Books of prime entry

The books and what goes in them

Posting the day books

Each item in a day book is posted to the personal account (customer or supplier). The total for the period is posted to the general ledger.

• Sales day book: debit each customer; credit Sales with the total.
• Purchases day book: credit each supplier; debit Purchases with the total.

Trade discount (a reduction for trade customers) is deducted on the invoice and never recorded in the ledgers. Cash discount (for prompt payment) is recorded in the cash book discount columns: discount allowed total is debited to Discount allowed (an expense); discount received total is credited to Discount received (income).

Sales day book for June

Cash book and petty cash

A three-column cash book has Discount, Cash and Bank columns on each side. A contra entry moves money between cash and bank (for example, cash paid into the bank: debit Bank column, credit Cash column).

The petty cash book usually works on the imprest system: the cashier starts with a fixed float; at the end of the period the amount spent is reimbursed, restoring the float. Analysis columns (postage, cleaning, travel) give totals to post to expense accounts.

Worked example

Goods with a list price of £2,000 are sold on credit with 15% trade discount and 2% cash discount for payment within 14 days. The customer pays within 14 days. Find the invoice amount, the discount allowed and the cash received.

1. Invoice = 2,000 x 0.85 = £1,700 (trade discount is not recorded).
2. Discount allowed = 2% of 1,700 = £34.
3. Cash received = 1,700 - 34 = £1,666.

Answer: Sales day book £1,700; cash book: bank £1,666, discount allowed £34.

Check yourself

1. Goods listed at £3,600 are sold on credit with 25% trade discount. What amount is entered in the sales day book?
   Show answer

   £2700. 3,600 x 0.75 = 2,700. Trade discount is deducted on the invoice.

2. A credit customer owes £1,700 and pays within the discount period, taking a 2% cash discount. How much does the business receive?
   Show answer

   £1666.00. Discount = 34; received = 1,666.

3. A petty cash float of £200 is kept on the imprest system. Vouchers for the month total £163.45. How much cash is needed to restore the float?
   Show answer

   £163.45. Under the imprest system the reimbursement equals the amount spent: £163.45.

4. A business buys a delivery van on credit from a garage. In which book of prime entry is this first recorded?
   • General journal
   • Purchases day book
   • Cash book
   • Sales day book
   Show answer

   General journal. The purchases day book is for goods bought for resale; a non-current asset bought on credit goes through the journal.

5. Why is trade discount not recorded in the ledger accounts?
   • It is recorded in the cash book instead
   • It is an expense of the seller
   • The invoice is already shown at the reduced price
   • It is only given to cash customers
   Show answer

   The invoice is already shown at the reduced price. Trade discount is a price reduction shown on the invoice; only the net amount is recorded.

6. The discount allowed column in the cash book totals £260 for the month. How is the total posted?
   • Debit Discount allowed account
   • Credit Discount allowed account
   • Debit Discount received account
   • Credit Sales account
   Show answer

   Debit Discount allowed account. Discount allowed is an expense, so its account is debited. Each customer's account is credited individually.

Practise with instant feedback Print this lesson

Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting specification (issue 2), Unit 1 and Appendices 6 to 8

Last updated 8 November 2026. Spotted a mistake? Tell us.