Books of Prime Entry – Subsidiary Ledger and Other Types of Prime Entry Books

In this video we will be analyzing prime entry books.  Remember during the course on source documents we can say that source documents we support business transactions and based on those documents accounting interest are made and accounting information is being recorded in the accounting books.  Source documents must be grouped into certain groups based on the different types of transactions and also the account system it must provide possibility to track any transaction and details about any transaction performed so based on the source documents we are able to track payments from customers to check movement of goods or provision of services to check the payments made to suppliers and get over information on the business transactions performed.

And reports which are made based on the source documents, they are not necessarily made only in the general journal but also books of prime entry are used and books of prime entry they provide different details on the different categories of transactions and depending on the type of transaction and on the category to which the transaction belongs there might be different types of prime entry books.  Sales day book, purchase day books and return day book, purchase return day book, general journal and cash book and those books they reflect different categories of the accounting information and they summarize different types of source documents.

Before coming to the examples of certain categories of prime entry books let’s analyze the difference between general ledger prime entry book and subsidiary ledger.  If we go to the description or to the concept of general ledger it is a list of all the accounts and together with the balances of those accounts as of particular date and here in the general measure we can see only total balances of each account but we cannot see any details so we cannot see how the balance was gathered and what are the details under that balance.

If we want to learn the details we can go to books of prime entry and the books of prime entry we can see at the details and usually those details are provided on a daily basis.  For example if we have general ledger and accounts receivable balance the arrears is $10.230.  We cannot see from the general ledger how that amount was gathered and what exactly is under that amount and in order to know that we can go to the book of prime entry and to subsidiary general ledger. So again, accounts receivable general, ledger account it is $10,230.

Sales day book it includes records on a daily basis how the sales on credit were made and what particular customers purchased goods on credit and when we summarize information in the sales day book by customers we include that information and subsidiary accounts receivable ledger and the in the subsidiary ledger we specify the total balance of accounts receivable by each separate customer.  So from the subsidiary accounts receivable ledger we can see what exact customers owe to the business and when they will have to pay the debt and also we can see all the details on the purchases made by those customers for our business.

So we can go through the examples of prime entry books.  If we go to the sales day book it is a book of prime entry and here there is a list of invoices issued and they reflect on credit and those info invoices which were sent on a daily basis to the customers and example is like this so in the sales day book we can see date so this day during which sales on credit were made we can see also number of issued invoice and that number is necessary who want to track sales and if you want to know the details under each invoice also we have a customer name so we know which customer purchase goods on credit during that particular date and also we have an amount of invoice issued.

And here you can see that there is a list of all the sales on credit made during that particular date and together with all the details.  However in the sales day book we do not have balances which are owed by separate customer.  Those balances are provided in the subsidiary accounts receivable ledger.  Another book of prime entry is purchase day book.  This book is used to record purchases on a daily basis and those purchases which are made on credit so we make purchase but we will be paying cash later.

Again, here we have a date, particular day when we have made purchases on credit we have number of received invoice also for tracking purposes so this is information which we will be using if we want to track and see the details of a particular purchase made during mandate.  We have name of supplier so this is a company from which we were making the purchase and total amount of invoice received from that particular supply so that purchase day book.

Also closely related to sales day book and to purchase day book returns day book so first is sales returns days book and here we include a list of credit invoices which we issue and send to customers and based on those credit invoices we allow customers to pay less for the goods acquired.  Here, we also have details on the credit notes and this is a day also we have a number of credit note issued, we have a name of custom and description of the goods which are being returned by the customer and also total amount of credit note.

So here we have a detailed information about returns which were made by customers during that particular day then which hare supported by credit notes and these amounts will decrease accounts receivable from the particular customer so this is the right for the customer to pay less for the goods acquired and another is purchase returns day book.  This is vice versa comparing to the sales day book and it reflects our returns to the suppliers so it might happen that we acquire certain goods and afterwards we would like to return all of them or part of them due to certain reasons like goods were damaged or the quality was not as we expected and many other reasons.

And here we will have information or details about the returns made to the suppliers and credit notes received.  So this is a day during which the return was made.  This is a name of supplier and the description of goods which we are returning and this is the amount of credit notice sheet and this credit notice issued by supplier and we receive that credit note based on which we are allowed to pay less to the supplier for the goods acquired.

So these were many types of prime entry books used and their accounting and just to remind us those prime entry books they include a lot of details on the sales and purchase transactions which cannot be seen from the general ledger.

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