BOOKS OF PRIME ENTRY

SECTION 2-B

1. Topics to cover

Books of Prime Entry

Earlier we studied that for small business, generally all transactions are recorded in one book or
register known as general journal. However, as the business grows, so does the number of
ledger accounts, so it becomes necessary to divide the ledger into different sections.

For Bigger businesses, we use different ledgers, as explained below:

Sales Ledger Purchases Ledger Cash Books Nominal Ledger

All individual All individual Cash and Bank All other accounts
accounts of accounts of suppliers accounts are kept that are not in
customers who buy from whom we buy in this ledger. Sales Ledger or
on credit form us on credit go in this Purchase Ledger or
go in this ledger. ledger. in Cash Books are
kept in this ledger.
AKA Debtors ledger AKA Creditors ledger

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Important:
Customer who buys on credit
from us is known as debtor
He owes us (our money is with
him – Asset)
Supplier from whom we buy on
credit is known as a creditor
We owe him (Liability)
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Debtors appear as Trade
Receivables in Current Assets in
Balance Sheet
Where debtors appear in
Balance Sheet OR Income
Statement?
Creditors appear as Trade
Payables in Current Liabilities in
Balance Sheet
(© Sheraz Ahmed )
Let’s test our knowledge

Q1. State which ledger each of the following accounts would appear:
a) Rent account
b) AB Finance Co. loan account
c) XY Stores account (a supplier)
d) Capital account
e) Sales returns account
f) Gee Tee Traders account (a customer)
g) Bank account

Q2. Enter the following transactions in the books of Malika. She maintains a three-column cash book and divides the ledger into three sections –
sales ledger, purchase ledger and nominal ledger.
Balance the cash book on 31 Jan 2007 and transfer the totals of the discount columns to the relevant accounts in the nominal ledger. Balance the
accounts in the sales and purchases ledgers where necessary.
2007
January 1 Malika had a cash balance of $60 and a bank overdraft of $1060
4 Bought goods, $5200, on credit from Lodi Road Traders
8 Returned goods, $200, to Lodi Road Traders
12 Sold goods, $770, on credit to A&J Singh
14 Cash sales $680
17 Paid $650 cash into the business bank account
21 Received a cheque from A&J Singh in settlement of their account
24 Sold goods, $1200, on credit to North East Stores

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 26 A&J Singh’s cheque was dishonored and returned by the bank
28 Paid Lodi Road Traders the amount due, by cheque, after deducting a discount of 2½ %
31 North East Stores paid the amount due by cheque less a cash discount 3%

______________________
Discount Discount
Date Details FO Cash Bank Date Details FO Cash Bank
Allowed Received

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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Date Details FO $ Date Details FO $

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(© Sheraz Ahmed )