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 up
the 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 the p&r(hase order and 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 business
will 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
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 be
e"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 follows
the 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 petty
cashbook, 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 diagram
page 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 to
the purchases account in the general ledger and so on.
Ba$an(#ng o"" a((o&n%s #n $edgers
The various debtor and creditor accounts when balanced off in the ledger will have a
balanced brought down for the ne"t accounting period if all payments were not received
or paid. 4owever it is also possible to transfer these balances to total accounts in the
general ledger. 'or e"ample, the total of all the debtor balances would be transferred to
the Total +ebtor account in the general ledger.
1ales 5edger
6. Blake #ccount
+ate +etails 'olio #mount +ate +etails 'olio #mount
%$ 7ar 1ales 18.9 &3% &$7ar Transfer to
$. 7ar 1ales 18.9 $.% Total +ebtors 65 /:%
/:% /:%
6eneral 5edger
Total +ebtors #ccount
+ate +etails 'olio #mount +ate +etails 'olio #mount
&$7ar Total ;redit /:%
1ales
Returns &ournals
These journals are also part of the books of original entry. They deal with instances
where customers for whatever reason return goods purchased to the retailer. The more
common reasons for returning goods are )*
$. (rong type eg. 'ine point for medium pen
.. (rong colour eg. (rong shade of ribbon or thread in sewing
&. 'aulty goods eg. Blender does not work
(hen goods are returned the customer is given a document called a cre!it note showing
the amount their account would be reduced by or credited hence the cre!it note' (See
)*++, o- Fran$ .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<cs in the
sales le!*er. entered on the credit side of these a<cs.
6oods are also returned to suppliers by businesses for similar reasons. (hen this is done
a !e#it note is given to the supplier along with the goods and reason for return. -f the
supplier agrees a credit note will be sent to the business. see pg$$/ 'rank (ood!.
1imilarly at the end of the period all debit notes are entered in a Return Outar!s
&ournal and the total transferred to a return outar!s A0c in the General Le!*er. The
various creditors a<cs are then adjusted in the purchases ledger. on the debit side! to
show the reduction the to the amount owing.