Books of prime entry
Books of prime entry are accounting records that are used to document and record business transactions in a systematic and organized way. They are the first point of entry for recording financial transactions and are used to provide a chronological record of business activity.
There are several types of books of prime entry, including:
- Sales daybook: This is a record of all sales transactions, including the date, the name of the customer, and the amount of the sale. It is used to track the revenue generated by the business.
- Purchase daybook: This is a record of all purchases made by the business, including the date, the name of the supplier, and the amount of the purchase. It is used to track the cost of goods or services that the business acquires.
- General journal: This is a record of all transactions that do not fit into the other categories, such as wages, rent, and other expenses. It is used to track all miscellaneous transactions that occur within the business.
- Cash book (sometimes called a bank book): This is a record of all transactions involving the business’s bank account, including deposits, withdrawals, and transfers. It is used to track the business’s financial activity with its bank.
- Petty cash book: This is a record of all small cash payments made by an organisation.
The books of prime entry are an essential tool for financial management and decision-making, as they provide a detailed and accurate record of a business’s financial transactions. They are also used to create financial statements and reports, such as the profit and loss statement and the balance sheet, which provide insight into the financial health and performance of the business.