Books of prime entry

• The books of prime entry are the cash book, petty cash book, sales journal, purchases journal, sales returns journal, purchases returns journal and the general journal.
• They group similar transactions, so the ledger receives totals instead of hundreds of single entries, and work can be shared.
• Trade discount is never recorded; cash discount is recorded as discount allowed (expense) or discount received (income).
• The cash book is both a book of prime entry and the ledger account for bank and cash.
• Bank transfers, standing orders, direct debits and card payments go in the bank columns.
• The imprest system gives the petty cashier a fixed float that is topped up by exactly the amount spent.

Sort first, post later

Advantages: similar items are grouped, so only the period total is posted to the nominal ledger account (one entry for all credit sales, for example); the ledger has fewer entries and is less cluttered; several people can work at once; and each book gives an audit trail back to the source document, making errors and fraud easier to find.

Individual entries to personal accounts, the total to the nominal ledger

Each invoice is posted individually to the customer’s or supplier’s personal account. At the end of the month the journal is totalled and the total is posted to the sales, purchases or returns account.

Worked example

Sales on credit in July 2025: Jul 3 B Khan $640; Jul 9 C Diaz $1,120; Jul 21 B Khan $380. On Jul 12 C Diaz returned goods worth $120. Write up the journals and post them to the ledger.