How do we list transactions before they reach the ledgers, and why do we bother?
Write up the sales, purchases and returns journals and the general journal, and total them
A simple answer to the N(A)-Level Principles of Accounts outcome on the journals. What the sales, purchases and returns journals and the general journal are for, how to write them up, and how their totals are used.
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What this dot point is asking
SEAB wants you to write up the journals (the books of prime entry) and total them. Journals are the bridge between source documents and the ledger: transactions are listed here first, in date order, before being posted. The central insight is that journals let us group similar transactions and post their totals, so the ledger stays tidy and the work can be shared.
The answer
Why journals exist
If every invoice were posted straight to the ledger, the sales account would have hundreds of tiny entries. Instead, similar transactions are first listed in a journal, then only the total is posted to the main account. This keeps the ledger clean and makes checking easier.
The five main books of prime entry
| Journal | Records | Source document |
|---|---|---|
| Sales journal | Credit sales | Sales invoices |
| Purchases journal | Credit purchases | Purchase invoices |
| Returns inwards journal | Goods returned by customers | Credit notes issued |
| Returns outwards journal | Goods returned to suppliers | Credit notes received |
| General journal | Anything not in the others (opening entries, corrections, asset purchases on credit) | Various |
Cash and cheque transactions go in the cash book, which is covered separately.
Writing up and totalling
Each journal lists the date, the name of the other party, and the net amount. At the period end the journal is totalled. That total is posted to the relevant account in the general ledger (for example, the sales journal total goes to the sales account), while each individual entry is posted to the personal account of the customer or supplier.
Examples in context
Example 1. A busy month of credit sales. A wholesaler makes forty credit sales in a month. Rather than forty entries in the sales account, all forty are listed in the sales journal and only the single monthly total is posted to sales. Each customer is still updated individually in the sales ledger, so the business knows who owes what, while the general ledger stays clean.
Example 2. Buying a van on credit. A sole trader buys a delivery van on credit. This is not goods for resale, so it does not belong in the purchases journal. Instead it is entered in the general journal, debiting motor vehicles and crediting the supplier. This shows that the general journal is the catch-all for transactions that do not fit the specialised journals.
Try this
Q1. State which journal records goods returned to a supplier. [1 mark]
- Cue. The returns outwards journal (from credit notes received).
Q2. A sales journal lists \200\ and \450$. State the total and where it is posted. [2 marks]
- Cue. Total = \1,000$, posted to the credit side of the sales account in the general ledger.
Q3. Explain one reason a business lists transactions in a journal before posting them. [2 marks]
- Cue. It groups similar transactions so only the total is posted, keeping the ledger tidy and making checking and dividing the work easier.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original6 marksWrite up the sales journal from these credit sales and total it: 3 May, to Tan \400\; 12 May, to Ng \350$. State what the total is used for.Show worked answer →
Sales journal:
- 3 May, Tan, \400$.
- 7 May, Lim, \250$.
- 12 May, Ng, \350$.
- Total = 400 + 250 + 350 = \1,000$.
The total of \1,000$ is posted to the credit side of the sales account in the general ledger (one entry for the whole month), while each customer is debited individually in the sales ledger.
What markers reward: a correct list with dates and names, the total of \1,000$, and the explanation that the total is posted to sales while individuals are posted to each customer.
Original5 marksExplain the purpose of using books of prime entry instead of posting every transaction straight to the ledger. Give two benefits.Show worked answer →
Books of prime entry are where transactions are first listed, in date order, before being posted to the ledger. They are used so that similar transactions are grouped together and the ledger is not cluttered with hundreds of small entries.
Two benefits:
The ledger stays tidy, because only periodic totals (for example the monthly sales total) are posted, not every single invoice.
Errors are easier to find and the work can be divided among staff, since each journal can be kept separately.
What markers reward: a clear statement that journals are the first listing of transactions, plus two valid benefits such as a tidier ledger, easier checking, or division of work.
Related dot points
- Identify common source documents and state which book of prime entry each one is recorded in
A simple answer to the N(A)-Level Principles of Accounts outcome on source documents. The invoice, credit note, receipt, cheque counterfoil and others, what each one proves, and the book of prime entry it leads to.
- Write up a two-column cash book recording cash and bank receipts and payments, with discount columns
A simple answer to the N(A)-Level Principles of Accounts outcome on the cash book. How the two-column cash book records cash and bank together, how receipts and payments are entered, and how the discount columns work.
- Post from the books of prime entry to the sales, purchases and general ledgers
A simple answer to the N(A)-Level Principles of Accounts outcome on posting to the ledgers. The three ledgers, how journal totals and individual entries are posted, and why the ledger is divided this way.
- Prepare a trial balance from a list of ledger balances and explain its purpose
A simple answer to the N(A)-Level Principles of Accounts outcome on the trial balance. What a trial balance is, which balances go on the debit and credit sides, how to total it, and what it can and cannot prove.