Chapter (5)
Books of Original Entry
1. Book of original entry: the accounting journals in which business transactions are initially
recorded.
2. Business documents :documents used when processing the sale or purchase of goods and
services (e.g: invoice, credit note, cheque book stub)
3. Types of Books of Original Entry
Book of prime entry Business Document Ledger Entry Account to be Account to be
debited credited
Sale journal Revenue invoice Sale account Individual credit Sale A/C
(Cr) customers A/C
Purchase journal Purchase invoice Purchase account Purchase A/C Individual credit
(Dr) supplier’s A/C
Sale returns journal Credit note Sale return Sale return A/C Individual credit
account (Dr) customers A/C
Purchase returns Purchase credit note Purchase return Individual credit Purchase Return
journal account (Cr) supplier’s A/C A/C
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4. Classification of Accounts
• Personal accounts. These are accounts for people or businesses, i.e. the trade receivables
and trade payables.
• Impersonal accounts. Includes all other accounts. Impersonal accounts are divided into:
real accounts. These deal with the possessions of the business. For example,
buildings, machinery, computer equipment, fixtures and fittings, inventory, etc.
nominal accounts. Expenses and income are recorded here. For example, revenue,
purchases, wages, electricity, commissions received, etc.
5. Division of Ledger
Dividing the ledger into sections makes it more convenient to use as the same type of
accounts can be kept together and the task of maintaining the ledger can be divided between
several people.
To check the procedure to be introduced
To reduce the possibility of fraud
1. Name the ledger in which you would expect each of the following accounts to appear.
(a) Purchase account
(b) D Smith – Trade receivable
(c) Rent Payable
(d) Machinery
(e) Drawings
(f) Sales
2. Name four types of personal account
What type of account is each of the following?
a) Machinery
b) Sales
c) General expenses
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d) Bank
e) Inventory
3. State one advantage of dividing the ledger into specialist areas. And then, state in which
ledger each of the following accounts would appear.
a) Rent account
b) AB Finance Co Loan account
c) XY Stores account (a supplier)
d) Capital Account
e) Sale Returns account
f) Gee Tee Traders account ( a customer)
4. Yuri Keeps a full set of accounting records. Name the ledger in which each of the
following accounts is found.
a) Insurance
b) Sales
c) Purchase
d) Lottie, a credit supplier
e) Matthew, a credit customer
f) Equity
6. Purchase Journal/ Daybook
Step(1) When a business purchases goods or services from a supplier on credit, they are
sent a purchase invoice.
The supplier and the customer both require an invoice. sent by Rivett Rugby and
Football Club to their customer, Gramson’s Sports.
In the accounting records of Rivett Rugby and Football Club it is a revenue
invoice.
In the accounting records of Gramson’s Sports it is a purchase invoice.
Step(2) Purchase Journal
Purchases journal = purchase book or purchase day book
The purchases journal is a list of the names (creditors) of businesses from which
credit purchases were made, the value of the purchases and dates on which the
purchases were made.
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• When goods are purchased on credit
Enter the date, supplier name and the invoice total in the purchase journal
Credit the supplier ‘s account in the purchase ledger with the invoice total
Step(3) Posting Credit Purchases to the Payable Ledger
• At the end of the month
Debit the purchase account in the nominal ledger with the purchases journal total.
From the double entry: all the individual credit entries in the purchase ledger.
Purchase Journal/ Day Book -for credit purchase
Purchase Journal
Date Details Invoice Folio Amount
Number ($)
2022
May 3 B Green PV 01 300
7 C Yellow PV 02 400
15 A Mon PV 03 700
31 Transfer to 1400
Purchase account
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Purchase Ledger= Trade Payable Ledger
B Green A/C
Date Details Folio Amount Date Details Folio Amount
2022
May 3 Purchase 300
Nominal Ledger= General Ledger
Purchase Account
Date Details Folio Amount Date Details Folio Amount
2022
May 31 Credit purchase for 1400
month
7. Cash Revenue & Credit Revenue
When a customer purchases goods and pays for them immediately by cash, there is
no need to enter the sale of these goods into the sales day book or the receivables
ledger.
For each credit sale, the supplier sends a document to the buyer showing details and
prices of the goods sold. This document is known as a revenue invoice to the supplier,
and a purchase invoice to the buyer.
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8. Sale Daybook/ Journal
Step(1): A revenue invoice is made out by the supplier when the supplier despatches the
goods to the buyer. The top copy of the revenue invoice is sent to the buyer.
Step(2) Sale Journal
Sale journal = sale book or sale day book
The sale journal is a list of the names (debtors) of businesses to which credit sale
were made, the value of the sale and dates on which the sale were made.
• When goods are sold on credit
Enter the date, customer name and the invoice total in the sale journal
Debit the customer ‘s account in the sale ledger with the invoice total
Step(3) Posting Credit sale to the Receivable Ledger
• At the end of the month
Credit the sale account in the nominal ledger with the sales journal total.
From the double entry: all the individual debit entries in the sales ledger.
Sale Journal/ Day Book -for credit sale
Sale Journal
Date Details Invoice Folio Amount
Number ($)
2022
May 3 B Green SV 01 657
7 C Yellow SV 02 418
15 A Mon SV 03 835
31 Transfer to sale 1910
account
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Sale Ledger= Trade Receivable Ledger
B Green A/C
Date Details Folio Amount Date Details Folio Amount
2022
May 3 Sales 657
Nominal Ledger= General Ledger
Sale Account
Date Details Folio Amount Date Details Folio Amount
2022
May 31 Credit sales for 1378
month
9. Purchase returns (Return outwards) and Purchase Credit Notes or Debit Note
Step 2:
When the customer returns the goods to the supplier, the supplier issues a credit note.
• Purchase return journal = purchase returns book or return outward book
• Purchase return journal lists the names of the business (suppliers)
• When goods are returned to a credit supplier
Enter the date, supplier name and the credit note total in the purchase returns
journal
Debit the supplier ‘s account in the purchases ledger with the credit note total
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Step 3: Posting credit notes to the purchase and Nominal ledger
At the end of the month
Credit the purchase returns account in the nominal ledger with the
purchase returns journal total.
From the double entry: all the individual debit entries in the purchase
ledger.
Purchase Journal/ Day Book -for credit purchase
Purchase Journal
Date Details Invoice Folio Amount
Number ($)
2022
May 3 B Green PV 01 300
7 C Yellow PV 02 400
15 A Mon PV 03 700
31 Transfer to 1400
Purchase account
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Purchase Ledger= Trade Payable Ledger
B Green A/C
Date Details Folio Amount Date Details Folio Amount
2022
May 3 Purchase 300
Nominal Ledger= General Ledger
Purchase Account
Date Details Folio Amount Date Details Folio Amount
2022
May 31 Credit purchase for 1400
month
10. Sales returns (return inwards) and purchase returns (return outwards)
When goods are bought and sold, some goods will be unsuitable.
Faulty or damaged
Not suitable for example, the wrong type
Part of an incomplete consignment
Subject to an overcharge on the invoice
11. Sale returns (Return inwards) and Credit Notes
Step2:
If the goods supplied are unsuitable, the supplier will need to rectify the situation.
When the supplier makes an allowance for goods that have been returned, or a
reduction in price is agreed, the supplier issues a credit note to the customer.
Sale return journal = sale returns book or return inward book
Sale return journal lists the names of the business (customers )
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When goods are returned to a credit customer
Enter the date, customer name and the credit note total in the sale returns journal
Credit the customer ‘s account in the sale ledger with the credit note total
Step 3: Posting Credit Notes to the Revenue and Nominal Ledger (Credit Notes Issued)
• At the end of the month
• Debit the sale returns account in the nominal ledger with the sales return journal
total.
• From the double entry: all the individual credit entries in the sales ledger.
Sale return or return inward Journal/ Day Book -for credit sale return
Sale Return Journal
Date Details Credit Note Folio Amount
No. ($)
2022
May 4 B Green C 01 300
10 C Yellow C 02 400
31 Transfer to Sale ရရန်ရှိ 700
Return account စာရင်း
လျော့ Cr
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Sale Ledger= Trade Receivable Ledger
B Green A/C
Date Details Folio Amount Date Details Folio Amount
2022
May 4 Sale Return 300
Nominal Ledger= General Ledger
Sale Return Account
Date Details Folio Amount Date Details Folio Amount
2022
May 31 Credit Sale Return 700
for month
12. Book of original entry and Business Document (ကျက်စာ)
Book of prime (original) entry Source document
Sales journal Sale invoice
Purchases journal Purchase Invoice
Sales returns journal Credit Note
Purchase returns journal Debit Note
Cash Book Cheque Counterfoil, or Cash receipt
Petty Cash Book Petty cash voucher
General Journal Notification of debtor going bankrupt
13. State two reasons why business uses books of prime (original) entry.
Reduces the number of entries in the ledger
Helps in the preparation of control accounts
Groups together similar types of transactions
To see as a list of transactions/reference purposes
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14. Purpose of Book of original entry
Book of prime (original) entry Purpose
Sales journal To record sales of goods on credit
Purchases journal To record purchases of goods on credit
Sales returns journal To record goods returned by customers
previously sold on credit
Purchase returns journal To record goods returned to suppliers
previously purchased on credit
Cash Book To record receipts and payments of cash
Petty Cash Book To record small cash payment using the
imprest system
General Journal To record all transactions which cannot be
recorded in other books of prime entry
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