(11)-SOURCE DOCUMENTS AND THE BOOKS OF PRIME ENTRY

Source Documents and the Books of Prime Entry

Source Documents
Whenever a business transaction take place, involving sales or purchases, receiving or paying money, or owing or being owed money, it is usual for the transaction to be recorded on a document. These documents are the source of all information recorded by a business.
Examples –

• Sales order – A customer writes out an order or signs an order for goods or services he wishes to buy.
• Purchase order – A business makes an order from another business for the purchase of goods or services.
• Invoice – An invoice relates to a sales order or a purchase order. When a business buys goods or services on a credit customer it sends out an invoice. The details on the invoice should match up with the details on the sales order. When a business sells buys goods or services on credit it receives an invoice from the suppliers. The details on the invoice should match up with the details on the purchase order.
• Credit note – A credit note is a document relating to returned goods or refunds when a customer has been overcharged. It can be regarded as a “negative invoice”.
• Remittance advices – A customer sends this with a payment.
• Cheque stubs – A business record of payments it has made.
• Petty cash vouchers – A claim for reimbursement out of petty cash.

Books of Prime Entry
The details on these source documents need to be summarized, as otherwise the business might forget to ask for some money, or forget to pay, or even accidentally pay some twice.
Books of prime entry are books in which we first record transactions. They are sometimes called books of prime entry.
The main books of prime entry which we need to use are as follows

1. Sales day book – The sales day book is the book of prime entry for credit sales.
2. Purchase day book – The purchase day book is the book of prime entry for credit purchase.
3. Sales returns day book – The sales returns day book is the book of prime entry for goods returned by the customers.
4. Purchases returns day book – The purchases return day book is the book of prime entry for goods returned to suppliers.
5. Cash book – The cash book is the book of prime entry for cash and bank receipts and payments.
6. Petty cash book – The petty cash book is a cash book for small payments.
7. The journal – The journal keeps a record of unusual movement between accounts. It is used to record any double entries made which do not arise from the other books of prime entry. For example, journal entries are made when errors are discovered and need to be corrected.