Books of Prime Entry (Copy)
BOOKS OF PRIME ENTRY — COMPLETE O LEVEL & IGCSE ACCOUNTING GUIDE
MEANING OF BOOKS OF PRIME ENTRY
| Concept | Detailed Explanation | Common Mistakes | Examiner Expectations |
|---|---|---|---|
| Books of Prime Entry | Books where transactions are first recorded before posting to ledger accounts. | Calling them ledger accounts. | Must mention first/permanent recording. |
| Alternative Name | Books of original entry. | Thinking both are different books. | Both terms accepted. |
| Purpose | To record transactions systematically and reduce errors. | Giving vague explanations. | Mention classification and efficiency. |
| Source Documents | Transactions are entered using source documents. | Ignoring source documents. | Must link both concepts. |
TYPES OF BOOKS OF PRIME ENTRY
| Book | Transactions Recorded | Source Document Used | Common Error |
|---|---|---|---|
| Sales Journal | Credit sales of inventory | Invoice issued | Including cash sales |
| Purchases Journal | Credit purchases of inventory | Invoice received | Including non-current assets |
| Sales Returns Journal | Returns inward | Credit note issued | Mixing with purchases returns |
| Purchases Returns Journal | Returns outward | Credit note received | Using debit note only |
| Cash Book | Cash and bank transactions | Receipts, cheques | Treating as ordinary journal |
| General Journal | Non-routine transactions | Journal voucher | Using for regular sales |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
SALES JOURNAL
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records all credit sales of inventory. | Including cash sales |
| Source Document | Invoice issued | Wrong document |
| Entries Included | Only inventory/goods for resale sold on credit | Including asset sales |
| Posting | Total posted to sales account; individual amounts to trade receivables accounts | Posting wrong side |
FORMAT OF SALES JOURAL
| Date | Customer Name | Invoice No. | Ledger Folio | Amount ($) |
|---|
DOUBLE ENTRY FOR SALES JOURNAL
| Debit Entry | Credit Entry |
|---|---|
| Trade Receivables Account | Sales Account |
PURCHASES JOURNAL
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records all credit purchases of inventory. | Including cash purchases |
| Source Document | Invoice received | Wrong document |
| Entries Included | Inventory bought for resale on credit only | Including machinery |
| Posting | Total to purchases account; individual entries to trade payables accounts | Wrong account posting |
FORMAT OF PURCHASES JOURNAL
| Date | Supplier Name | Invoice No. | Ledger Folio | Amount ($) |
|---|
DOUBLE ENTRY FOR PURCHASES JOURNAL
| Debit Entry | Credit Entry |
|---|---|
| Purchases Account | Trade Payables Account |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
SALES RETURNS JOURNAL
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records goods returned by customers. | Confusing with purchases returns |
| Alternative Name | Returns inward journal | Mixing terms |
| Source Document | Credit note issued | Using debit note |
| Posting | Total to sales returns account; individual entries to trade receivables accounts | Reversing entries |
FORMAT OF SALES RETURNS JOURNAL
| Date | Customer Name | Credit Note No. | Ledger Folio | Amount ($) |
|---|
DOUBLE ENTRY FOR SALES RETURNS JOURNAL
| Debit Entry | Credit Entry |
|---|---|
| Sales Returns Account | Trade Receivables Account |
PURCHASES RETURNS JOURNAL
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records goods returned to suppliers. | Mixing with sales returns |
| Alternative Name | Returns outward journal | Confusing terminology |
| Source Document | Credit note received | Using invoice |
| Posting | Total to purchases returns account; individual entries to trade payables accounts | Wrong side posting |
FORMAT OF PURCHASES RETURNS JOURNAL
| Date | Supplier Name | Credit Note No. | Ledger Folio | Amount ($) |
|---|
DOUBLE ENTRY FOR PURCHASES RETURNS JOURNAL
| Debit Entry | Credit Entry |
|---|---|
| Trade Payables Account | Purchases Returns Account |
CASH BOOK
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records all cash and bank transactions. | Omitting bank entries |
| Special Feature | Acts as both book of prime entry and ledger account. | Treating as ordinary journal only |
| Source Documents | Receipts, cheque counterfoils, paying-in slips | Ignoring source documents |
| Types | Single column, two-column, three-column cash book | Mixing formats |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
THREE-COLUMN CASH BOOK FORMAT
| Date | Details | Discount Allowed | Cash | Bank | Date | Details | Discount Received | Cash | Bank |
|---|---|---|---|---|---|---|---|---|---|
| Debit Side | Credit Side |
COMMON CASH BOOK ENTRIES
| Transaction | Debit Side/Credit Side | Entry |
|---|---|---|
| Cash sales | Debit side | Cash/Bank |
| Cash purchases | Credit side | Cash/Bank |
| Received from customer | Debit side | Bank/Cash + discount allowed |
| Paid supplier | Credit side | Bank/Cash + discount received |
| Cash deposited into bank | Contra entry | Both sides |
| Cash withdrawn from bank | Contra entry | Both sides |
CONTRA ENTRIES
| Transaction | Debit Entry | Credit Entry |
|---|---|---|
| Cash deposited into bank | Bank column | Cash column |
| Cash withdrawn for office use | Cash column | Bank column |
GENERAL JOURNAL
| Feature | Details | Common Mistakes |
|---|---|---|
| Purpose | Records non-routine transactions. | Using for regular transactions |
| Transactions Included | Correction of errors, depreciation, opening entries, disposal entries | Missing special entries |
| Format Includes | Date, details, debit, credit, narration | Forgetting narration |
| Narration | Short explanation of transaction | Omitting completely |
GENERAL JOURNAL FORMAT
| Date | Details | Debit ($) | Credit ($) |
|---|---|---|---|
Narration: Explanation of transaction
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
COMMON TRANSACTIONS IN GENERAL JOURNAL
| Transaction | Debit Entry | Credit Entry |
|---|---|---|
| Depreciation charged | Depreciation Expense | Provision for Depreciation |
| Bad debts written off | Bad Debts | Trade Receivables |
| Correction of error | Depends on error | Depends on error |
| Opening entry | Asset accounts | Capital and liabilities |
| Dishonoured cheque | Trade Receivables | Bank |
COMMON EXAM MISTAKES
| Mistake | Why It Loses Marks |
|---|---|
| Including cash sales in sales journal | Only credit sales recorded |
| Including machinery in purchases journal | Non-current assets excluded |
| Mixing returns inward/outward | Wrong journal used |
| Forgetting narration in journal | Incomplete journal entry |
| Wrong posting direction | Double entry becomes incorrect |
| Recording trade discount separately | Trade discount not recorded separately |
FREQUENTLY TESTED TRAPS
| Trap | Correct Handling |
|---|---|
| Sale of motor vehicle | General journal/cash book, not sales journal |
| Purchase of equipment on credit | General journal, not purchases journal |
| Cash discount | Recorded in cash book |
| Trade discount | Not recorded separately |
| Contra entries | Marked with “C” on both sides |
| Journal narration | Short explanation required |
ADVANTAGES OF BOOKS OF PRIME ENTRY
| Advantage | Explanation |
|---|---|
| Division of Work | Different clerks maintain different books |
| Saves Time | Similar transactions recorded together |
| Reduces Errors | Easier checking and classification |
| Efficient Posting | Totals posted periodically |
| Easy Reference | Transactions easily located |
HIGH-SCORING EXAM TECHNIQUES
| Question Type | Best Approach |
|---|---|
| Identify journal | Check transaction type carefully |
| Source document questions | Link correct document and journal |
| Cash book questions | Watch contra entries carefully |
| Journal entries | Include narration |
| Advantages questions | State advantage + explanation |
QUICK REVISION SUMMARY
| Book of Prime Entry | Records |
|---|---|
| Sales Journal | Credit sales |
| Purchases Journal | Credit purchases |
| Sales Returns Journal | Returns inward |
| Purchases Returns Journal | Returns outward |
| Cash Book | Cash and bank transactions |
| General Journal | Non-routine transactions |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.