Slide 11.

Chapter 11
Books of original entry and ledgers

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.2

Learning objectives

After you have studied this chapter, you should be able to:
 Justify the need for books of original entry
 Explain what each book of original entry is used for
 Describe the process of recording transactions in a book of original entry
and then recording a summary of the transactions involving similar items
in a ledger

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.3

Learning objectives (Continued)

 Distinguish between personal and impersonal accounts

 List the ledgers most commonly used and distinguish between those that
are used for personal accounts and those that are used for impersonal
accounts
 Explain the broader role of an accountant, the communicator role that lies
beyond the recording and processing of data about transactions

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.4

Types of books of original entry

There are six books of original entry:

Sales day book – for credit sales
Purchases day book – for credit purchases
Returns inwards day book – for returns inwards
Returns outwards day book – for returns outwards
Cash book – for receipts and payments of cash and cheques
Journal – for all other items

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.5

Types of ledger

There are three types of ledgers:

 Sales ledger – for customers’ personal accounts.
 Purchases ledger – for suppliers’ personal accounts.
 General ledger – for the remaining double entry accounts such as
expenses, non-current assets and capital.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.6

Procedure

 Entries are made in the books of original entry.

 These entries are then summarised and the summary information is
entered into the various ledgers using double entry bookkeeping.
 Often, each ledger is operated by a separate bookkeeper, to make the
work easier and to allow checking to take place.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.7

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.8

Types of accounts

Accounts can be classified as personal or impersonal accounts:

 Personal accounts belong to debtors and creditors.
 Impersonal accounts are subdivided between –
Real accounts in which possessions such as assets are recorded.
Nominal accounts in which expenses, income and capital are
recorded.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.9

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.10

The accountant as a communicator

Accountants don’t just prepare figures but need to be able to

communicate:

 Talking to people to explain financial statements.

 Sending letters giving information.
 Writing reports analysing information.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.11

Learning outcomes

You should have now learnt:

1. That transactions are classified and details about them are entered in the
appropriate book of original entry
2. That the books of original entry are used as a basis for posting the
transactions in summary form to the double entry accounts in the various
ledgers

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 11.12

Learning outcomes (Continued)

3. That there is a set of books of original entry, each of which serves a

specific purpose
4. That there is a set of ledgers, each of which serves a specific purpose
5. That accountants need to be good communicators

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012