Financial Accounting · General ledger accounts and journal entries

Ledger Accounts and the Books of Prime Entry Explained

Updated 11 October 2026 · Fact-checked

Books of prime entry are the first place a transaction is recorded from a source document. Day books, the cash book and the journal collect similar items in groups. You then post the totals to the general ledger using double entry. To solve questions, identify the book, then debit and credit the correct accounts.

Understand Ledger Accounts and the Books of Prime Entry

Every business transaction starts with a source document: an invoice, credit note, receipt or cheque stub. You do not write each one straight into the ledger. That would be slow and error-prone. Instead you first record it in a book of prime entry.

The main books of prime entry are:

Sales day book: credit sales invoices.
Purchase day book: credit purchase invoices.
Sales returns day book: credit notes issued to customers.
Purchase returns day book: credit notes received from suppliers.
Cash book: receipts and payments through the bank.
Petty cash book: small cash payments.
Journal: everything else, such as non-current asset purchases on credit, corrections and opening entries.

The day books and the journal are only lists. They are not part of double entry. The cash book is also a book of prime entry, but where it doubles as the bank account it is part of double entry. The petty cash book can double as a ledger account in the same way. The general ledger holds the double entry. At regular intervals you add up each day book and post the totals to the ledger accounts. For example, the sales day book total is debited to the receivables control account and credited to sales (and to sales tax payable if sales tax applies).

The ledger is the full set of accounts, each recording the transactions and balance for one item. The journal is a book of prime entry that records the debit and credit entries for a transaction, which may involve several accounts, with a narrative, before they are posted. That is the key difference between the two: the journal is where you first record unusual transactions, the ledger is where the accounts and the double entry are held.

Individual customer and supplier balances sit in the receivables ledger and payables ledger. These are memorandum records. The control accounts in the general ledger hold the totals.

Key formulas to remember

Sales day book posting: Dr Receivables control (gross total); Cr Sales (net total); Cr Sales tax payable (tax total); Gross = net + sales tax. Post the totals, not each invoice, to the general ledger.
Purchase day book posting: Dr Purchases (net total); Dr Sales tax recoverable (tax total); Cr Payables control (gross total); Use an expense or asset account instead of purchases if the item is not goods for resale.
Sales returns day book posting: Dr Sales returns (net); Dr Sales tax payable (tax); Cr Receivables control (gross); Credit notes reverse the original sale.
Purchase returns day book posting: Dr Payables control (gross); Cr Purchase returns (net); Cr Sales tax recoverable (tax); Credit notes received reduce what you owe.
Cash book posting: Receipts: Dr Bank, Cr the other account. Payments: Dr the other account, Cr Bank; Bank is an asset, so a receipt is a debit and a payment is a credit.
Ledger account balance: Balance c/d = larger side total − smaller side total; Insert balance c/d on the smaller side so both sides total the same. Show balance b/d below the totals on the side opposite to c/d, which is the larger side, as the first line of the next period.

How to solve Ledger Accounts and the Books of Prime Entry questions

Use this routine for any question on prime entry books or ledger posting.

1Read the question and identify the transaction type: credit sale, credit purchase, return, cash receipt, cash payment or other.
2Name the book of prime entry where it is first recorded. Anything that does not fit a day book or cash book goes through the journal.
3Work out the net, sales tax and gross amounts if sales tax is involved.
4Decide the debit and credit using double entry: which account gains value or expense (debit) and which gives value or income (credit).
5Post the day book total, not individual invoices, to the general ledger accounts.
6If asked for a balance, add both sides and find the difference. Put it on the smaller side as balance c/d so the totals are equal, then show balance b/d below the totals on the side opposite to c/d, which is the larger side.
7Check that total debits equal total credits, and that the answer is in the format asked (account name, amount, debit or credit).

Quickest way: Day book to ledger in three checks

When to use it: Use this in Section A objective questions where you have about 2 minutes per 2-mark question (120 minutes for 100 marks) and must name the debit or credit.

Ask: who owes whom? A credit sale makes the customer owe you, so debit receivables. A credit purchase means you owe the supplier, so credit payables.
Ask: is it a return? If so, reverse the direction of the original entry.
Ask: is it cash or bank? Money in is a debit to bank. Money out is a credit to bank.
Match the answer to the option that fits all three checks, and eliminate options that put sales tax on the wrong side.

Common mistakes in Ledger Accounts and the Books of Prime Entry

Treating day books as part of double entry and thinking each invoice is posted twice.
Day books look like ledger accounts because they have amounts and dates.
Fix: Remember they are lists only. The double entry happens when you post the totals to the general ledger.
Debiting sales and crediting receivables for a credit sale.
Students match 'sales' with 'debit' by instinct.
Fix: Sales are income, so credit sales. The customer owes you, so debit receivables.
Posting the gross invoice total to sales instead of the net amount.
The question gives the total first and students forget sales tax.
Fix: Split gross into net and sales tax. Only net goes to sales or purchases.
Recording a credit purchase of a non-current asset in the purchase day book.
It is a credit purchase, so it seems to belong there.
Fix: The purchase day book is for goods for resale. Record asset purchases through the journal and debit the asset account.
Putting bank receipts on the credit side of the bank account.
Students think of the bank statement, where the bank sees your deposit as a credit.
Fix: In your own books, bank is an asset. Money in is a debit, money out is a credit.
Putting the balance c/d on the wrong side when balancing an account.
Rushing the final step.
Fix: Put balance c/d on the smaller side so both sides total the same. Show balance b/d below the totals on the side opposite to c/d, which is the larger side.

Worked examples

Example 1

A business's sales day book for a month shows net sales of $40,000 and sales tax of $8,000. Which entries are made in the general ledger?

Show the solution

Gross total = $40,000 + $8,000 = $48,000.
Customers owe the business the gross amount, so debit receivables control with $48,000.
Sales are income, so credit sales with the net amount of $40,000.
Sales tax collected is owed to the tax authority, so credit sales tax payable with $8,000.
Check: debit $48,000 equals credits $40,000 + $8,000 = $48,000.

Answer: Dr Receivables control $48,000; Cr Sales $40,000; Cr Sales tax payable $8,000.

Example 2

The receivables control account has an opening balance of $12,000 debit. During the month, credit sales (gross) were $30,000, cash received from customers was $27,000 and sales returns (gross) were $2,000. Find the closing balance.

Show the solution

Debit side: opening balance $12,000 + credit sales $30,000 = $42,000.
Credit side: cash received $27,000 + sales returns $2,000 = $29,000.
Balance = $42,000 − $29,000 = $13,000.
The debit side is larger, so the credit side carries down $13,000 as balance c/d.
Both sides total $42,000. The $13,000 is brought down as a debit balance.

Answer: Closing balance $13,000 debit (balance b/d on the debit side).

Exam tips

Section A questions often ask which book a transaction is first recorded in. Memorise which items go in each day book and that the journal holds the rest.
For multiple response questions, read the number you must select and check each option against double entry rules separately.
In number entry questions, check whether the figure asked is net, tax or gross before you calculate.
In Section B ledger questions, show opening balances, every posting and the balance c/d clearly, because method can earn marks even if a figure is wrong.
Use rough sense checks: a receivables control balance should normally be a debit, and a payables control balance a credit.

Practice questions from General ledger accounts and journal entries

Ledger Accounts and the Books of Prime Entry: frequently asked questions

What is the difference between the ledger and the journal?

The journal is a book of prime entry where you first record the debit and credit entries for a transaction, which may involve several accounts, with a narrative. The ledger is the set of accounts where double entry is held. Journal entries are posted to the ledger.

Which transactions go in the sales day book?

Only credit sales of goods the business normally sells, listed from sales invoices. Cash sales go in the cash book. Returns go in the sales returns day book.

How do you post from day books to the ledger?

Add up each day book for the period. Post only the totals to the relevant general ledger accounts, such as receivables control, sales and sales tax. Individual invoices are entered in the receivables or payables ledger as memorandum records, so they are not posted to the general ledger a second time.

Is the cash book part of double entry?

It can be either. In many exam questions the cash book is both a book of prime entry and the bank ledger account, so entries in it are part of double entry. The petty cash book can also double as a ledger account. Read the question to see how it is treated.