Books of Original Entry – Level 3 Business BTEC Revision

Understanding Books of Original Entry

Books of Original Entry are the first place where a business’s financial transactions are recorded.
They record transactions in chronological order, providing a time-sequenced record.
Examples of Books of Original Entry include the cash book, purchases day book, sales day book, purchases returns book, sales returns book and journal.
The purpose of Books of Original Entry is to provide a clear record of all transactions, aid in error detection, and simplify the final accounts preparation.

Cash Book: The cash book records all cash transactions, both receipts and payments. It usually has two sides - debit for cash receipts and credit for cash payments.
Purchases Day Book: The purchases day book is used to record all the credit purchases of goods. Entries are made from suppliers’ invoices.
Sales Day Book: The sales day book contains all credit sales of goods. Entries are made from copies of sales invoices.
Purchases Returns Book: This book records the goods returned to suppliers. Usually, credit notes from suppliers are the source documents for entries.
Sales Returns Book: The sales returns book notes the goods returned by customers. Entries are typically based on credit notes issued.
Journal: The journal records all non-cash transaction and adjustments which are not entered in other books of original entry.

Ease of Transaction Tracking: Books of Original Entry helps in tracing any transaction from its origin.
Error Detection: They also aid in early error detection and resolution.
Classification of Transactions: They classify transactions by type, making it easier to analyse financial data.
Preparation for Ledger Posting: The information from these books is transferred to the ledger accounts, helping to streamline the posting process.

Time-Intensive Process: Maintaining these books can take considerable time and effort.
Potential for Errors: There’s a risk of errors in recording transactions due to the large volume of data.
Limited Use for Small Businesses: Small businesses with fewer transactions can manage without maintaining these books. They can directly record transactions in the ledger accounts.