The books of Prime Entry in Accounting

The book or record where certain types of transactions are recorded before recording them in the double-entry bookkeeping system is called the prime entry. The common books of prime entry include the daybook, the cash book, and the journal. Some of the business transactions recorded are mentioned below.

Today’s post will highlight the list of the different books in the prime day book and their importance in the sector.

Books of Prime Entry in Accounting

In business, there are numerous daily financial transactions. So, there is a separate book to keep the track of the receipts and payments of this transaction.

The ledger accounts in a business are the main source of information that is used to prepare financial statements. While, if a business is required to update its ledgers, then each time a transaction occurs, the ledger accounts would quickly become clustered, and chances of errors might be made. This would also be a very lengthy process.

To avoid all such complications, the transactions are first recorded in a book of prime entry. The main books of prime entry are:

• Sales daybook
• Purchase daybook
• Sales return daybook
• Purchases return daybook.
• Bank Book
• Cash Receipts Book
• Cash Payments Book
• Petty Cash Receipts Book
• Petty Cash Payments Book
• Journal

The Importance of Books of Prime Entry

Now we are quite sure that Books of Prime Entry are very prevalent in business, for their advantageous characteristics. The following are the advantages of a journal:

• Provides a Chronological Record: The journal book records transactions in the occurrence of their date. Hence, it is possible to get day-to-day information.
• The Book of Prime Entry Minimizes the possibility of errors: The nature of the transaction affects the financial position of the business; this is ascertained by recording and analyzing the transaction.
• Helps to finalize the accounts: With the book of prime entry, it provides a basis for ledger posting and the ultimate draft of the Trial Balance.  
• Future references: References can be given to the financial transactions that become easy as these transactions are similar and are recorded in one journal.
• Few mistakes that can be detected easily: With the help of Prime Entry, the mistakes in the ledger accounts can be easily detected.
• Lessens the chance of business fraud, negligence, and mistakes: The Chronological recording of financial transactions reduces the chance of business fraud, negligence, and mistakes.
• Journals are shown in clarity: Journals show all these transactions in great detail, so the business is not mandated to rewrite them in detail in the ledger section, thus it keeps the ledger accounts brief and uncluttered.
• Perfect back-up of each other: If records are by chance lost then along with the ledger and the books of original entry the organization will get through. They act as perfect backups for each other.
• Bases the control on one ground: Handling each type of journal entry by a different member of the staff causes variation, this prevents a single person from having exclusive control of the accounting system. This leads to fraud and is difficult to do. Hence, it is more likely that errors would be identified by this system.
• Ensuring that the documents are not skipped: To ensure that the documents do not go unrecorded, the source of documents is normally copied twice with consecutive numbers and is noted in day books while recording the transactions.

The Significance of Prime Entry Books and Ledgers in both Integrated and Interlocking Accounting Systems

The term ‘ledger’ refers to a book. There are commonly three ledgers in accounting systems:

• Wages, sales, purchases, electricity, travel, advertising, rent, insurance, repairs, receivables, payables, and non-current assets are all recorded in the General or nominal ledger. Although cash and bank accounts are legally part of this ledger, they are frequently kept in a separate book due to the volume of cash and bank transactions.
• The Payables ledger (sometimes known as the creditors’ ledger or the purchase ledger) is a record of all payments made to creditors. Although the overall amount owed to suppliers is noted in the general ledger, the specifics of what is owed to whom are documented here as well. Each supplier has his or her account. The payables balance in the general ledger should match the total of the amounts owed in this ledger.
• The Receivables ledger (also known as the debtors’ ledger or the sales ledger) is a book that keeps track of money owed to you. The overall amount owed by customers is recorded in the general ledger, but the specifics of what is owed from whom are also noted here. Each credit consumer has his or her account. The total of the sums owing in this ledger should match the main ledger’s receivables balance.