CHAPTER FOUR

BOOKS OF ORIGINAL ENTRY

They are the books in which business transactions are first recorded, right from the source
documents. They are commonly referred to as ‘journals’ or ‘day books. There are separate books
for each kind of transaction. Thus, the nature of the transaction affects which book it is entered
into. For example, Sales will be entered in one book, purchases in another book and cash in another
book.

Information entered in the books of original entry includes:

1. The date on which each transaction took place (entered in the date column). The
transactions should be shown in date order;
2. Details relating to the transaction (entered in the details column)
3. A folio column entry is made for cross-referencing back to the original ‘source document’,
e.g. the invoice;
4. The monetary amounts are entered in the amount’s columns included in the books of
original entry

Types of books of original entry

They include:

1. Sales Day Book (or Sales Journal) – for credit sales.

2. Purchases Day Book (or Purchases Journal) – for credit purchases.
3. Returns Inwards Day Book (or Returns Inwards Journal) – for returns inwards.
4. Returns Outwards Day Book (or Returns Outwards Journal) – for returns outwards.
5. Cash Book – for receipts and payments of cash and cheques.
6. General Journal (or Journal if the term ‘Day Book’ is used for the other books of original
entry) – for other items.
PREPARATION OF BOOKS OF ORIGINAL ENTRY

Journal, journalizing, & the double entry system of accounting

A journal is the book of original entry in which transactions are recorded in the books of accounts
from the source documents e.g receipts and payment vouchers. The transactions are recorded in a
chronological order i.e., as and when they take place (date wise)

Journalizing refers to the process of recording transactions in the book of original entry

Transactions recorded in the journals, follow the double entry concept.

Double entry system of accounting recognizes the fact that every transaction has two aspects (a
Debit & a Credit) and both aspects of the transaction must be recorded in the books of accounts

Formats of Journals.

They follow the T shape format of accounting.

How to record each transaction in the books of accounts/ nature of double entry system

NB1. All transactions pertaining to a given account should be recorded in one account in a
chronological manner instead of opening several accounts for every transaction regarding that
account.

NB2. A narration should follow the journal entries (give examples)

NB3. In future when you have fully mastered the T format (you know where to debit or credit
transactions) you may do away with the T formats (give examples)
Exercise.

1. Outline the accounts to be affected by the following transactions

(a) Bought lorry for cash.

(b) Paid creditor, T Lake, by cheque.

(c) Repaid P Logan’s loan by cash.

(d) Sold lorry for cash.

(e) Bought office machinery on credit from Ultra Ltd.

(f) A debtor, A Hill, pays us by cash.

(g) A debtor, J Cross, pays us by cheque.

(h) Proprietor puts a further amount into the business by cheque.

(i) A loan of £200 in cash is received from L Lowe.

(j) Paid a creditor, D Lord, by cash.

2. Kenya Kwanza Ltd was started on 20th September 2022 with KES 20,000,000 in cash. On
the same day the company rented office space and paid in KES 200,000 in cash. On 25 th
September the company bought a van worth KES 2,500,000 in cash. On 26 th September
2022 the company furnished it office with furniture fixtures and fittings worth KES
1,350,000 in cash. On 27th the company received stock from Azimio ltd worthy KES
7,500,000 on credit to be paid in the next 60 days. On 29 th September the company sold
goods worthy KES 1,500,000 for KES 3,000,000 to Dangote ltd on credit. On 30 th
September, the company transferred KES 4,000,000 to KCB bank for salaries, salaries
being KES 2,400,000.

Required. Open all relevant journal entries for Kenya Kwanza ltd

3. Write up the asset, liability and capital accounts to record the following transactions
in the records of F Murray.

2017 July 1 Started business with £15,000 in the bank.

 2 Bought office furniture by cheque £1,200.

3 Bought machinery £1,400 on credit from Trees Ltd.

5 Bought a van paying by cheque £6,010.

8 Sold some of the office furniture – not suitable for the business – for £150 on credit to

D Twig & Sons.

15 Paid the amount owing to Trees Ltd £1,400 by cheque.

23 Received the amount due from D Twig & Sons £150 in cash.

31 Bought more machinery by cheque £650.

4. You are required to open the asset, liability and capital accounts and record the
following transactions for June 2018 in the records of TUM ltd.

June 1 Started business with £12,000 in cash.

2 Paid £11,700 of the opening cash into a bank account for the business.

5 Bought office furniture on credit from Dream Ltd for £1,900.

8 Bought a van paying by cheque £5,250.

12 Bought equipment from Pearce & Sons on credit £2,300.

18 Returned faulty office furniture costing £120 to Dream Ltd.

25 Sold some of the equipment for £200 cash.

26 Paid amount owing to Dream Ltd £1,780 by cheque.

28 Took £130 out of the bank and added to cash.

30 F Brown lent us £4,000 – giving us the money by cheque.

5. Write up the asset, capital and liability accounts in the books of Rigathi ltd to record
the following transactions relating to the month of June 2019:

June 1 Started business with £16,000 in the bank.

 2 Bought van paying by cheque £6,400.

5 Bought office fixtures £900 on credit from Old Ltd.

8 Bought van on credit from Carton Cars Ltd £7,100.

12 Took £180 out of the bank and put it into the cash till.

15 Bought office fixtures paying by cash £120.

19 Paid Carton Cars Ltd a cheque for £7,100.

21 A loan of £500 cash is received from B Berry.

25 Paid £400 of the cash in hand into the bank account.

30 Bought more office fixtures paying by cheque £480.

6. The following transactions relates to Juhudi ltd for the month of March 2017.
Required, write up the accounts to record the following transactions:

March 1 Started business with £750 cash and £9,000 in the bank.

2 Received a loan of £2,000 from B Blane by cheque.

3 Bought a computer for cash £600.

5 Bought display equipment on credit from Clearcount Ltd £420.

8 Took £200 out of the bank and put it in the cash till.

15 Repaid part of Blane’s loan by cheque £500.

17 Paid amount owing to Clearcount Ltd £420 by cheque.

24 Repaid part of Blane’s loan by cash £250.

31 Bought a printer on credit from F Jones for £200