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The Ledgers and Books of Original Entry.
In a book-keeping system there are different types of account: a distinction is made between personal and impersonal accounts. Personal accounts are the names of people and businesses, these are the accounts of debtors and creditors. Impersonal accounts are the other accounts; these are usually divided between real accounts, which represent things such as cash, bank, equipment, cars, fixtures, etc, and nominal
accounts, which record income and expenses such as sales, purchases, wages, etc.
Impersonal Personal Accounts Accounts
Accounts of people and businesses eg debtors and creditors.
Accounts that record those accounts which the transactions deal with sales, purchases, concerning property returns, expenses and gains, loans, or possessions of the capital and drawings of the. business. business
Division of the Ledger
The Ledger is the main file of the business in which all the different accounts are kept in a double entry system. In order to cope with an expanding book-keeping system, the ledger is divided into separate sections. This is called the division of the ledger. The ledger is divided into three main sections and these are:
1. The sales ledger containing the accounts of debtors 2. The purchases ledger, containing the accounts of creditors 3. The general ledger, containing the nominal accounts and the real accounts.
Example: Bought goods on credit. Debit : Purchases Account in the General Ledger Credit : The personal account of the creditor in the Purchases Ledger
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The Books of Original Entry
These books are also known as Subsidiary books, Books of First Entry or Books of Prime Entry. These books are used to record transactions for the first time, before entering them in their respective ledger. The main books of original entry are:
1. Sales day book 2. Purchases day book 3. Returns Inwards day book or Sales Returns Day Book 4. Returns Outwards day book or Purchases Returns Day Book 5. Cash Book 6. Journal
In the rest of this chapter we will see how the first four of these day books fit into the accounting system. The other books will be looked at in more detail in later chapters.
The Sales Day Book The Sales Day Book is also known as the Sales Book or Sales Journal. It is used to record all sales on credit made by the business to the customers (debtors). The sales of some businesses will consist entirely on credit sales. For each credit sale the selling firm will send a document to the buyer showing full details of the goods sold and the prices of the goods. This document is known as an invoice and to the seller it is known as a sales invoice. The sales daybook is prepared by:
first keeping one or more copies of each sales invoice; filing the sales invoices in date order: Entering the information in the sales journal (daybook).
Note that Cash Sales (i.e. when goods are sold and an immediate payment is done) are not recorded in this book...