Slide 11.

Books of
Original Entry
Prepared by: Ms. Doris

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.2

Types of 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
• General journal – for all other items

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.3

Types of ledgers

The different types of ledgers most businesses

use are:

• Sales ledger – for customers’ personal accounts

• Purchases ledger – for suppliers’ personal accounts
• General ledger – for all remaining double entry
accounts

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.4

Sales day book and

sales ledger

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.5

Cash sales
• When goods are paid for by cash, cheque or
immediate transfer, they are described as
‘cash sales’.
• For accounting purposes, we do not need to
know the name and address of the customer
and there is no entry made in the sales day
book.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.6

Credit card payments

• When someone pays by credit card, we treat

the customer as though they are a cash
customer and do not note their name or
address.
• However, a debtor does exist – the credit
card company – and we do set-up a debtor’s
account.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.7

Credit sales

• The majority of businesses will make mostly

credit sales.
• For each credit sale, an invoice is issued,
giving full details of the sale, and this is used
to request payment from the customer.
• The business uses the invoice as a record of
the sale and enters the details in the sales
day book, including date, customer name,
invoice number and invoice amount.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.8

An example of the sales day

book

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.9

Posting credit sales

From the sales day book:

• All credit sales are posted individually to the

debit side of each customer’s account in the
sales ledger.

• The total of the credit sales is posted to the

credit of the sales account in the general
ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.10

Posting credit sales (Continued)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.11

Activity

Post the entries in the sales day book to the

customer accounts in the sales ledger and
the sales account in the general ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.12

Activity (Continued)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.13

Purchase day book and

purchase ledger

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.14

Purchase invoices
• Purchase invoices are sent to the buyers of
any goods that have been bought on credit.
• Any sales invoice issued by a business is a
purchase invoice when received by the
buying business.
• The buyer enters the purchase invoice into a
purchase day book before recording the
details using double entry bookkeeping.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.15

Purchase day book

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.16

Posting credit purchases

From the purchases day book:
• The credit purchases are posted
individually to the credit of each
supplier’s account in the purchases
ledger.
• The total of the credit purchases is
posted to the debit of the purchases
account in the general ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.17

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.18

Activity
Post the purchases day book to the supplier
accounts in the purchases ledger and the
purchases account in the general ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.19

Activity (Continued)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.20

Returns day books

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.21

Returns inwards and credit notes

• When a seller agrees to take back goods and
refund all or part of the amount paid, a credit
note is sent to the customer.
• The customer’s account is credited with the
amount on the credit note to show the
reduction in the amount owed.
• To identify them from invoices, credit notes
are often printed in red.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.22

Posting credit notes

From the returns inwards day book:

• The values of the credit notes are individually

posted to the accounts of the customers in
the ledger.

• The total of the returns inwards day book is

posted to the debit of the returns inwards
account.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.23

Activity
Post the returns inwards day book to the
customer accounts in the sales ledger and
the returns inwards account in the general
ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.24

Activity (Continued)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.25

Returns outwards and debit notes

• When goods are returned, the supplier will
send a credit note to the customer, but if the
customer chooses, they can send a debit
note to the supplier.
• A debit note will contain the same details as
a credit note, but is always titled as a debit
note.
• Debit notes are entered in the returns
outwards day book.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.26

Posting debit notes

From the returns outwards day book:

• The values of the debit notes are individually

posted to the accounts of the suppliers in the
ledger.

• The total of the returns outwards day book is

posted to the credit of the returns outwards
account.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.27

Activity
Post the returns outwards day book to the
supplier accounts in the purchase ledger and
the returns outwards account in the general
ledger.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.28

Activity (Continued)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.29

Example – Sales/Purchase Day Book

 Sunny has sent and received the following
invoices and credit notes.
Invoice sent to customers Amount of invoices ($)
1 May Allen 2,850
5 May Shirley 1,950
Invoice received from Amount of invoices ($)
suppliers
3 May Bernard 4,600
4 May Florence 5,200
Credit note sent to Amount of invoices ($)
customers
1 May Allen 300
5 May Shirley 150
Credit note received from Amount of invoices ($)
suppliers
4 May Bernard 800
5 May Wood
Florence 500
and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11
th
Edition © Pearson Education Limited 2008
Slide 11.30

Example – Sales/Purchase Day Book

Required:
a)Record the above transactions in their
respective books of prime entry.
b)Then, from the books of prime entry post the
transactions to ledger accounts.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.31

The Cash Book

 Businesses record their cash and cheque

transactions in the cash book.
 The cash book consist of:
 Cash account
 Bank account
 In the cash book, the debit column is for
cash/cheque/bank received transactions while
the credit column is for cash/cheque/bank
payment transactions.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.32

Two column cash book

• Example:
Cash Book
Date Description Cash Bank Date Description Cash Bank

1 May Capital 2,000 2 May Printing 15

3 May Tom 25 5 May Charlie 75
20 May Dale 100 25 May Rent 200
__ ____ 31 May Bal c/d 10 1,825
25 2,100 25 2,100
1 Jun Bal b/d 10 1,825

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.33

Three column cash book

 For a three column cash book, an additional

column is added for discounts.
 Cash transactions
 Bank transactions
 Discount received and allowed

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.34

Quick Practice – Cash Book

On 1 May, Alex’s cash book showed balances as
follows: cash - $1,350 and bank $7,480.
•Prepare a three column cash book for the
following transactions:
Date Transactions
3 May Payment of trade payable, Campbell. The amount owed
was $2,600 paid by cheque. This amount was settled less
5% cash discount.
5 May Receipt of cheque from trade receivable, Scott, who owed
$1,600. The amount was settled less 2% cash discount.
9 May Cash sales totalling $4,540.
16 May Payment of trade payable, Wright. The amount owed was
$4,480 paid by cheque. This amount was settled less 5%
cash discount.
21 May Paid cash $4,200 into the bank account.
29 May Paid rent for the month $350 by cheque

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.35

General Journal

When the other items do not pass through the five

books of prime entry, the general journal is used
to record the transactions.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.36

General Journal

• Example of a general journal:

The Journal

Date Description Dr ($) Cr ($)

The name of the account to xxx

be debited.
The name of the account to xxx
be credited.
The narrative.

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.37

General Journal

Some of the main uses of a general journal are as

follow:
a.The purchase and sales of fixed assets on credit.
b.Writing-off bad debts.
c.The correction of errors in the ledger accounts.
d.Opening entries. These are entries needed to open a
new set of books.
e.Adjustments to any of the entries in the ledgers.
Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.38

Quick practice - General Journal

Purchase of a non-current asset

A sewing machine is purchased on credit from
Fashion Ltd for $5,500 on 1 July 2016.
The Journal
Date Description Dr ($) Cr ($)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.39

Quick practice - General Journal

Sales of a non-current asset

Sold a motor vehicle which is no longer required in
the business to Keith for $1,000 on 3 July 2016.
The Journal
Date Description Dr ($) Cr ($)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008
Slide 11.40

Quick practice - General Journal

Bad Debts
A debt of $85 owing to us by Henry is written off as
bad debt on 31 July 2016.
The Journal
Date Description Dr ($) Cr ($)

Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11th Edition © Pearson Education Limited 2008