Page 75 - Book-keeping for Secondary Schools Student’s Book Form One

Recording of business transactions

furniture is purchased on 16 January 2023 for TZS 550,000 on credit from Jerome. The
transaction involves an increase in asset (furniture) and an increase in liabilities (amount
payable to Jerome, the creditor). Following the double entry rules, the recording in the
journal will be presented as follows:

General journal
FOR ONLINE READING ONLY
Date Details Folio Debit Credit

TZS TZS
16/1/2023 Furniture account 550,000
Other Payables 550,000

Being the purchase of furniture on credit
from Jerome

Opening entries
Opening entries refer to the initial entries used to record business transactions when

the business is being established or starting a new accounting period. Sometimes, the
business will have balances of different items, while missing others. For example, a
business may have balances of assets and liabilities but missing the balance of capital
in its records. In this case, the value of capital can be calculated using the accounting
equation that is:

ASSETS = CAPITAL + LIABILITIES

The values of each asset and liabilities together with the calculated value of capital are
recorded in the general journal showing debit entries for assets and credit entries for
liabilities and capital. Once this is done, subsequent increases and decreases in assets,
liabilities and capital are made in the usual way as for any other business, following the
rules of debit and credit.

Activity 4.12

Your friend would like to know why sales daybooks, purchases daybooks, purchase
returns, sales returns, cash books and journal proper are called books of prime entry. Write
a brief summary of your response to him. In your response, please point out why it is
important for an enterprise to use books of prime entry to record its daily transactions by
using different sources.

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