Books of Prime Entry (Cambridge International A-Level Accounting)
Purpose of business documents
What are business documents?
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Business documents are used to keep records of all transactions
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They are used as sources of information
- The amounts are then entered into the books of prime entry
- They can be used to check potential errors
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The business document depends on the transaction
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The table below shows common transactions
| Transaction | Business document for the customer | Business document for the supplier |
|---|---|---|
| The customer buys goods on credit from the supplier | Purchases invoice | Sales invoice |
| The supplier reduces the customer's balance after receiving the returned goods | Credit note received | Credit note issued |
| The customer pays a supplier using cash | Receipt | Receipt |
| The customer pays a supplier using a cheque | Cheque counterfoil | Cheque |
| The customer pays the supplier by credit transfer, telephone transfer, direct debit or standing order | Bank statement | Bank statement |
Purpose of books of prime entry
Spec point — the role of books of prime entry in the recording of business transactions – sales journal – sales returns journal – purchases journal – purchases returns journal – cash book – general journal
Purpose of books of prime entry
What are books of prime entry?
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Books of prime entry are used to record the details of a transaction
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Older terminology for these books includes
- Subsidiary books
- Books of original entry
- Daybooks
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Information is taken from the business documents and entered into the books of prime entry
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The details are then transferred from the books of prime entry to the ledger accounts
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The table below shows the six books of prime entry and their uses
| Book of prime entry | Uses |
|---|---|
| Sales journal | Records all credit sales using the sales invoices |
| Purchases journal | Records all credit purchases using the purchases invoices |
| Sales returns journal | Records all the returns from credit customers using credit notes that have been issued |
| Purchases journal | Records all the returns to credit suppliers using credit notes that have been received |
| Cash book | Records all receipts and payments involving cash in hand or cash in the bank using receipts and bank statements |
| General journal | Records all other transactions such as sales and purchases of non-current assets, correcting errors, transferring balances to financial statements, etc |
What are the advantages of using books of prime entry?
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Books of prime entry are another stage which can be used to check for errors
- They can help in the preparation of control accounts to check the accuracy of the ledger accounts
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Each book of prime entry collects the same type of transaction
- The books allow managers to see the totals for different types of transactions easily
- Therefore, there are fewer entries in some of the ledger accounts
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Bigger businesses may have multiple book-keepers
- Different book-keepers can be responsible for different books of prime entry without any risk of work being duplicated or missed
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