What is the book of the original entry?
The book of prime entry is one of the books of accounts where transactions from source documents are first entered. There are mainly two books of accounts bookkeepers use daily to record business transactions. These are original books or journals and ledger books.
When a business event occurs, the staff attending to it prepares a source document to effect the transaction. This source document is sent to the bookkeeper to affect it in the subsidiary books or journals before they are posted to the ledger. Thereafter, a trial balance is prepared. From the trial balance the financial statements are prepared and presented to the management of the company.
Prime books are used to record financial transactions for the first time before they are posted to the ledger.
Therefore, the book of original entry is a vital part of the bookkeeping and accounting process of any organization. It is the first contact place for financial records. Therefore, it will contain undiluted data that can be utilized by the entity for decision-making.
The use of accounting software has changed the way prime books are used. With computer-assisted accounting techniques (CAAT), the book of first entry is automated within the accounting software. Thereby reducing the time it takes to record into the book and their respective ledger accounts.
Types of books of original entry
There are mainly two types of prime books. The subsidiary books and journals. Subsidiary books are further divided into sales day books, purchases, return inward and return outwards day books. All subsidiary books have a similar format. This includes “date, details, description, folio, and amount.” We will discuss them below.
Sales day book
A sales day book is a book that is used to record credit sales transactions when they first occur in a business. This implies that, when a business makes a sale on credit terms the transaction is recorded here. However, cash sales transactions will not be entered into this book. The source document for the sales day book is the sales invoice.
Purchases day book
As stated with the sales day book, only credit purchase transactions are recorded in the purchases day book. Therefore, after entering the transaction into this account, they are posted to their respective ledger accounts. The source document for the purchase day book is the purchase invoice provided by the supplier of the goods.
Return inwards day book
The return inward day book is the book used to record sales returns or goods returned by customers. Rebates in cash do not enter this book of original entry. The return inward journal uses a debit note issued or credit note received as its source document.
Return outwards day book
Also referred to as the purchase return book is utilized for goods that are returned to suppliers. A cash refund by vendors cannot be recorded in this book. Its source document is either a debit note received from the supplier or a credit note issued to the vendor.
Cash book
This is a subsidiary book used to record cash transactions. Unlike other day books listed above, the cash book records all cash items and its source document is the receipt issued or received by the entity.
The Journal
A daily journey of the business activities in a chronological manner. The Journal is an accounting diary for financial transactions. It records every other activity in a business that cannot be recorded in the subsidiary books explained above. Internal transactions such as the sales of office motor vehicles are examples of events that are recorded here.
Importance of prime books
The book of original entries is a significant part of bookkeeping.
It serves as the first source of record for financial transactions. Therefore, accountants and auditors find this book important when carrying out their tasks.
Serve as the basis for posting to ledger books. It is from the prime books that accounts in the ledger books are posted. For example, entries in the sales day book are posted to the sales account and debtors (account receivables) accounts in the ledger.
Generally, without the journals trial balance and financial statements can not be prepared for the organisation. This is true for businesses that comply with the double entry principle.
It is also used as a form of control. A separate accounting system known as control accounts can be prepared from the books of original entries. This can be used to check the accuracy of the ledger as well as detect errors and fraud.
