Acca f3 Financial Accounting (int) Study Text

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4: Sources, records and books of prime entry   Part C  The use of double entry and accounting systems 

The analysis gives the managers of the business useful information which helps them to decide how best 

to run the business. 

3.2 The purchase day book 

A business also keeps a record in the purchase day book of all the invoices it receives.

The

purchase day book is the book of prime entry for credit purchases. 

An extract from a purchase day book might look like this. 

PURCHASE DAY BOOK 

   Total 

amount 

  

Date

Supplier Invoiced

Purchases

Electricity 

etc

20X8

$

$

$

Mar 15

Cook & Co

315.00

315.00

W Butler

29.40

29.40

EEB

116.80

116.80

Show Fair Co

100.00

100.00

561.20

444.40

116.80

 

There is no 'invoice number' column, because the purchase day book records 

other people's 

invoices, which have all sorts of different numbers. 

 

Like the sales day book, the purchase day book analyses the invoices which have been sent in. In 

this example, three of the invoices related to goods which the business intends to re-sell (called 

simply 'purchases') and the other invoice was an electricity bill. 

3.3 The sales returns day book 

When customers return goods for some reason, a credit note is raised. All credit notes are recorded in the 

sales returns day book. An extract from the sales returns day book follows. 

SALES RETURNS DAY BOOK 

Date

Credit note 

Customer and goods 

Amount

20X8  

 

$

30 April 

CR008 

Owen Plenty 

3 pairs 'Texas' boots 

135.00

The

sales returns day book is the book of prime entry for credit notes raised. 

Not all sales returns day books analyse what goods were returned, but it makes sense to keep as complete 

a record as possible. Where a business has very few sales returns, it may record a credit note as a 

negative entry in the sales day book. 

3.4 The purchase returns day book 

Not surprisingly, the purchase returns day book records credit notes received in respect of goods which 

the business sends back to its suppliers.

An extract from the purchase returns day book follows. 

PURCHASE RETURNS DAY BOOK 

Date Supplier 

and goods 

Amount 

20X8

$

29 April 

Boxes Co 

 300 

cardboard boxes 

46.60 

Key term 

Key term 

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Part C  The use of double entry and accounting systems

  4:  Sources, records and books of prime entry

63

The

purchase returns day book is the book of prime entry for credit notes received from suppliers. 

Once again, a business with very few purchase returns may record a credit note received as a negative 

entry in the purchase day book. 

4 Cash book 

The

cash book may be a manual record or a computer file. It records all transaction that go through the 

bank account. 

4.1 The cash book 

The cash book is also a day book, used to keep a record of money received and money paid out by the 

business. The cash book deals with money paid into and out of the business 

bank account. This could be 

money received on the business premises in notes, coins and cheques, subsequently paid into the bank. 

There are also receipts and payments made by bank transfer, standing order, direct debit and bank interest 

and charges, directly by the bank. 

Some cash, in notes and coins, is usually kept on the business premises in order to make occasional 

payments for odd items of expense. This cash is usually accounted for separately in a 

petty cash book 

(which we will look at shortly). 

One side (the left) of the cash book is used to record receipts of cash, and the other side (the right) is 

used to record payments. The best way to see how the cash book works is to follow through an example. 

For convenience, we are showing the cash receipts and cash payments sides separately, but they are part 

of the same book. 

The

cash book is the book of prime entry for cash receipts and payments. 

4.2 Example: Cash book 

At the beginning of 1 September, Robin Plenty had $900 in the bank. 

During 1 September 20X7, Robin Plenty had the following receipts and payments. 

(a) 

Cash sale: receipt of $80 

(b) 

Payment from credit customer Hay $400 less discount allowed $20 

(c) 

Payment from credit customer Been $720 

(d) 

Payment from credit customer Seed $150 less discount allowed $10 

(e) 

Cheque received for cash to provide a short-term loan from Len Dinger $1,800 

(f) 

Second cash sale: receipt of $150 

(g) 

Cash received for sale of machine $200 

(h) 

Payment to supplier Kew $120 

(i) 

Payment to supplier Hare $310 

(j) 

Payment of telephone bill $400 

(k) 

Payment of gas bill $280 

(l) 

$100 in cash withdrawn from bank for petty cash 

(m)  Payment of $1,500 to Hess for new plant and machinery 

If you look through these transactions, you will see that seven of them are receipts and six of them

are payments. 

The receipts part of the cash book for 1 September would look like this. 

Key term 

Key term 

FAST FORWARD

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