Books of Prime Entry (Cambridge (CIE) AS Accounting): Revision Note
Exam code: 9706
Purpose of business documents
What are business documents?
Business documents are used to keep records of all transactions
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
The business document depends on the transaction
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
What are books of prime entry?
Books of prime entry are used to record the details of a transaction
Older terminology for these books includes
Subsidiary books
Books of original entry
Daybooks
Information is taken from the business documents and entered into the books of prime entry
The details are then transferred from the books of prime entry to the ledger accounts
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?
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
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
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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