Books of Prime Entry, Ledger Accounts and the Trial Balance
What the exam tests
This domain tests the flow from source documents to books of prime entry, posting to ledger accounts, balancing accounts and extracting a trial balance. It checks double-entry accuracy and the purpose of each book.
Core rules
- Sales day book records credit sales; purchases day book records credit purchases; returns books record credit returns; cash book records cash and bank receipts and payments; general journal records other transactions, corrections and year-end adjustments.
- Postings: credit sale debits receivables and credits sales; credit purchase debits purchases and credits payables.
- The cash book is both a book of prime entry and a ledger account.
- A trial balance lists debit and credit balances to check arithmetic equality, not to prove completeness.
Worked example
A trader makes a credit sale of N250,000, a credit purchase of N180,000 and receives a credit note for goods returned by a customer of N20,000. Entries: debit receivables N250,000, credit sales N250,000; debit purchases N180,000, credit payables N180,000; debit sales returns N20,000, credit receivables N20,000. Extracted balances include receivables N230,000 debit, sales N250,000 credit, purchases N180,000 debit, sales returns N20,000 debit and payables N180,000 credit. Debits total N430,000 and credits total N430,000 before other items.
Traps
Do not post a credit sale directly to the cash book. Do not use the general journal for routine credit sales. A balanced trial balance does not mean the ledger is error-free: omission, compensating error and reversal can still exist.