Chapter 2: Books of Prime Entry

Question 1

What is meant by day books/ book of prime entry?

Answer 1

Books which in theory are written up every day

Question 2

What is the sales Day book?

Answer 2

The book of prime entry which lists all the business’s invoices sent to credit customers

Question 3

What is the Sales Returns Day book?

Answer 3

Book of prime entry which lists all credit notes raised against credit sales.

Question 4

What is the purchase day book?

Answer 4

Book of prime entry which records purchase invoices from credit suppliers

Question 5

How is the purchase day book analysed

Answer 5

different types of purchases and expenses

Question 6

What does the purchase analysis column in the purchase day book contain?

Answer 6

Items bought for primary use (e.g. flour)

Question 7

What does the expenses analysis column in th purchase day book contain?

Answer 7

Overhead expenditure, such as stationary and utility bills.

Question 8

Purchases and Expenses are recorded as the…

Answer 8

Net amount

Question 9

What is the purchase returns day book?

Answer 9

A list of all the credit notes received against purchases which have been made on credit

Question 10

What is the purpose of books of prime entry?

Answer 10

To categorise like business documents together so that we can see the level of sales and expenditure for a particular period.

Question 11

What is the purpose of the sales and purchase ledgers?

Answer 11

To record how much is owed from each credit customer and the amount due to each supplier at any point in time.

Question 12

What are the subsidiary ledgers?

Answer 12

Purchase ledger

Sales Ledger

Question 13

What is the Sales Ledger?

Answer 13

A record that contains ledger accounts for every credit customer

Question 14

Where are the customer ledger account found and what do they show?

Answer 14

Sales Ledger

Show the amount owed by an individual customer.
It helps with customer queries over invoices, credit notes and receipts.

Question 15

What is the purchase ledger?

Answer 15

A record that contains ledger accounts for every credit supplier

Question 16

Where are the supplier ledger accounts found and why are they useful?

Answer 16

Purchase Ledger

They show the amount owed to individual suppliers.

It helps the business identify how much to pay each supplier and the date the payment should be made.

Question 17

What is recorded on the left hand side (debit) of the account ledger?

Answer 17

Invoices which increase the amount owed by the customer

Question 18

What is recorded on the right hand side(credit) of the credit customer’s ledger account?

Answer 18

Credit notes, prompt payment discounts taken and payments received from the customer, all of which decrease the amount owed by the customer.

Question 19

Where are documents off the same type recorded?

Answer 19

In books of prime entry

Question 20

Where are sales invoices recorded initially?

Answer 20

In the sales day book

Question 21

What does the sales day book show?

Answer 21

The net amount , VAT and gross totals from each invoice

Question 22

Where are Sales Credit Notes recorded?

Answer 22

The Sales Returns day book.

Question 23

What does the Sales Returns Day Book show?

Answer 23

The Net amount, VAT and gross totals from each credit note and may be analysed.

Question 24

Where are the purchase invoices recorded?

Answer 24

Initially in the purchase day book

Question 25

What does the purchase day book show?

Answer 25

the net amount, Vat and Gross totals from each supplier invoice, and the net amount is nearly always analysed to show the different types of purchase and expense

Question 26

Where are the Purchase Credit notes from Suppliers recorded?

Answer 26

Purchase returned day book

Question 27

What does the purchase returns day book show?

Answer 27

net amount, VAT and gross totals from each credit note, may be analysed

Question 28

Where are recipes of money into the business recorded?

Answer 28

Cash book-debit side

Question 29

Where are payments of money by the business recorded?

Answer 29

Cash book- credit side

Question 30

What does the sales ledger show?

Answer 30

The amount owed by each individual credit customer

Question 31

What does the purchase ledger show?

Answer 31

The amount owed to each individual credit supplier