Books of prime entry
- Cash book — records transactions of large amounts of cash and bank.
- Petty cash book — records transactions of small amounts of cash.
- Sales journal — records credit sales.
- Purchases journal — records credit purchases.
- Sales returns journal — records returns inwards.
- Purchases returns journal — records returns outwards.
- General journal — records everything else.
Trade vs cash discounts
| Trade discount | Cash discount |
|---|---|
| Given when customers purchase in bulk. | Given when payment is made before a set time. |
| Encourages people to buy in large quantities. | Encourages quick payment by trade receivables. |
| Not recorded in any book of account, but shown on the invoice. | Recorded in the cash book. |
| The amount recorded in the books is after deducting the trade discount. |
Imprest system
Imprest system of petty cash — a fixed maximum amount is set for small transactions each month. Each month money is added to restore the petty cash back to the fixed amount.