All financial documents need to be recorded somewhere to ensure that they can be traced accurately, and to enable double entry bookkeeping to take place. These financial documents, also known as source documents, are recorded in the books of prime entry.
What gets recorded in books of prime entry?
The books of prime entry can be computerised on accounting software like Sage 50 accounts, or even in Excel. They can also be written into a paper-based book. The books need to record the vital information from invoices, which is:
- The date: it’s important to know which financial period the document falls into
- The customer/supplier name: you know who you owe money to, or who owes you money
- The invoice number: this is the unique reference number if there are any queries or concerns.
- The amount of the invoice, recorded as the net value, the vat value and the gross value. This is to make it easier to post into the general ledger from a double entry perspective
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Types of books of prime entry
There are five main books of prime entry.
The first book of prime entry is the sales daybook. This book is where all of the sales invoices that the company creates are written. The daybook is totaled at the end of the period, and then posted into the general ledger.
The sales returns daybook is another book of prime entry. This book records all of the credit notes that a company send out. The totals are also entered into the general ledger.
Another daybook is the purchase daybook. This is where all of the supplier invoices received by the company are recorded. The totals at the end of the financial period are then entered into the general ledger.
The opposite book to this is the purchase returns daybook, which is where all the supplier credit notes received by the company are entered.
The final daybook is the cashbook. This is where all of the payments and receipts of the company are entered, and will show all of the money coming in and out of the company. The cashbook can be reconciled to the bank statement to ensure everything is recorded accurately.
Keeping the daybooks accurate and up-to-date is hugely important, as it is the first step towards the financial accounts.
Books of prime entry, as well as other key accounting skills and knowledge, are covered in more depth on our AAT courses.