Books of Prime Entry Interview Questions & Answers

Q: What are books of prime entry?

Books of prime entry (also called books of original entry or day books) are where transactions are first recorded from source documents before being posted to the ledgers. They include the sales day book, purchases day book, sales and purchases returns day books, the cash book, the petty cash book, and the journal. They group similar transactions to make posting to the ledger efficient.

Q: What is the sales day book and what is recorded in it?

The sales day book (sales journal) records credit sales only, listed from sales invoices—date, customer name, invoice number, and amount (net, VAT, gross). Cash sales are not recorded here; they go in the cash book. Periodically the totals are posted: the total to the sales account and VAT account, and individual amounts to customers' accounts in the sales ledger.

Q: What is the purchases day book?

The purchases day book (purchases journal) records credit purchases only, listed from suppliers' invoices with date, supplier, invoice number, and net/VAT/gross amounts. Cash purchases go in the cash book. Totals are posted to the purchases account and VAT account, and individual amounts to suppliers' accounts in the purchases ledger.

Q: What are the sales returns and purchases returns day books?

The sales returns day book (returns inwards) records goods returned by customers, from credit notes issued. The purchases returns day book (returns outwards) records goods returned to suppliers, from credit notes received. They reduce sales/purchases respectively and adjust the relevant ledger accounts and VAT.

Q: What is the journal (general journal) used for?

The journal is the book of prime entry for transactions that don't fit the other day books—opening entries, closing/adjusting entries, correction of errors, depreciation, writing off bad debts, purchase/sale of non-current assets on credit, and transfers between accounts. Each journal entry shows the accounts to debit and credit, the amounts, and a narrative explaining it.

Q: What is a source document and why is it important?

A source document is the original record evidencing a transaction—invoices, credit notes, receipts, till rolls, bank statements, remittance advices, and cheque counterfoils. It is the starting point for entries in the books of prime entry, provides an audit trail, and supports the accuracy and validity of the records.

Q: How do you post the sales day book to the ledgers?

Total the sales day book for the period. Post the total net sales to the credit of the sales account, the total VAT to the credit of the VAT (output) account, and the total gross to the debit of the sales ledger control account. Individually, post each customer's gross invoice to the debit of their personal account in the sales ledger.

Q: What is the difference between a book of prime entry and a ledger?

A book of prime entry is where a transaction is first recorded from its source document (a listing/journal), and is not itself part of the double-entry ledger (except the cash book, which is both). A ledger contains the double-entry accounts (nominal/general, sales, purchases ledgers) where transactions are classified into individual accounts. Prime entry books feed the ledgers.

Q: Why is the cash book considered both a book of prime entry and a ledger account?

The cash book is where cash and bank transactions are first recorded (prime entry) directly from receipts and payments, but it also functions as the ledger account for cash and bank because it contains the double-entry balances for those accounts. This dual role means cash/bank aren't duplicated in the nominal ledger.

Q: How is VAT recorded in the books of prime entry?

In the day books, invoices are analyzed into net, VAT, and gross columns. Output VAT on sales is credited to the VAT account; input VAT on purchases is debited to it. The VAT account accumulates the net amount owed to or reclaimable from the tax authority, and its balance is settled periodically.

What are books of prime entry?

Beginner

Books of prime entry (also called books of original entry or day books) are where transactions are first recorded from source documents before being posted to the ledgers. They include the sales day book, purchases day book, sales and purchases returns day books, the cash book, the petty cash book, and the journal. They group similar transactions to make posting to the ledger efficient.

Real-world example A bookkeeper lists each credit sale invoice in the sales day book during the day, then posts the totals to the ledger later.

Common follow-ups: Why record in day books before the ledger? | Name the main books of prime entry.

Sales & Purchase Ledgers Cash Book & Petty Cash Books of Prime Entry

What is the sales day book and what is recorded in it?

Beginner

The sales day book (sales journal) records credit sales only, listed from sales invoices—date, customer name, invoice number, and amount (net, VAT, gross). Cash sales are not recorded here; they go in the cash book. Periodically the totals are posted: the total to the sales account and VAT account, and individual amounts to customers' accounts in the sales ledger.

Sales Day Book (extract):
  Date  Customer  Inv  Net    VAT   Total
  3/5   A Ltd     101  1,000  200   1,200
  Totals posted: Dr Debtors control; Cr Sales 1,000, VAT 200

Real-world example Only invoiced credit sales appear in the sales day book; a walk-in cash sale is entered in the cash book instead.

Common follow-ups: Are cash sales recorded here? | Where do the totals get posted?

Sales & Purchase Ledgers Control Accounts Books of Prime Entry

What is the purchases day book?

Beginner

The purchases day book (purchases journal) records credit purchases only, listed from suppliers' invoices with date, supplier, invoice number, and net/VAT/gross amounts. Cash purchases go in the cash book. Totals are posted to the purchases account and VAT account, and individual amounts to suppliers' accounts in the purchases ledger.

Purchases Day Book totals posted:
  Dr Purchases (net) + Dr VAT (input)
  Cr Creditors (purchases ledger) control

Real-world example Each supplier invoice for goods on credit is entered in the purchases day book before posting to the ledgers.

Common follow-ups: What does it exclude? | Which accounts receive the totals?

Sales & Purchase Ledgers Control Accounts Books of Prime Entry

What are the sales returns and purchases returns day books?

Beginner

The sales returns day book (returns inwards) records goods returned by customers, from credit notes issued. The purchases returns day book (returns outwards) records goods returned to suppliers, from credit notes received. They reduce sales/purchases respectively and adjust the relevant ledger accounts and VAT.

Returns inwards (customer returns):
  Dr Sales Returns + Dr VAT; Cr Debtors control
Returns outwards (to supplier):
  Dr Creditors control; Cr Purchases Returns + Cr VAT

Real-world example When a customer returns faulty goods, the credit note is entered in the sales returns day book.

Common follow-ups: What source document feeds returns day books? | Which account is debited for returns inwards?

Sales & Purchase Ledgers Control Accounts Books of Prime Entry

What is the journal (general journal) used for?

Beginner

The journal is the book of prime entry for transactions that don't fit the other day books—opening entries, closing/adjusting entries, correction of errors, depreciation, writing off bad debts, purchase/sale of non-current assets on credit, and transfers between accounts. Each journal entry shows the accounts to debit and credit, the amounts, and a narrative explaining it.

Journal entry (bad debt write-off):
  Dr Bad Debts Expense   500
      Cr Trade Receivables    500
  (Being irrecoverable debt of X Ltd written off)

Real-world example Depreciation and error corrections are recorded via journal entries with a narrative, not in the sales or cash book.

Common follow-ups: What is a narrative? | Give examples of journal-only transactions.

Correcting Errors Control Accounts Books of Prime Entry

What is a source document and why is it important?

Beginner

A source document is the original record evidencing a transaction—invoices, credit notes, receipts, till rolls, bank statements, remittance advices, and cheque counterfoils. It is the starting point for entries in the books of prime entry, provides an audit trail, and supports the accuracy and validity of the records.

Real-world example The bookkeeper enters a purchase only after receiving the supplier's invoice as the source document.

Common follow-ups: Name common source documents. | Why do source documents create an audit trail?

Sales & Purchase Ledgers Cash Book & Petty Cash Books of Prime Entry

How do you post the sales day book to the ledgers?

Intermediate

Total the sales day book for the period. Post the total net sales to the credit of the sales account, the total VAT to the credit of the VAT (output) account, and the total gross to the debit of the sales ledger control account. Individually, post each customer's gross invoice to the debit of their personal account in the sales ledger.

Period totals: Net 10,000, VAT 2,000, Gross 12,000
  Dr Sales Ledger Control 12,000
      Cr Sales 10,000
      Cr VAT (output) 2,000
Memorandum: Dr each customer account (gross)

Real-world example At month-end the day book total credits sales and VAT while the control account is debited with the gross figure.

Common follow-ups: Which side does the control account go? | Are individual customer postings part of double entry?

Control Accounts Sales & Purchase Ledgers Books of Prime Entry

What is the difference between a book of prime entry and a ledger?

Intermediate

A book of prime entry is where a transaction is first recorded from its source document (a listing/journal), and is not itself part of the double-entry ledger (except the cash book, which is both). A ledger contains the double-entry accounts (nominal/general, sales, purchases ledgers) where transactions are classified into individual accounts. Prime entry books feed the ledgers.

Real-world example The purchases day book merely lists invoices; the double entry happens when its totals are posted to the ledgers.

Common follow-ups: Is the cash book a special case? | Do day books form part of the double entry?

Cash Book & Petty Cash Control Accounts Books of Prime Entry

Why is the cash book considered both a book of prime entry and a ledger account?

Intermediate

The cash book is where cash and bank transactions are first recorded (prime entry) directly from receipts and payments, but it also functions as the ledger account for cash and bank because it contains the double-entry balances for those accounts. This dual role means cash/bank aren't duplicated in the nominal ledger.

Real-world example A receipt is entered once in the cash book, which serves as the bank ledger account itself.

Common follow-ups: Why isn't there a separate bank account in the nominal ledger? | What dual role does it play?

Cash Book & Petty Cash Bank Reconciliation Books of Prime Entry

How is VAT recorded in the books of prime entry?

Intermediate

In the day books, invoices are analyzed into net, VAT, and gross columns. Output VAT on sales is credited to the VAT account; input VAT on purchases is debited to it. The VAT account accumulates the net amount owed to or reclaimable from the tax authority, and its balance is settled periodically.

Sales invoice: Dr Debtors 1,200; Cr Sales 1,000; Cr VAT 200
Purchase invoice: Dr Purchases 500; Dr VAT 100; Cr Creditors 600
VAT account net = output 200 - input 100 = 100 payable

Real-world example The day book VAT columns feed the VAT control account, whose balance shows the amount due to HMRC.

Common follow-ups: What is output vs input VAT? | How is the VAT balance settled?

Control Accounts Sales & Purchase Ledgers Books of Prime Entry