assume the position

Assume the Position

ACT 1100

Introduction to Accounting

Lecturer: Troy J. Wishart

Summer Course

ACT 110Is EASY

POP!

Our Confession

Because, Death and Life is in the Power of the Tongue

Accounting Cycle

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 EntryLecture Notes 3


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.


Why do we Need BOPE?• 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.


Definition• Books of Prime Entry are the books

where the first entry of a transaction is made.

Definition• 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 column Folio Column – for cross-referencing

purposes Money Column


Types of Books of Original EntryoSales Day Book/Journal – for credits

salesoSales Return Day Book/Journal – for

sales returns inwardsoPurchases Day Book/Journal – for

credit purchases


Types of Books of Original EntryoPurchase Return Day Book – for

purchases returnsoCash Book (and discount columns) –

for receipts and payments of cash and cheques


Types of Books of Original EntryoPetty Cash Book – For petty cash

transactionsoGeneral Journal – For all other items



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

The General Journal as a Books of Prime Entry

Lecture Notes 3


[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.


[Kieso & Weygandt, 1992:66, 71] – Journal• 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.


General Journal[Kieso & Weygandt, 1992:66, 71]

• 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.


[Millichamp 1992: 142,144]• 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.


General JournalToday the journal, if used at all is used for the following transactions:-

1. The purchase and sale of assets on credit

2. Opening and closing entries3. The correction of errors


General JournalToday the journal, if used at all is used for the following transactions:-

4. Transfer between accounts5. Any other items not recorded in

another book of original entry


General JournalAll 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.


General Journal• Transactions, except for routine cash

entries and sales and purchases of goods are entered first in the journal.


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; and


Function of the General JournalThe function of the General Journal in bookkeeping can be described as:3. Acting as a Book of Instruction – States

which accounts to be debited and credited In Ledger

[Favell, A.J. 1977:49]

Books of Prime EntryFormat 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

The General Journal Exercises

Lecture Notes 3

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

Purchases Day Book

Lecture Notes 3


Purchases Day Book• It is used record Purchases on credit

for resale.• It is also known as the Purchases

Journal, Bought Journal, Purchases Book and Bought Day Book.


Purchases Day Book• A separate ledger called the Bought or

Purchases Ledger is kept for the accounts of suppliers of these goods.


Purchases Day Book• Aggregate amount of purchase

invoices are debited to the Purchases Account in the General Ledger.


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.


Purchases Day Book• An invoice is made out by the seller,

and at least one copy is sent to the buyer. [Whitehead 1074:97]

Purchases Return Day Book

Lecture Notes 3


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.


Purchases Return Day Book• 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]


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]

Sales Day BookLecture Notes 3


Sales Day Book• It records the sale of goods on credit

• It is also referred to as the Sales Journal or Sales Book,


Sales Day Book• 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.


Sales Returns Day Book• 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.

assume the position

Documents

book of prime entry

books of prime entrywhy

books of prime entrymillichamp

booksbooks of prime

separate book

primary book

original entrypetty

purchases returnscash