Books of Original Entry or Books of Prime Entry or Day Books and Journal – Introduction and Definition:
A business must ensure that its accounting system includes detail of every single transaction. It is however, very unlikely, even in small organizations to record all transactions in a single journal. Organizations normally maintain numerous journals to record similar types of transactions separately.
The sub-division of Journal is called books of original entry or books of prime entry or day books.
The word journal is derived from the French word “Jour” which means “day”, so journals are also known as day books due to the fact that transactions are recorded on daily basis.
(1) General Journal = To record the transactions not recorded in special journals.
(2) Special Journals = Special journals include further sub-journals; as given below:
(i) Sales journal = To record sales invoices issued by the firm when selling goods on credit.
(ii) Purchases journal = To record purchases invoices received by the business from suppliers, when buying goods on credit.
(iii) Return inwards journal = To record sales returns from customers.
(iv) Return outwards journal = To record purchases returns to suppliers.
(v) Cash book = To record receipts or payments
These books are maintained to have a date wise (chronological) record of all financial transactions as soon as the source documents mentioned above are issued or received.
The following are the advantages of maintaining books of original entry:
(i) Future references to transactions become easy as transactions of similar nature are recorded in one journal.
(ii) Mistakes in ledger accounts can be easily detected.
(iii) Chronological recording of transactions reduce the chance of frauds.
(iv) Journals show all the transactions in detail so it is not necessary to rewrite them in detail in the ledger, so ledger accounts may be kept brief and uncluttered.
(v) If records are lost then the ledger and the books of original entry act as a back-up for each other.
(vi) Handling of each type of journal by a different member of the staff prevents any one person from having exclusive control on the accounting system. This makes frauds more difficult to perpetrate and makes it more likely that errors would be identified.
(vii) In order to ensure no documents go unrecorded; source documents are normally reprinted with consecutive numbers and are noted in day books while recording transactions.
Components of Books of Original Entry or Books of Prime Entry or Day Books:
Entries in the books of original entry normally consist of:
(i) Date of transaction.
(ii) Details relating to transactions, i.e., the second aspect of transactions, e.g., name of trade receivable in sales journal.
(iii) Monetary amount of the transactions.
(iv) References to the relevant ledger account (often called folio).
(v) References to original source documents, e.g., invoice number.