written by | May 23, 2022

What does Books of Original Entry mean?

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Business transactions that can be measured are recorded in the order in which they are entered, i.e., in chronological order. Journal is called the Book of Original Entry since every transaction is first recorded. Rules of debit and credit are applied to each transaction at the time of recording in the books of accounts. The transactions recorded in the Journal are posted into Ledger Accounts.

Ledger is called the Principal Book of account and can be obtained all the accounting information from this book. Both Journal and Ledger are necessary to complete a system of accounting.

Did you know? 

"A Book of Original Entry is a Day-to-day record of financial transactions of a business."-M.J. Keeler. Journal is subdivided into Books of Original Entry as there are many transactions in the larger-sized firm. It is subdivided into:-

  • Cash Book;
  • Purchase Book;
  • Sales Book;
  • Purchase Book;
  • Purchase Return Book;
  • Sales Return Book;
  • Journal Proper.

The above Books are also called Supplementary Books, Special Journals, or the Original Entry Books.

Types of Books of Original Entry

  • Purchases Journal:- Purchase Journal is an auxiliary ledger for making credit purchases of goods. Cash purchases of non-commodities such as tangible assets are not recorded in the purchase ledger.
  • Sales Journal:- A Sales Journal is an auxiliary ledger that records credit sales of goods traded by a company. Cash sales are recorded in the cash book, not the Sales Journal. In addition, credit sales of products other than those traded by the entity (such as sales of property, plant and equipment) are not recorded in the Sales Journal, and they are recorded in the Journal Proper.
  • Returns Outward Book:- Returns Outward Book is a Subsidiary book maintained to record the credit goods or materials returned to the sellers of goods purchased.
  • Returns Inward Book:- Returns Inward Book is a Subsidiary book maintained to record the goods or materials returned by the purchaser sold on credit.
  • Journal Proper:- Journal Proper is used for recording every transaction which cannot be recorded in any of the other subsidiary books. 
  • Cash Journal:- Cash Journal is a primary entry book in which receipt and payment are recorded.

Also Read: What is Accounts Receivables?

Components Of Books Original Entry or Books Of Prime Entry Or Day books

  • In Chronological Order, the transactions are recorded in a book of original entries.
  • Journal that is recorded before the transaction is posted to the ledger account
  •  Capture both aspects of the transaction.
  •  The original entry ledger is a record that shows the full details of the transactions in the entry. 
  •  Journaling is the process of recording a transaction in a journal, and the format in which it is recorded is called a journal entry.

Advantages of a Book of Original Entry

  • Provides accounting data in chronological order:-Transactions in the Journal are recorded when they occur. Therefore, accounting data records will be available in chronological order. 
  • The chances of error are reduced:-The debit, and credit amounts are written side by side, reducing the chance of error. You can compare the two to credits to see if they are the same. If the account is written directly to the ledger, you may write the wrong amount. Alternatively, the amount written to the debit side could be greater, or there is a description that describes the entry and later underestimates the entry. 
  •  Posting to General Ledger:- The Journal is the basis for posting transactions to the General Ledger account. The debit and credit aspects of a transaction are clearly identified as debits and credits, simplifying posting to the ledger account.
  • Location of Errors:- Location of errors is facilitated in case of disagreement of Trial Balance.

Limitation of Book of Original Entry

  • Not suitable for large numbers of transactions:- If you do not have many transactions, you can record all transactions in the Journal. The Journal book grows large with many transactions, making it inconvenient to keep a journal to reward all transactions. 
  • Your cash balance will not be displayed:- Record all transactions in the books of the original transaction. You can know your cash balance after the cash transaction has been posted to your cash account, and it is a hassle. 
  •  After posting a transaction to a ledger account, there is no substitute for ledger information related to a particular person or head. Therefore, the Journal is not a replacement for the general ledger.

Types of entries in Book of Original Entry

  • Simple Journal Entry 
  •  Compound Journal Entry 

The Format of a Book of Original Entry

  • Date
  • Particulars
  • Narration
  • Ledger Folio

Example:

Also Read: Learn About Bookkeeping: Definition, Types & Importance

Characteristics of Book of Original Entry

  • The transactions are recorded in a book of original entries in chronological order, i.e., they are entered daily.
  • It is a Journal in which transactions are written before posting them in the ledger accounts.
  • It records both aspects of a transaction.
  • Books of Original Entry is a record showing complete details of transactions in one entry.
  • Journalising is a process of recording a transaction in the Journal, and the form in which it is recorded is known as Journal Entry.

Conclusion

Business transactions that can be measured are recorded in the order in which they are entered, i.e., in chronological order. Journal is called the Book of Original Entry since every transaction is first recorded. Rules of debit and credit are applied to each transaction at the time of recording in the books of accounts. 

The Book of Original Entry is also known as Journal. The transactions recorded in the Journal are posted into Ledger Accounts. “A Book of Original Entry is a Day-to-day record of financial transactions of the business.” -M.J. Keeler. 
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FAQs

Q: Difference between Sales Book and Sales account?

Ans:

Sales Book 

  1. It is a part of a Book of Original Entry.
  2. Like a book of final entries, it does not have debit and credit columns.
  3. Only credit sales of goods are recorded.
  4. The total amount of sales book is posted to the Sales account periodically.

Sales Account 

  1. It is part of a Book of Final Entry.
  2. It has debit and credit columns 
  3. It recorded every kind of goods sold.
  4. The balance in the account is transferred to the trading account.

Q: What are the types of entries in the Book of Original Entry?

Ans:

Journal entries are of two types:-

  1. Simple Journal Entry: Simple Journal Entry is a Journal Entry in which only two accounts are affected, i.e., one account is debited, and another is credited with an equal amount. 
  2. Compound Journal Entry: Compound Journal Entry is a Journal Entry in which more than two accounts are affected, i.e., one or more accounts are debited, one or more accounts are credited, or vice versa.

Q: Explain the format of the Book of Original Entry?

Ans:

The format of a Book of Original Entry is as follows:-

  • Date:- In this column, the transaction date is written.
  • Particulars: According to the Dual Aspect Concept of accounting, both the aspects of a transaction are recorded, i.e., at least two accounts are affected by a transaction.
  • Narration: A brief description of the transactions is also given after the entry.
  • Ledger Folio: ledger pages with posted debit and credit aspects of the transaction are written in this column.

Q: What are the limitations of the Book of Original Entry?

Ans:

a) Cash Balance is not revealed;

b) Not a Substitute for ledger;

c) Not suitable for large Volume of transactions.

Q: What is the first entry in the Book of Original Entry?

Ans:

The starting entry is an entry created at the beginning of the fiscal year to debit the assets shown on the previous year's balance sheet and credit the liabilities and capital to open the books.

Q: Identify the original entry book in which this transaction will be recorded and why?

Ans:

 i) Purchase of furniture with credit for use in the shop. 

 ii) Sale of goods by credit. 

 iii) Goods returned by the debtor. 

 iv) Purchase of goods by supplier.

 v) Goods returned to the creditor. 

 vi) Selling goods in cash. 

 Answer: i) Journal: Credit purchases of fixed assets are recorded in the Journal. 

ii) Sales Ledger: This is because the sales ledger only records non-cash sales of merchandise. 

iii) Sale Return Ledger: This is because the goods returned by the customer are recorded in the Sale Return Ledger. 

iv) Purchase Ledger: The purchase ledger records only product purchases. 

v)  Return Ledger: To record only the goods returned by the company to the supplier.

 vi) Cashbook: The Cashbook is for recording cash receipts and payments.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.