Books of Original Entry

A journal is also known as a book of original entry. These books are primarily required for initial records. This book is also known as a first entry or a preliminary entry. It is the journal to document invoices, cash transactions, vouchers and other bills before shifting them to ledgers. All commercial transactions, including their specifics and descriptions, are initially documented in the book of original entry.

How are books of original entry used?

The accounts associated with a commercial transaction are essentially reflected in the book of original entry. Entries include vouchers, invoices, currency and other accounts documented in a book, list, notebook, diary or leaflet. An entry is an act of writing the evidence and details of a business transaction in the appropriate book, which could be a diary or a journal.

There following are the two categories of entries::

• Journal entry refers to documentation of commercial transactions recorded in a journal.
• Ledger entries are business transactions that are posted or transferred from a journal to a ledger.

A ledger contains many accounts, and each business transaction is recorded in the appropriate ledger account.

Types of books of original entry

Here are some of the types of books of original entry used in the accounting process. These journals are specialised books that are used for specific purposes.

Special journals: These feature additional sub-journals listed below.

• General journal: These are to record transactions that were not recorded in dedicated journals.
• Sales journal: Used to keep track of sales invoices issued by the company while selling products on credit.
• Cashbook: A book in which receipts and payments are recorded.
• Return outbound notebook: This journal is used to document purchases that are returned to suppliers.
• Purchases journal: Used to record purchase invoices received from vendors when purchasing products on credit.
• Return inwards journal: Used to record consumer sales returns.

Components of original entry

Transaction dates

Journals should include the date when the deal occurs or is being added to the account before writing a transaction in the books of original entry. If the journal is preserved chronologically, it is advisable to record that transaction in the appropriate date feature. To maintain uniformity, the date format should also be the same across all transactions.

Business and transaction details

When a transaction is recorded in the books of original entry, the transaction must highlight the business involved with the credit transaction, i.e., vendor or seller in the case of a buying record. If a transaction is added to the general journal, it should include essential business information. Wrong or irrelevant information passed as transaction details can cause issues in the ledger accounts. 

Narration

The summary of a transaction offers the transaction data and concisely describes the rationale for any transaction. It showcases precisely the particulars of the goods or services for which the transaction is made.

Monetary information

The monetary amount involved in the transaction should be mentioned in the entry. This entry also involves the credit and debit information of the transaction.

Include a source to the original document

It should link the original document that was used to book the transaction, such as a bill number in the event of a purchase. Linking the original document adds authenticity to any business transaction and helps recall the document when required.

Relevant ledger account details

It should specify the applicable ledger account to where relevant transaction records will be posted following the successful completion of the journals’ recording.

Advantages of Books of Original Entry

• Daily transactions are documented in the books with recordkeeping in the books of initial entry, which decreases the chances of omission of any transaction.
• When debit and credit accounts are incorporated in a journal, the chance of error while publishing them to a ledger is reduced.
• Because the transactions are recorded in chronological order, categorising and transferring them into relevant ledgers becomes reasonably simple.
• Any issues and inaccuracy in a transaction record can be detected while transferring data in the individual ledgers because all the transaction details, including narrations and summaries, are kept with the journal.

Disadvantages of Books of Original Entry

• Books of original entry are large with numerous volumes, making it challenging to manage the data.
• It takes a long time to post-book all transactions into the individual ledger.
• An individual can find the transaction only if they know the date of the transaction, which makes the journals difficult and time-consuming to search.

Conclusion

Books of original entry or a journal are vital in the accounting process. These books help keep an original record of the transaction process and help segregate different expenses and profits. Furthermore, the books help keep track of the financial statements.