Books of Original Entry

7/27/2019 Books of Original Entry

1/3

BOOKS OF ORIGINAL ENTRY & LEDGERS

Before the entrepreneur of any business or the accountant can enter accounting

transactions into the companys books, they must first journalise these transactions to

record them for future use. This is in keeping with the accounting cycle.

BASIC ACCOUNTING CYCLE see page 152 Frank Wood

Wh are !ooks o" or#g#na$ en%r &sed'

This is done for two main reasons; to have a record for any future queries, and to have a

paper trial from which to formulate the ledger accounts. This is important to ensure

continuity of accounting even if personnel change, or unforeseen circumstances occur

which prevent the normal daily functioning of a business to occur e.g. hurricane!. The

books of original entry are also used to organise the companys accounts by splitting upthe accounts into categories. The books of original entry are drawn up from source

documents.

So&r(e )o(&*en%s

These are documents used in business to conduct transactions. Two e"amples of these

are thep&r(hase orderand sa$es #n+o#(e. The purchase order gives details of what items

are being bought, while the sales invoice give details of what items were in fact

purchased. # business usually receives a purchase order for items needed. The businesswill then ship out the items requested and send the buyer a sales invoice along with the

goods. # typical sales invoice should include the following see page $%& 'rank (ood!)*

+ate of transaction

urchase order number

#ddress of the seller company address!

#ddress of the buyer

-nvoice number

-temised listing of the items purchased giving a description, unit cost, any

discounts received and the total cost.

L#s%#ng o" !ooks o" or#g#na$ en%r

The books of original entry are as follows)*

Sales journal

Purchases journal

Return inar!s journal


2/3

Return outar!s journal

General journal

"ash#oo$ & Pett% cash#oo$

#ll journals should have the following format e"cept the general journal, which will bee"amined later see e"hibit $./ page $%$ 'rank (ood!)*

+ate +etails -nvoice 0o. 'olio #mount

#fter each journal is completed, it is then used as the source document to draw up the

ledgers. 'or e"ample the sales journal is used to draw up the sales ledger. This followsthe accounting cycle. #s discussed earlier the books of original entry serve to organise

the accounts of a business. #ll cash transactions are recorded in the cashbook and pettycashbook, while all credit sales are recorded in the sales journal then to the sales ledger.1imilarly all credit purchases are recorded in the purchases journal then to the purchases

ledger; all return outwards are recorded in the return outwards journal then to the various

creditor accounts in the purchases ledger; and all return inwards are recorded in the return

inwards journal and then to the various debtor accounts in the sales ledger. see diagrampage 23 %f 'rank (ood!. 0ote, the totals of each journal, is then transferred to their

respective accounts in the general ledger. 'or e"ample the total of the sales journal is

transferred to the sales account in the general ledger, the total of the purchases journal tothe purchases account in the general ledger and so on.

Ba$an(#ng o"" a((o&n%s #n $edgers

The various debtor and creditor accounts when balanced off in the ledger will have a

balanced brought down for the ne"t accounting period if all payments were not receivedor paid. 4owever it is also possible to transfer these balances to total accounts in the

general ledger. 'or e"ample, the total of all the debtor balances would be transferred to

the Total +ebtor account in the general ledger.

1ales 5edger

6. Blake #ccount

+ate +etails 'olio #mount +ate +etails 'olio #mount

%$ 7ar 1ales 189 &3% &$7ar Transfer to$ 7ar 1ales 189 $% Total +ebtors 65 /:%

/:% /:%

6eneral 5edgerTotal +ebtors #ccount

+ate +etails 'olio #mount +ate +etails 'olio #mount

&$7ar Total redit /:%


3/3

1ales

Returns ournals

These journals are also part of the books of original entry. They deal with instanceswhere customers for whatever reason return goods purchased to the retailer. The more

common reasons for returning goods are )*$. (rong type eg. 'ine point for medium pen. (rong colour eg. (rong shade of ribbon or thread in sewing

&. 'aulty goods eg. Blender does not work

(hen goods are returned the customer is given a document called a cre!it noteshowingthe amount their account would be reduced by or credited hence thecre!it note' (See)*++, o- Fran$ .oo! -or e*/'The credit note has a number and shows addresses of

both customer and retailer; along with the items returned and allowance amount.

#t the end of the month all the credit notes are entered in a return inar!s journal and

the total transferred to the return inar!s a0c in the *eneral le!*er (see )*++, Fran$.oo!/. 'rom the journal, entries can be made to adjust the various debtor a

Documents

Books of Original Entry