(7) PRIME ENTRY BOOKS

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Introduction to prime entry books 

There may be issues in recording the business transactions in the ledger accounts directly as they take place' Hence, before the transactions are recorded in ledger accounts, they should be recorded in a separate set of books known as ''the prime entry books.'' 

The prime entry books are the books in which the transactions of a business are recorded at first, according to the order in which each transaction had occurred by using a generally accepted method before recording them in the ledger accounts. 

Prime entry books are also named as journals, day books, and subsidiary books. 

It is not suitable to record all the transactions in a single prime entry book. Hence, the transactions have to be classified and recorded based on their nature and other common characteristics. Accordingly, the transactions which are similar in nature and occur recurrently should be recorded in different prime entry books. 

The following table shows various types of transactions and the relevant prime entry books in which those transactions should be recorded. 


Table 7.1 - Various types of transactions and the relevant prime entry book.

Necessity of prime entry books 


The recording of transactions in prime entry books is necessary due to the following reasons. 

  • Similar types of transactions of a period need to be classified and recorded. 
  • Posting transactions to the ledger becomes systematical and convenient after recording them in the prime entry book. 
  • Responsibility of preparing each prime entry book can be assigned distinctly to various individuals and accordingly, the business could minimize possible errors and frauds. 
  • It is easy to maintain the ledger because the totals of prime entry books are posted to the ledger, which minimizes the number of entries posted. 
  • Minimizes the occurrence of accounting errors and it is easy to find out such errors. 
Information of the transactions is obtained from source documents to record them in the prime entry books. Therefore, it is important to understand the relationship between the prime entry books and the source documents. 

The source documents 


As and when transactions take place in a business, the documents prepared by including all the details of such transactions and authorized by a person-in-charge are known as source documents. 

Each source document prepared by a business is assigned a serial number. Source documents are used as a basis for recording the transactions in the prime entry books of a business. 

Source documents include the following details. 


  • Name and address of the business 
  • Serial number 
  • The date on which the transaction had taken place 
  • The details of the other party that is connected to the transaction 
  • Description of the transaction 
  • The monetary value of the transaction 
  • Signature of the officer who is responsible for the transaction.
The table given below shows examples of various source documents used for recording transactions in different types of prime entry books. 

Table 7.2 - Examples for various source documents used for recording transactions in different types of prime entry books.


Uses of source documents 


Source documents could be used for following purposes 
  • Can be used as an initial document for a transaction 
  • Can be used as a written evidence of the transactions 
  • Additional information on transactions can be obtained 
  • Can be used for recording transactions in the prime entry books 
  • Responsibility can be assigned to a specific officer as it is authorized by that person. 
You can study each of the prime entry books mentioned above in detail in the next post.


THE END OF THE PRIME ENTRY BOOKS

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