Books of Original Entry/prime book of entry/subsidiary book

Types of accounts
Some people describe all accounts as personal accounts or as impersonal accounts.

1. Personal Accounts: All accounts relating to a person/company. These are for trade receivable
(debtors) and trade payable (creditors) (i.e., customers and suppliers, company).

2. Impersonal Accounts: Business transaction which do not affect a person/company are termed as
impersonal account which is divided between ‘real’ accounts and ‘nominal’ accounts:

– Real Accounts: it consists of what the business owns and possesses. Examples are buildings,
machinery, fixtures, and inventory.

– Nominal Accounts: accounts in which expenses, losses, income, gain and capital are recorded.

Expenses due, expense prepaid, income due or income prepaid are personal account.

Topic: Books of Original Entry

Books of Original Entry
The books of original entry or prime entry are the books, where transactions are recorded first time.
Book of Original Entry
1. Sales Day Book/Sales Journal
2. Purchase Day Book /purchase
Journal
3. Sales Return Day Book /
return inward Journal/return
inward book
4. Purchases Return Day Book /
return outward Journal/return
outward book
5. Cash Book – Cheque
payments
6. The Journal / General Journal
7. Petty cash
Source Document Transaction recorded
Sales Invoice Recording of credit sales
Purchase Invoice Recording of Credit Purchases
Credit Note issued. Recording of Sales Return
Credit Notes Received Recording of Purchases Return
Cheque counterfoil Recording of cheque/cash
payments, cheque/cash received,
Discount allowed; discount
received
Other documents Recording of other transactions
not mentioned above
Voucher Record small transaction

Posting of transaction from journal to account

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Books of Original Entry/prime book of entry/subsidiary book

Types Double-entry
1. Sales Journal Debit individual customer - name

Credit Sales acc ( by the total amount from sale journal)

2. Sales Return Journal Debit Sales Return- individual customer - name

Credit Sales ledger control ( by the total amount from sale

return journal)
3. Purchase Journal Debit Purchases( by the total amount from purchase journal)

Credit individual supplier - name

4. Purchase Return Journal Debit individual supplier - name

Credit Purchase Return( by the total amount from purchase

return journal)

Types of ledgers

The different types of ledgers most businesses use is:

1. Sales Ledger. This is for customers’ personal accounts. – includes all customer or trade
receivable receivable.
2. Purchases Ledger. This is for suppliers’ personal accounts. – includes all supplier or Trade
payable .
3. General Ledger. This contains the remaining double entry accounts, such as those relating
to expenses, non-current asset, income. rest of all T – accounts will be part of this (sale and
purchase, sale return, purchase return, non-current asset).

Cash book has a dual function both as a book of prime entry and as a ledger for bank and cash
Advantages Of Dividing the Ledger:
1. It facilitates division of labour in the maintenance of ledger.
2. It becomes easy to locate errors in ledger accounts.
3. It helps the ledger clerks to complete their respective work on time with perfection.
4. It becomes easy to refer to any account.

Prepared by Mr. Parwez Kurmally

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Books of Original Entry/prime book of entry/subsidiary book

General journal (heading)

Example
1. Purchase of non-current asset on credit like machine, land and building, motor car.
2. Sale of non-current asset.
3. Written off bad debts.
4. Correction of errors.
5. Depreciation of non-current asset.
6. Provision for doubtful debts.
7. Accrual and prepayment.

Petty cash book

Businesses set aside some amount of money for minor expenses such as stationery, postages, cleaning,
purchase of refreshment, refund for traveling etc. The petty cash book is similar to cash book.

Evidence for all payment is in term of cash receipt or cash voucher. A petty cash vouch is used as
details record whenever some money is withdrawn.

Dr Petty cash book Cr

Total Date Details Total paid Stationery Postage Traveling) Refreshment Ledger
received ($) accounts
1150 June 1 Bal b/d
100 2 Cash
25 25
10 10
30 30
60 60
50 50
175 25 30 10 60 50
30 Bal c/d 1075
1250 1250
1075 1 July Bal b/d

Advantage of petty cash book.

1. To remove small cash payments from the main cash book.
2. To reduce the number of entries in the main cash book and the expenses account in the ledger.
3. To allow the chief cashier to delegate some of the work.
4. Provided valuable training to the staff.
5. Reduce burden on main cashier and allowing him to concentrate on more important tasks.
6. Allows segregation of duties thereby making fraud more difficult
7. Cash payments are properly controlled and documented with evidence.
8. Can help to reduce fraud.

Prepared by Mr. Parwez Kurmally

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Books of Original Entry/prime book of entry/subsidiary book

What is the imprest system?

Under the imprest system, each month the petty cashier has a fixed amount of money known as petty
cash float\imprest for making payments of petty expenses. At the start of each month, the amount
spent in the previous month is replenished by the chief cashier to restore the imprest. Hence the petty
cash float is always at the same level at the start of each month.

Double entry for imprest

Set up petty cash fund Debit Petty cash

Credit Bank or Cash

Advantage:
1. The chief cashier is aware of exactly how much is spent in each period.
2. Better control on petty cash expenses since the cash in the petty cash box and the vouchers.
received must always equal the imprest amount.
3. It can act as a deterrent against fraud.

Prepared by Mr. Parwez Kurmally

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