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   1. What are books of original entries?

Books of original entries are books in which we first record the transactions. We record entries in them according to nature of transactions and entries are made to them on daily basis

Books of original entries are used because business wants to record the detail of transactions or economic events as much as possible

Examples of books of original entries are as follows:

1. General journal or Day book - For recording general double entries
2. Sales Journal or Sales day book - For recording credit sales
3. Purchase journal or purchase day book - For recording purchases on credit
4. Sales return journal or sale return day book - For recording sales return
5. Purchase return journal or purchase return day book - For recording purchases return
6. Cash receipts journal - For recording all kinds of cash receipts
7. Cash payments journal - For recording all kinds of cash payments
8. Cash book - For recording cash receipts and payments

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   2. Why do we need the books of original entries?

The requirement for Books of original entries is significant because businesses need more information of a transaction than an account can provide. For example if a business sells goods on credits to Mr. Z, business would like to record all his contact details and personal details.

Moreover, In the course of business, source document (such as invoices, credit notes and debit notes etc..) are created. The detail of these source documents need to be summarized, as otherwise the business may forget to make payment or ask for the payment of cash or even accidentally pay twice. In other words, businesses need the record of source documents of transactions to track what's going on. These kinds of records are made in books of original entries.

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   3. What are the different kinds of Books of original entries?

There are many books of original entries used to record financial activities of a business and transactions are recorded in them according to the nature of transactions

1. General journal or Day book - For recording general double entries
2. Sales Journal or Sales day book - For recording credit sales
3. Purchase journal or purchase day book - For recording purchases on credit
4. Sales return journal or sale return day book - For recording sales return
5. Purchase return journal or purchase return day book - For recording purchases return
6. Cash receipts journal - For recording all kinds of cash receipts
7. Cash payments journal - For recording all kinds of cash payments
8. Cash book - For recording all kinds of cash receipts and payments

Journal is also known as day book

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   4. What is a journal or day book?

Journal is a book of original entry. Journal is a book where a business records the transactions and their details in the first place

There are many types of journals for example:

9. General journal or Day book - For recording general double entries
10. Sales Journal or Sales day book - For recording credit sales
11. Purchase journal or purchase day book - For recording purchases on credit
12. Sales return journal or sale return day book - For recording sales return
13. Purchase return journal or purchase return day book - For recording purchases return
14. Cash receipts journal - For recording all kinds of cash receipts
15. Cash payments journal - For recording all kinds of cash payments

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   5. What is the difference between a journal and daybook?

There is no difference between a journal and daybook

In accounting, the words journal and daybook are used interchangeably. Therefore, no need to be confused if you see the word daybook rather that journal or journal instead of daybook.

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   6. What are specialized journal?

All journals other than general journal are specialized journals

Journal general is used to record the general accounting transactions or in some cases it can be used to record entries that other specialized journal can’t record

As the name of specialized journals suggests special journal are utilized to record special or specific journal entries in each of the specialized journal. For example all credit sales will be recorded in sales journal whereas all credit purchases will be recorded in purchases journal and so on.

We have given below the examples of specialized journals to help in understanding the concept

1. Sales Journal or Sales day book - For recording credit sales
2. Purchase journal or purchase day book - For recording purchases on credit
3. Sales return journal or sale return day book - For recording sales return
4. Purchase return journal or purchase return day book - For recording purchases return
5. Cash receipts journal - For recording all kinds of cash receipts
6. Cash payments journal - For recording all kinds of cash payments

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   7. Why do we need to prepare specialized journals?

When a business is small, it can keep all transactions record in one general journal or day book. However, as the business grows, its scale of business activities grows as well and more day to day financial transactions take place. As you know a business needs to record the detail of transaction as much as possible. For a large business, its impossible to record all financial transactions in one book because it needs a lot pages of a book to enter the large number of transactions and it is difficult to find a specific transaction and to detect an error in recording the transactions and even a single book would be too hard to handle and manage

The simple solution to this problem is the use of more than one book to record the details of transactions. When a business uses more than one book to record transactions, it put together all the similar transaction in a book. In each book we don’t record and mix transactions of different nature.

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   8. What does folio or post ref column in a journal indicate?

Folio column is the reference to a specific ledger account or any other book of accounts. In this column, the name account and page No. on which we have entered the other part of double entry are filled in to help find out the other part of entry.

For example:

The transaction "Cash sales amounting to $400 were made to Mr. Z" is entered in cash receipt journal on page No.12 and Sales account that is located on page No. 22

The folio column would record the following entries:

In the cash receipt journal, we would enter SL 22 in folio column to indicate that the record related to sales to Mr. Z can be found on page No. 22 of sales ledger account

In the Sales ledger account, we would enter CJ 12 in the folio column to signify that the record related to cash receipt from Mr. Z can be found on the page No. 12 of cash receipt journal

An accountant is supposed to fill in this column when they complete the double entry.

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   9. What are the benefits of folio or post ref column?

Folio column indicates that other part of double entry has been completed and it helps find out on what page No. it is located.

If you see the folio column blank, you can assume that we have not yet completed the double entry and it helps trace out many errors.

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   10. What is an invoice?

Invoice is also known as bill. An invoice is a commercial document issued by the seller (or business) to a buyer stating the name and description of products, quantity of goods, agreed price of goods etc.

If goods are being purchased on credit, invoice may indicate the max days or months to repay the debt

Invoice is a legal document which means it can be served as an evidence of sales contract

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   11. What is a credit note?

Also referred to as credit memorandum or credit memo

A credit note is a written instrument or document sent by business to the customer for agreeing to take back the goods which are being returned by the customer. Business or seller will then return money either the full or partial price of goods.

Credit note No. is entered in sales return journal and it is useful for a business in its future transactions

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   12. What is a debit note?

Also referred to as debit memorandum or debit memo

A debit note is a written instrument or document sent by the customer to a business describing reasons and giving the full details of goods being returned by them.

Debit note No. is entered in purchase return journal and it is useful for a business in its future transactions.

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   13. What is the difference between debit note and credit note?

A credit note is issued by a business to the customers or buyers, accepting the return of good by customer because of some defects in goods or another reason

On the other hand, a debit note is sent by the customers to a business letting the business know why they have returned the goods. A credit note contains the description and reason for the return of goods

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   14. What are the applications of a sales invoice for a business?

Following are the some benefits or uses of a sales invoice

  • It prevent fraud and misappropriation by checking them a business can know the real price of goods sold not the price shown by the employees
  • It’s a legal document which means it can be served as an evidence of sales
  • A business might choose to use sales invoice to confirm that correct goods were sent to customers
  • An invoice can prevent different types of errors and mistakes regarding prince, quantity and description of goods

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   15. What might be the customers' records a business would like maintain other than accounting records?

A business would like to record as much the details and personal information of a customer as possible because such information is very useful for increasing your future sales. For example a business can use personal information to invite customers to a special occasion where the business can present special promos and unveil new products.

A business can use customer details to contact them and let them know special offers which can enhance sales.

Moreover, businesses use customers’ information for effective marketing and advertisement schemes such as presenting specific products to a particular class of customers that may need these products

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   16. What are the contents of an invoice?

Invoices are issued in a numerical order so as to make them easily traceable.

The details generally shown by an invoice are as follows:

- The name of seller and buyer
- Address of seller and buyer
- Date of sale made
- Description of what was sold to whom
- Price and quantity of product which was sold
- A unique reference number
- The detail of trade discount given on list price of product
- Information regarding cash discount and lists down its terms & conditions
- Total amount of invoice including any tax or other charges

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   17. What are the details that a credit note provides?

A credit note shows the following details:

- At the top of the page “Credit note” is printed
- Business or sender’s address along with its phone and fax number
- A “credit note number” is printed on it represents a series of credit notes that you sent out
- Payment terms and conditions
- Reference number
- The receiver or customer address along with other contact details of customer such as telephone number
- The description of reason why credit note is being sent
- Total price of goods needs to be returned

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   18. What details does a debit note show?

A debit note is similar to credit note. Therefore, its details are much alike as well. Following are the contents of a debit note:

- The title of debit note goes at the top
- Customer or sender’s address along with their phone and fax number
- A “debit note number” is printed on it represents a sequence of debit notes that you sent out
- Reference number
- The receiver or business address along with other contact details of business such as telephone number
- The description of reason why are goods being returned
- Total price of goods that are being returned to the business/seller

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