Important Theory Questions & Notes Books of Prime Entry Sales day book Purchase day book Sales return day book Purchase return day book General journal Cash book they're called books of prime entry because they're where transactions from source documents are first recorded. These are not accounts; they are simply books that record the details of transactions, almost like a diary. The firm will have a separate book for each kind of transaction. The type of the transaction will affect which book it is entered into. Sales will be entered in one book, purchases in another book, cash in another book, and so on. Causes of depreciation Wear and tear/physical deterioration Obsolescence/economic reasons Depletion Passage of time Explain why depreciation is an application of the matching/accruals principle. Continuity of the business is assumed for an indefinite period. Non-current (fixed) assets will be shown at their book value in the balance sheet and not their expected sale values. The cost of the non current (fixed) asset can be spread over the life of the asset State advantages of maintaining a full set of double entry accounts Balance of assets, liabilities, trade receivables (debtors), trade payables (creditors) can readily be obtained. Individual transactions will be recorded and can be located easily. Accuracy of the accounts can be checked at regular intervals. The accounts can be presented to the bank in order to obtain a loan or overdraft facility Profit can be ...
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