Books of original entry definition
/What are Books of Original Entry?
Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced. Each accounting journal contains detailed records for the types of accounting transactions pertaining to a specific area. Examples of these accounting journals are the cash journal, general journal, purchase journal, and sales journal.
The general ledger is not considered a book of original entry if it only contains summarized entries posted to it from one of the underlying accounting journals. However, if transactions are recorded directly into the general ledger, it can be considered one of the books of original entry.
Advantages of Books of Original Entry
There are multiple advantages associated with the use of books of original entry; they are as follows:
Easily searchable. Books of original entry are extremely useful for investigating individual accounting transactions. Anyone using these records can easily search through them by date to find what they need. Furthermore, transactions are recorded in different books depending on the transaction type (such as sales transactions being entered in the sales journal), making it even easier to drill down through the various books to find specific transaction records.
Easy reference for auditors. Books of original entry are commonly accessed by auditors, who verify a selection of business transactions to ensure that they were recorded correctly, as part of their audit procedures. It is especially easy to conduct these investigations, because the transactions recorded in the books of original entry were made in chronological order.
Improves reconciliations. Because books of original entry are well-organized, they make it easier to reconcile an organization’s cash balances with the statements received from its banks and lenders. This makes it easier to identify discrepancies and make adjustments to ensure a high degree of recordkeeping accuracy.
Logical division of work. Different accounting staff can be held responsible for maintaining different books of original entry, which promotes specialization within the accounting department. This reduces the workload on any one person, and also improves a firm’s system of internal controls.
Terms Similar to Books of Original Entry
A journal may also be referred to as a day book.
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FAQs
Are Source Documents Required for Books of Original Entry?
Source documents are essential for recording transactions in books of original entry because they serve as evidence that a transaction occurred. Examples include invoices, receipts, purchase orders, and bank statements. These documents support the accuracy, authenticity, and auditability of the accounting records.
Are Books of Original Entry Used in Computerized Accounting Systems?
Books of original entry are still used with accounting software, though the process is automated. The software records transactions in digital journals before posting them to the general ledger, maintaining the same accounting structure. This ensures a clear audit trail and preserves the integrity of financial data.
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