act 110 is easy pop! our confession because, we encourage, study with, share with & pray for...
TRANSCRIPT
ACT 110Is EASY
POP!
Our Confession
Because, We encourage, study with, share with & pray for
each other!
Accounting Cycle
Source Documents
Record in Daybooks/Journals
Post to Ledgers
ExtractTrial Balance
Prepare Financial
Statements
Books of Prime Entry
The Recording Process• The transactions• Evidencing the transactions in the form of documents• Entering the details of each transaction in a Primary
book or Journal.• Entering the details of each transaction in the double
entry accounts
Books of Prime Entry
Why do we Need BOPE?• While a firm is small all double entry accounts can be
kept in one book.• As the firm grows it will be impossible to just keep one
book.• Also if we have several bookkeepers, they could not all
use the same ledger.• The answer to the problem is for us to use more books• Books of Prime Entry was created to record and
summarize similar types of transactions in the same book before entering them in the ledgers.
Books of Prime Entry
Definition• Books of Prime Entry are the books where the first entry
of a transaction is made.• There is a separate book for each different kind of
transaction depending on its nature.• These books give the following details:
Date – The transactions should be shown in in chronological order.
Details columnFolio Column – for cross-referencing purposesMoney Column
Books of Prime Entry
Types of Books of Original Entry• Sales Day Book/Journal – for credits sales• Sales Return Day Book/Journal – for sales returns
inwards• Purchases Day Book/Journal – for credit purchases• Purchase Return Day Book – for purchases returns• Cash Book (and discount columns) – for receipts and
payments of cash and cheques• Petty Cash Book – For petty cash transactions• General Journal – For all other items
Books of Prime Entry
Books of Original Entry & The Double Entry Accounts
Sales Day
Book
Purchases Day Book
Sales Return
Day Book
Purchases Return
Day Book
Cash Books
General Journal
Sales Ledger
Purchases Ledger
General Ledger
Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] - Journal• The book of original entry is where transactions and
selected other events are initially recorded. • Various amounts are transferred to the ledger from the
book of original entry.
• In practice, transactions and selected other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.
Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] – General Journal• To circumvent this problem and to have a complete
record of each transaction or other event in one place, a journal [the book of original entry] is employed.
[Millichamp 1992: 142,144]• The Journal is used as a book of prime entry for any
sequence of transactions, which are non-routine. • The Journal entries form a connected story and thus
items, which might properly be included in other books of prime entry are included for the sake of completeness.
Books of Prime Entry
General JournalToday the journal, if used at all is used for the following transactions:-
1. The purchase and sale of assets on credit2. Opening and closing entries3. The correction of errors4. Transfer between accounts5. Any other items not recorded in another book of
original entry
Books of Prime Entry
General Journal• All credit entries [those in which no cash changed hand]
– into the journal first.
• Unusual Cash Entries – all such cash transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first.
• Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.
Books of Prime Entry
Function of the General JournalThe function of the General Journal in bookkeeping can be described as:1. Acting as a Diary – Business events are recorded;2. Acting as a Book of Explanation - Brief Explanatory
note or narration is given; and3. Acting as a Book of Instruction – States which
accounts to be debited and credited In Ledger [Favell, A.J. 1977:49]
Books of Prime Entry
Format of the General Journal
Date Particulars Folio Debit CreditJan 5 Office Equipment
Bank AccountBeing purchase of computer 123 for use in the Admin Office
$650,000$650,000
LB.17 CB1
Books of Prime EntryGeneral Journal - Exercises• Nov. 1 - Buys a new delivery truck on account from Auto
Sales Ltd. $22,400• Nov. 3 - Received an invoice from Evening Graphic for
advertising $280.• Carl, a dealer in antiques, acquired the assets of a rival
business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:-
• Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650
Books of Prime Entry
Purchases Day Book• It is also known as the Purchases Journal, Bought
Journal, Purchases Book and Bought Day Book.• It is used record Purchases on credit for resale.• A separate ledger called the Bought or Purchases
Ledger is kept for the accounts of suppliers of these goods.
• Aggregate amount of purchase invoices are debited to the Purchases Account in the General Ledger.
Books of Prime Entry
Purchases Day Book• The source document used to write up the purchases
day book is the invoice. • An invoice is a document, which is made out whenever
one person sells goods to the other. • It is made out by the seller, and at least one copy is sent
to the buyer. [Whitehead 1074:97]
Books of Prime Entry
Purchases Return Day Book• A record of the return of goods purchased on credit is
kept in a Returns Outwards Day Book. • The information to record these transactions is
obtained from a source document called the credit note.
• A credit note is a business document, which made out whenever one person returns goods to another.
• The credit note is made out by the original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]
Books of Prime Entry
Purchases Return Day Book• The functions of a credit note are:-• To evidence the acceptance of the return of goods by
the seller from the buyer. • To evidence to a buyer that he need not pay for goods
invoiced to him because the goods have been lost in transit.
• To correct errors on invoices, such errors may be over pricing or inclusion of goods not actually sent [Millichamp 1992:7]
Books of Prime Entry
Sales Day Book• It is also referred to as the Sales Journal or Sales Book, • It records the sale of goods on credit• A separate ledger called the Sales Ledger is kept for the
accounts of customer of these goods.• The aggregate amount in the Sales Day book is credited
to the Sales Account in the General Ledger. • A record of the return of goods sold on credit is kept in
a Returns Inwards Day book. • It is important to note that the day books do not form
part of the double entry system.