What are Books of Original Entry?

Explanation

Original records mean the initial journal entry of the transaction kept together with the supporting documents & details regarding the transaction. It keeps records of all transactions like expense vouchers, invoices, cash transactions, bank transactions, etc. When all the details of the transactions are recorded in the books of original entry, only then the same transaction could be further posted in the individual ledgers governing the type of transactions.

Example of Books of Original Entry

As for the different types, there could be multiple examples for the same. For example, some of the examples could be:

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Books of Original Entry (wallstreetmojo.com)

  • Cash Journals: The books of original entry where all types of payments & receipts done through the medium of cash are recorded and maintained. For the period of entry of a record, every transaction that involves the movement in or out of the cash from the organization is booked in the cash journals with all the supporting evidence.Bank Journals: Like cash journals, bank journals are also maintained for the period that holds all the transactions involving the movement of amounts from the organization’s bank accounts.Sales Journals: Sales journalsSales JournalsA sales journal is a type of journal that is used to keep track of a company’s credit sale transactions and to maintain and manage the account receivable and inventory account.read more are the books where original entries of every transaction are directly related to the organization’s sales revenue.Purchase Journals: Purchase JournalsPurchase JournalsPurchase Journals, also known as Purchase Book or Purchase Daybook, are special journals which a Company uses to keep track of all the credit purchases. While Purchase Journal records credit transactions, a General Journal records cash purchases. read more are the books where original entries for the transaction related to purchases.

Types of Books of Original Entry

In general, it is of two types, shown as follows:

#1 – Special Journals

Special JournalsSpecial JournalsSpecial Journals are all accounting journals in an organization except the general journal where all the transactions of the similar transactions are recorded at a place in an organized form. They help the accountants and the bookkeepers of the company to keep the track of all the different business activities in a proper manner.read more are the special books of original entries where separate journals are prepared for different transactions. After all the transactions are posted in the separate books, these transactions, say balances, are transferred to their individual and separate ledgers. Examples of such Journals are –

  • Sales Journal: Used to record the transaction for the sales invoices when the goods have been sold on credit.Purchase Journal: Used to record the transactions of purchases for the organization when the goods have been purchased from the suppliers on a credit basis.Cash Journal or Cashbook: Used to record the payment or receipt done in cash.Sales Return & Purchase Return Journal: Used to record sales returns and purchases being returned. Etc.

#2 – General Journal

General JournalsGeneral JournalsThe General Journal is a book of entry that holds the initial record of every transaction before being posted to the concerned accounts like Sales Journal, Purchase Journal, & Cash Journal etc. read more are the journals used to record the transactions that are not recorded in any special journal or easier terms; it could be said as the books of entry for the transactions that are not qualified for any special or specific books of entry.

Components

As the books of original entry store the transactions and the details of the transactions, some specified components are mandatory to be mentioned for posting a transaction in the books. These components are as follows:

  • Date of Transaction: Before recording a transaction in the journal, it is mandatory to mention the date on which the same transaction occurs or is recorded in the books of accounts. If the journal is being kept date-wise, it is recommended that the transaction be entered in the right date feature.Relevant Party & Transaction Details: In case the transactions are being recorded in the special journal, the transaction should mention the party with whom the credit transaction has been placed, i.e., the supplier in case of purchase transaction but in case the transaction is booked in the general journal the transaction should mention the relevant parties details.Narration: The narration of the transaction provides the details of the transaction and explains the reason for the transaction or the nature of the transaction in a short form.Provide the Reference to the Original Document: It should reference the original document based on which the transaction has been booked, i.e., invoice number in case of purchase, etc.Monetary Details: The entry should mention the monetary amount involved in the transaction.Provide the Ledger Account: It should mention the relevant ledger accountLedger AccountLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more in which the same transaction would be posted after the successful complete recording in the original books.

Advantages

  • With the recordkeepingRecordkeepingRecordkeeping is a basic accounting stage that teaches us how to keep track of monetary business transactions with the goal of keeping a permanent record of all transactions, knowing the correct picture of assets-liabilities, profits and losses, etc., keeping control of expenses with the goal of minimizing expenses, and having important information for legal and tax purposes.read more in the books of original entry, daily transactions are being recorded in the books, reducing the chances of omission of any transaction.Since the books maintain all the details of the transaction and a summary of the transaction in the narrations, any error in the transaction could be easily identified during the postage in the individual ledger’s account.The transactions are recorded in chronological order, so it’s become relatively easier to categorize them and transfer them into relevant ledgers.

Disadvantages

  • The journals are bulky and have lots of volumes, making handling the data very difficult.It’s not easy to find a particular transaction unless the person knows the date of the transaction.The post-booking of all the transactions into the individual ledger takes time.

Conclusion

Books of Original Entry helps the organization record the daily transactions with all the supporting details. It helps to maintain the transactions in preform order & the arrangement of the same in chronological order makes it helpful to maintain the data, and the error or omission of the transaction gets reduced. Moreover, it always helps track the data flow from the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more to the prime journal books of accounts.

This has been a guide to what is Books of Original Entry. Here we discuss examples, types, components, and advantages and disadvantages. You may learn more about financing from the following articles –

  • Rules for Journal EntriesJournal VoucherJournal Entry FormatExpense Journal Entries