BOOKS OF PRIME ENTRY

Hello!
I am Puan Suryani.
Let’s learn chapter 5 together!

2
LEARNING OUTCOMES
AT THE END OF THIS CHAPTER, STUDENT SHOULD BE ABLE TO:
✔ Explain source of documents
✔ Identify the types of journal and ledger
✔ Prepare the proper journal and subsidiary ledgers
✔ Prepare a full set of accounting records from source documents to trial balance.

3
 The
Accounting
Cycle

4
What are source of documents?
✗ Each business transaction must be supported by source
document.

✗ Source document is the original document that contains the key

information of a business transaction.

✗ It is created when business transactions occurred.

✗ It includes the description of transaction, names of the parties
involved, transaction date and amounts paid or received (if any).

5
 The common type of business source of documents:
PURCHASE • a business document issued by a buyer to a seller that outlines the
ORDER expectations in terms of the type of product/service a buyer plan to
buy and the quantity.
• The original purchase order is sent to the seller and the copy is kept
by the buyer.

SALES ORDER • a business document issued by a seller to a buyer, confirming the

sale of goods/services after the purchase order received.
• It contains details about the sale such as the quantity, product
specification, price, delivery date and address, payment method and
any other relevant information.
• The original sales order is sent to the buyer and the copy is kept by
the seller.

6
 The common type of business source of documents:
DELIVERY NOTES • a document that accompanies a shipment of goods which provides a
list of the products and the quantity included in the delivery.
• It serves as a checklist to buyers to check whether they have
received all the products they paid for.
• If anything is missing, they can contact the seller to inform what is
lacking regarding the delivery.

INVOICE • It is a bill issued by a seller to buyer when particulars of the goods

sold/services completed. The information includes the terms of
payment, the date, quantity, and price.
• There are two types of invoices namely, sales and purchase invoice.
Sales invoice represent for goods sold on credit term while purchase
invoice is for goods bought on credit.
• The original invoice is sent to the buyer and the copy is kept by the
seller.
7
 The common type of business source of documents:
CREDIT & DEBIT • a special note issued by a seller to show the amount to be refunded
NOTES when a buyer returns some of the goods bought.
• In the seller’s book, this is called a credit note because the buyer’s
account has been credited as it reduces the amount owed by the
buyer.
• In the buyer’s book, it is called a debit note because the seller’s
account has been debited as it reduces the amount owed to the
seller.

RECEIPT • a document issued by seller to buyer to proof that payment has been
made. Once the buyer paid the bill/invoice, seller will issue a receipt.

8
 The common type of business source of documents:
DEPOSIT SLIP • a written form used to deposit money into a bank account.
• When a buyer pays by cheque or cash, the seller will write a bank
deposit slip which will be taken to the bank and attached together
with the cheques and cash deposited.
• The deposit slip will show the amount of money deposited and the
break-down of the cheque amounts and cash.
• The original slip is sent to the bank, and the counterfoil in the
paying-in slip book is kept by the depositor.

PAYMENT • an authorising document for a payment.

VOUCHER • The voucher can be issued for various form of payment such as
payment for wages and salaries and petty cash expenses.
• It serves an internal accounting control mechanism that ensures that
every payment is properly authorized.

9
What IS JOURNAL?
✗ Based on the accounting cycle, after business transactions are collected from
source documents, they will be recorded in journals.

✗ Journal is the first book that business transactions are initially recorded. Hence,
the accounting journal also known as Books of Prime Entry.

✗ Each journal contains detailed records for the types of business transaction
pertaining to a specific area and recorded in a chronological order.

✗ There are two main types of journal:

i. General journal – for transactions other than those recorded in specialized journal

ii. Specialised journal - consists of six types of specialized journal, based on specific
transactions 10
What IS LEDGER?
✗ Ledger is a book consists a list of accounts with the purpose of transferring
transactions from a journal and classify it into separate accounts.

✗ After business transactions has been recorded in journals, the total will be posted to
appropriate accounts in ledger.

✗ There are three types of ledgers:

i. Sales ledger - consists of all accounts receivable/ debtors of business.

ii. Purchase ledger - consists of all accounts payable/ creditors of business

iii. General ledger - contains accounts other than the accounts receivable and
payable. It consists of real account (e.g., cash, bank capital a/c) and nominal
accounts (e.g., purchase, sales and salary a/c)
11
 BOOKS OF PRIME ENTRY

GENERAL Purchase Return Return

Sales Cash Receipt Cash
JOURNAL Journal Outwards Inwards
Journal Journal Journal Payment
Journal Journal

For goods For goods

For goods For goods For any For any
return to return by
purchased sold on inflow of outflow of
supplier (on customer
on credit credit cash cash
credit) (on credit)

• Drawings of goods
• Purchase and sales Credit note Credit note Payment
Invoice from Invoice sent Cash receipt
of non-currents from sent to voucher
supplier to customer customer
assets by credit supplier
• Correction of
errors
• Opening entries
• Adjustments
SPECIALISED JOURNAL
12
LET’S TRY THE FOLLOWING
QUESTION

13
State the appropriate book of prime entry
for of transaction in Jan 20X1

14
State the appropriate book of prime entry
for of transaction in Dec 2021

15
 16

Let’s take a
BREAK!
PURCHASE JOURNAL
(format and illustrations)

17
The purchase journal is used to record goods or FORMAT
inventory purchases on credit. The format is shown as
below.

Records the reference

To record the To record the name of supplier from number of the ledger
purchase date which the goods were purchased posted

PURCHASES Journal
Date Particulars Invoice Folio RM
no
PL X
PL X
PL X
Transfer to PURCHASES Account GL X

To record the to record the

invoice number invoice amount
18
Sample of
recording

19
Posting the Purchases Journal to ledger accounts

The entries in the purchases journal will be posted to the purchase ledger and general
ledger. The procedure is done by the following:

1. Firstly, after an individual entry has been made in the purchase journal, the amounts are
posted to purchase ledger as credit entry in each of the individual supplier account.
Purchase ledger is also known as accounts payable subsidiary ledger. It is the individual
supplier’s account.

2. Then, at the end of each reporting period (assuming in monthly), the amount column of
the purchases journal is totaled, and this amount is posted to the general ledger as debit
in the Purchases a/c.

3. Finally, ensure that the total of credit purchase postings in the individual supplier a/c
(purchase ledger) is always equal to the amount posted to the Purchases a/c (general
ledger). This procedure helps to verify that all the postings have been made correctly.

20
 Sample of
recording

1) Purchase ledger 2) General ledger

3) Verify:
Amounts in individual accounts
payable = Purchase a/c

21
Sales journal
(format and illustrations)

22
The sales journal is used to record goods or inventory
FORMAT
sold on credit. The format is shown as below.

Records the reference

To record the To record the name of customer to number of the ledger
sales date which the goods were sold posted

SALES Journal
Date Particulars Invoice Folio RM
no
SL X
SL X
SL X
Transfer to SALES Account GL X

To record the to record the

invoice number invoice amount
23
Sample of
recording

24
Posting the sales journal to ledgers accounts

The entries in the sales journal will be posted to the sales ledger and general ledger. The
procedure is done by the following:

1. Firstly, after an individual entry has been made in the sales journal, the amounts are
posted to sales ledger as debit entry in each of the individual customer account. Sales
ledger is also known as accounts receivable subsidiary ledger. It is the individual
customer account.

2. Then, at the end of each reporting period (assuming in monthly), the amount column of
the sales journal is totaled, and this amount is posted to the general ledger as credit in
the Sales a/c.

3. Finally, ensure that the sum of all postings in the individual customer a/c (sales ledger) is
always equal to the amount posted to the Sales a/c in the general ledger. This procedure
helps to verify that all the postings have been made correctly.

25
 Sample of
recording

1) Sales ledger
2) General ledger

3) Verify:
Amounts in individual receivable
= Sales a/c

26
Return outwards journal
(format and illustrations)

27
The return outward journal is used to record return of goods
FORMAT
purchases on credit. For return of goods purchased by cash, it
will enter in the cash receipt journal. The format of return outwards
journal is shown as below.

Records the reference

To record the To record the name of supplier of number of the ledger
returned date which the goods were returned to posted

RETURN OUTWARDS Journal

Date Particulars Credit Folio RM
Note no
PL X
PL X
PL X
Transfer to RETURN OUTWARDS Account GL X

To record the to record the

Credit Note value of the
number goods returned 28
Sample of
recording

29
Posting the return outwards journal to ledger accounts

The entries from the return outwards journal will be posted to the relevant accounts in purchase
ledger and general ledger. The procedure is as follow:

1. Firstly, the individual entries in the return outwards journal are posted as debit to the respective
supplier accounts in the purchase ledger.

2. Then, at the end of each reporting period (assuming in monthly), the amount column of the return
outwards journal is totaled. This amount is then posted to the general ledger as credit in the
Return Outwards a/c.

3. Finally, ensure that the sum of return recorded in the individual supplier a/c (purchase ledger) is
always equal to the amount posted to the return outwards a/c in the general ledger. This
procedure helps to verify that all the postings have been made correctly.

30
 Sample of
recording

1) Purchase ledger 2) General ledger

3) Verify:
Amounts of return in individual supplier
accounts = Return outwards a/c

31
Return inwards journal
(format and illustrations)

32
The return inwards journal is used to record return of goods sold
FORMAT
by credit. For return of goods sold by cash, it will enter in the
cash payments journal. The format of return inwards journal is
shown as below.

Records the reference

To record the To record the name of customer number of the ledger
returned date who made the return posted

RETURN INWARDS Journal

Date Particulars Credit Folio RM
Note no
SL X
SL X
SL X
Transfer to RETURN INWARDS Account GL X

To record the to record the

Credit Note value of the
number goods returned 33
Sample of
recording

34
Posting from return inwards journal to ledger accounts

The entries from the return inwards journal will be posted to the relevant accounts in sales ledger
and general ledger. The procedure is as follow:

1. Firstly, the individual entries in the return inwards journal are posted as credit to the respective
customer accounts in the sales ledger.

2. Then, at the end of each reporting period (assuming in monthly), the amount column of the
return inwards journal is totaled. This amount is then posted to the general ledger as a debit in
the Return Inwards a/c.

3. Finally, ensure that the sum of return recorded in the individual customer a/c (sales ledger) is
always equal to the amount posted to the return inwards a/c in the general ledger. This
procedure helps to verify that all the postings have been made correctly.

35
 Sample of
recording

1) Sales ledger 2) General ledger

3) Verify:
Amounts of return in individual accounts
Accounts payable = Return Inwards a/c

36
Cash receipt journal
(format and illustrations)

37
 Cash receipts journal is used to record all cash received by a business
during the reporting period. These include all cash and cheque received FORMAT
such as cash invested by the owner, cheque received from sales goods and
sale of other assets, cash collected from accounts receivable, cheque
received from bank loan and cash received from dividend and interest.

To record the amount

e.g.: Receipt No, To record the amount of cash received To record the sources that lead
Cheque No., of cheque received to the receipt of cash
deposit slip No.

Date Reference Account to be Folio Bank Cash Discount Accounts Sales

No. credited (RM) Allowed receivable
(RM) (RM) (RM) (RM)

Transfer to GLX/GLX XX XX XX XX XX
38
Sample of
recording

39
Cash payment journal
(format and illustrations)

40
 Cash payment journal is used to record all cash paid by a business during
the reporting period. These include all cash and cheque paid such as cash FORMAT
drawings by the owner, cash paid for purchase of goods from supplier and
purchase of other assets, cash paid to creditors, loan paid to bank and cash
paid for other operating activities such as rental, utility, salary and
advertising.
To record the amount
e.g.: Receipt No, To record the amount paid by cash To record the sources that lead
Cheque No., paid by cheque to the payment of cash

Date Reference Account to be Folio Bank Cash Discount Accounts Purchases

No. debited (RM) received payable
(RM) (RM) (RM) (RM)

Transfer to GLX/GLX XX XX XX XX XX
41
Sample of recording

42
1 - Posting from cash receipt and cash payment journal to ledger accounts

The entries from the cash receipt and cash payment journal will be posted to the relevant
accounts in general ledger as follow:
1) Cash Receipt and Cash Payment journal

2) General ledger

43
2 - Posting from cash receipt and cash payment journal to ledger accounts

The entries from the cash receipt and cash payment journal will be posted to the relevant
accounts in general ledger as follow:
1) Cash Receipt and Cash Payment journal

2) General ledger

44
3 - Posting from cash receipt and cash payment journal to ledger accounts

The entries from the cash receipt and cash payment journal will be posted to the relevant accounts in general
ledger as follow:
1) Cash Receipt and Cash Payment journal

2) General ledger

45
General journal
(format and illustrations)

46
A general journal is a book to records other transactions that not
FORMAT
recorded in the specialized journal such as purchase of
non-current asset on credit, contribution of non-current asset by
owner into the business, drawings of goods by owner.

To record the name of accounts to to record the

reference number Records the amount
be debited and credited involved
of ledger posted

GENERAL Journal
Date Particulars Folio Debit (RM) Credit (RM)

xx GL X
xx GL X

47
Sample of
recording

48
Posting from general journal to ledger accounts

The entries from the general journal will be posted to the relevant accounts in general ledger as
follow:
1) General journal

2) General ledger

49
LET’S CHECK OUT THE FULL SET
OF ACCOUNTING RECORDS
(Pls refer to handout 1)

50
Thank you!
Any questions?
You can find me at:
✗ WhatsApp chatting
room
✗ Google classroom

51