THE BOOKS OF ORIGINAL ENTRY AND SOURCE DOCUMENTS

THE BOOKS OF ORIGINAL ENTRY AND SOURCE DOCUMENTS

The books of original entry constitute one of the two books of accounting. The other is the principal books which is the ledger.

The books of original entry could be defined as the books into which transactions are recorded on daily basis from the source documents and from which transfers are made at suitable intervals to the relevant accounts in the ledger.

They are also referred to as subsidiary books or books of prime entry. The subsidiary books include:

Sales Day Book/ sales journal: for recording credit sales

Purchases Day book / Purchases Journal: for recording credit purchases.

Returns Inwards Day Book / Returns Inward journal / sales returns day book / Journal: for recording returns from customers.

Returns Outward Day Book / returns inward journal / sales returns Day book / journal; for recording returns to suppliers.

Cash Book: for recording receipts and payment of money.

Journal Proper / Principal Journal / General Journal: For recording other transactions.

SOURCE DOCUMENTS

These are documents used to capture transactions at the point of occurrence and from which the subsidiary books are recorded. They are documentary evidence for the transactions. They include invoice, credit note, debit note, petty cash voucher, statements of accounts, receipts. They provide detail information about the transactions

Credit Note: This is sent to a customer to show reduction in the amount owned by him for any reasons. It must be printed on red to avoid confusion with invoices.

Invoices: Invoices specify the full details of goods supplied to a buyer, e,g, quantity, price, discount, terms of payment.

Debit Note:This is issued to customers to correct an undercharge. When goods are returned by customers, they may also use it to claim the allowance due to them.

Petty Cash Voucher: This shows payments made from petty cash.

Statement of Accounts: This is a document sent by the seller to the buyer at regular intervals showing the credit and debits to the customer’s account and balance due.

Other source documents include: pay-in-slip of banks and cheque counterfoil as well as any other correspondence containing other financial information.

The sales journal, purchases journal, sales returns journal, purchases returns journal as well as General journal are ruled so that there is a column for date, details, folio, and amount. The folio shows the ledger in which the entry is contained. There may also be a column for invoice number.

Posting to Ledger

The totals of purchases Day Book is posted to the debit side of the purchases account at regular and convenient intervals. The totals of sales Day Book is posted to the credit side of the sales account.

Similarly, the totals of returns inward journal and returns outward journal are posted to their respective accounts in the general ledger. In this way, the subsidiary books help to reduce the number of entries made in the concerned ledger accounts. It is assumed that credit sales and credit purchases are much larger in volume than cash sales and cash purchases. If the reverse is the case, the objective of taking unnecessary details out of the ledger can be achieved by using these day book for cash sales and cash purchases.