Books of original entry are referred to as the books or journal where a business records all the business transactions initially. The information that is contained in the books of original entry are summarised and recorded in the general ledger, which is then used to prepare trial balance and the financial statements.
Types of Books of Original Entry
The following are some of the types of books of original entry.
1. Purchase Journal: Purchase journal is used for recording all credit purchases done by the business. It is also known as the Purchase day book or the invoice book. It records all the credit purchase transactions of the core products of the business.
2. Sales Journal: Sales journal is used for recording all the sales done on credit by the business. It is also known as Sales Daybook or Sales Journal. The credit sales transactions are recorded for only those goods that belong to the core business operations of the company.
3. Cash Journal: Cash journal is also known as a cash book which records all the cash transactions such as payments and receipts of the business. Cash book serves the purpose of a ledger as well as a journal as payments and receipt entries are recorded on credit side and debit side, respectively.
4. General Journal: The general journal is for recording all those transactions that are not recorded in the cash book as well as the special journals. Or in other words, the general journal is a journal which records all the non-specialised entries of the business as there is no specific journal for such entries. The examples of such entries can be opening entries, closing entries, rectification entries, transfer entries, entries related to purchase or sale of fixed assets.
Advantages of Books of Original Entry
Following are some of the advantages of the books of original entry.
1. Daily transactions are recorded in the books of original entry which reduces chances of any omission.
2. The books of original entry records details as well as summary of transactions, which helps in tracing any error in recording.
3. Transactions are recorded in a chronological order which helps in categorising the transactions into separate ledgers.
Disadvantages of Books of Original Entry
Here are some of the disadvantages of the books of original entry.
1. Journals can be quite bulky which makes it difficult to manage data.
2. It takes a lot of time to record transactions in ledgers from the journals.
This concludes the topic of Books of Original entry, which is an important topic of Accountancy for Commerce students. For more such interesting articles, stay tuned to BYJU’S.
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