How is accounting information recorded?

How is accounting information recorded?

1. Processes used to record financial transactions

   • Transactions are first recorded in books of prime entry and then the ledger system.
     • Prime entry records consist of; the cash book, petty cash book, sales day book, purchases day book and the journal.
     • The ledger system consists of general ledger, payables ledger and receivables ledger.

2. Definition for a book of prime entry and a ledger

   • A book of prime entry is to record how and where money is used throughout the day.
   • A ledger is to record how the business is using it's money (e.g. wages advertisement and rent) and who owes them money and who they owe money to.

3. The purpose of content of the books of prime entry

   • Books of prime entry serve to record transactions as soon as possible so that they are not lost or forgotten about.