Books Of Prime Entry
Overview
Imagine posting every single credit sale straight into the ledger. A busy shop with hundreds of sales a day would bury its sales account under endless entries. Books of prime entry solve this. They are the books where a transaction is recorded first, before it ever reaches the ledger. They group similar transactions together, strip detail out of the ledger, and let the book-keeping be shared among several people. Every transaction begins its life in one of these books.
In this lesson you will meet all seven books of prime entry, learn which document fills each one and which ledger each one posts to, and practise writing up the cash book, the journals and the petty cash book. You will master trade and cash discount, the dual role of the cash book as both a book of prime entry and a ledger account, and the imprest system that keeps petty cash under control. These are the everyday mechanics of real book-keeping.
Objectives
- how to process accounting data in the books of prime entry: cash book, petty cash book, sales journal, purchases journal, sales returns journal, purchases returns journal and the general journal.
- how to post the ledger entries from the books of prime entry.
- trade discount and cash discount and how these are treated.
- the dual function of the cash book as a book of prime entry and as a ledger account for bank and cash.
- how to record receipts and payments made by cash, cheques, debit and credit cards, online and bank transfers.
- the purpose of the imprest system of petty cash.
- how to apply the imprest system.
- the benefits and limitations of keeping cash at the business property.
- the benefits and limitations of using manual methods for the original entry of business transactions.
- the benefits and limitations of using digital methods for the original entry of business transactions.
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Books Of Prime Entry. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which of the following is NOT a book of prime entry? A. Sales journal B. Cash book C. Trial balance D. General journal Answer: C
- Credit purchases are first recorded in the: A. Purchases ledger B. Purchases journal C. Cash book D. Nominal ledger Answer: B
- At the end of the month the total of the sales journal is posted to the: A. Debit of the sales account B. Credit of the sales account C. Debit of each customer's account D. Credit of the bank account Answer: B
- A customer owing $500 pays by cheque after deducting 2% cash discount. The amount of the cheque is: A. $500 B. $510 C. $490 D. $480 Answer: C
- Under the imprest system, the float is $150 and $90 was spent during the month. The amount reimbursed to restore the float is: A. $60 B. $90 C. $150 D. $240 Answer: B
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
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