments day book Cheques, direct debits, standing orders
Petty cash book Notes and coins paid and received
Journal Adjustments and unusual transactions

• Information collected in the books of prime entry then feed into the ledger
accounts of the business and ultimately the financial statements.
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Exam Practice

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Question 1
Sales orders are source documents that are
recorded in the sales day book?

A.True
B. False

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Question 2
When an entity returns goods to a supplier, it
will expect to receive from the supplier

A.an invoice.
B.a credit note.
C.a purchase order.
D.a goods received note.

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 Question 3
G purchases goods on credit from H for $1,000. $100 0f
these goods are defective and G returns them to H.
What document would H issue to G in respect of the
returned goods?

A.Invoice
B. Remittance advice
C. Credit note
D.Goods dispatched note

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Question 4
Which of the following are source documents?

1. Sales day book

2. Credit note from supplier
3. Trial balance
4. Invoice

A. 1 and 3
B. 1 and 2
C. 2 and 3
D. 2 and 4
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 Question 5
Which of the following is the best description of the function of
books of prime entry in a standard double entry bookkeeping
system?

A. Books of prime entry are used to record cash transactions.

B. Books of prime entry are used to summarise credit
transactions.
C. Books of prime entry record amounts owed to/from
individual suppliers and customers.
D. Books of prime entry are used to list similar transactions with
the totals being posted to the nominal ledger.

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Question 6

Which of the following is a book of prime entry?

A.Nominal ledger
B.Journal
C.Receivables ledger
D.Asset register

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Question 7
Which prime entry record is used to record returns
outwards?

A. Sales returns day book.

B. The journal.
C. The cash book.
D. The purchase returns day book.

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 Question 8
Which prime entry record is used to record direct
debits to pay utility bills?

A. Sales returns day book

B. The journal
C. The cheque payments day book
D. The purchase returns day book

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 Question 9
Which of the following statements about books of prime
entry is true?

A. A business can only have a maximum of five books of

prime entry.
B. Source documents are recorded in the books of prime
entry.
C. Credit notes received are recorded in the sales returns
day book.
D. The journal is not a book of prime entry.

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