Nominal ledger and prime entry

The books of prime entry

Books of prime entry are journals where business transactions are first recorded on a day-to-day basis. Cash receipts and cash payments which are recorded no later than the next work day, may be recorded and kept in a separate journal, or specified forms.

Nominal ledger

The nominal ledger, sometimes known as the general ledger, is the main accounting record for a business and is divided into different accounts providing a systematic overview of the company's financial status.

In addition, by using a bookkeeping program, you can easily record transactions in the books of prime entry and nominal ledger at the same time.

Time of registration

Cash inflows and outflows should normally be recorded no later than the next working day and other transactions as soon as possible.

Cash inflows and outflows

Cash inflows and outflows should normally be recorded no later than the next working day. Cash inflows and outflows does not only mean payments with coins and bills, but also payments with the purchaser's credit card or a money-order, as well as any other means of payment which may be converted to cash.

Cash inflows and outflows made through bank/postal giro services or with your own credit card is not included in the cash flow concept.

Other transactions

Other transactions should be recorded as soon as possible, this means as soon as you have enough information about the affair, e.g. when you receive an invoice.

According to regulations you may postpone recording of an entry posting if certain postulations are fulfilled. 

Method of accounting

The invoice method (accrual accounting)

Under the invoice method, outgoing and incoming invoices are recorded as income or expense on the date on which they are issued or received, i.e. the invoice date or arrival date. At this stage, the invoice is accounted for as a trade receivable or a trade payable.

When trade receivables or payables are settled, these transactions are also entered in the accounts. This method allows you to obtain an accurate picture of the company's financial position by looking at the accounts.

The cash method – invoices accounted for when paid

The cash method may be used by companies which have an annual net turnover not exceeding SEK 3 million.

Under the cash method, you do not account for the year's outgoing and incoming invoices until they are paid. Outstanding invoices are entered in the accounts at the end of the financial year (balance sheet date).

Compared with the invoice method, the cash method means you have one thing less to think about, as the invoices are never seen as trade receivables or payables in the accounts.

However, the method gives a less accurate picture of the company's financial position at any given time during the year. The figures do not give a true and fair picture until the annual accounts are prepared.