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Books of prime entry (Petty cash book (A common way of maintaining petty…
Books of prime entry
Petty cash book
Sometimes an organisation, regardless of its size, finds itself in a situation where it has to make or reimburse small value payments
Petty cash transactions include stamps, taxi fares, tea or coffee, emergency purchases of stationery
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Petty cash account: A record of relatively small cash receipts and payments, the balance representing the cash in control of an individual, usually dealt with under an imprest system
As the cash used to finance the petty cash float is normally transferred from the bank account, it is in effect a subsidiary of the main cash book
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Sales daybook
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Every sale, both cash sales and on credit, should have an invoice raised. These invoices are then recorded in the sales daybook
Each page of the sales daybook is sequentially numbered to assist in the financial control of sales, as is each invoice
Contains the date, invoice number, customer, sales ledger page, and the total invoiced
At the end of each day, each invoice should be entered to the individual customer's account in the sales ledger
The sales ledger contains an account for each customer and shows the business how much is owed by each of its customers ie its trade debtors
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Periodically, the total of the sales daybook page is analysed by credit sales, and the totals posted or entered to the sales account
Cash book
For accounting purposes, 'cash' includes cash, cheques, and bank transactions, unless specified as 'cash in hand' or 'petty cash'
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Records all 'cash' transactions, including coins, banknotes, cheques, direct debits, credit transfers and bankers drafts
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One page for receipts from customers, depending on whether it is in the form of cash or cheque. The opposite side of the cash book will be a page for payments, ie to creditors and for other expenses such as wages, electricity etc
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Sales returns daybook
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The return may be for all the sold goods, in which case the entire original invoice has to be cancelled
If only a few of the goods are returned, only part of the invoice may be offset. In which case, credit notes are issued
Should be completed in exactly the same way as the sales daybook in respect of goods returned from customers
When the individual entries are made, they will reduce the amount owed by the customer
The sales return will also reduce the sales achieved by the business, but they are posted to a separate account labelled sales returns or returns inwards
Purchases daybook
Contains information about the purchases made by a business and is a list of invoices from suppliers
Completed in the exact same way as the sales daybook, with each page being sequentially numbered
The invoice is the source document and describes the goods and services provided, a cross reference to the order number issued by the business to raise the purchase and the price the buyer has to pay
The individual invoices will be posted to the supplier's accounts in the purchases ledger, which contains an account for each supplier
At any point in time the supplier's account shows the financial position between the business and the supplier
Includes the date, the supplier, the supplier ledger page, and the total invoiced
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The journal
A record of financial transactions, such as transfers between accounts, not dealt with elsewhere.
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Examples
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Formal entry of accounting adjustments, ie deprecation and accruals
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In the early days of accounting, the information on the source documents was copied each day by a clerk into a book
This book is the source of any accounting entry, and gives it authority, it is called a book of prime entry
A first record of transactions, such as sales or purchases, from which details or totals, as appropriate are transferred to the ledgers
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