Page 1 :
Ranker’s Academy, (A Leading Institute of Accountancy, Business Studies and Economics for XI & XII), Chapter – 4, , RECORDING OF TRANSACTIONS – II, Special purpose books / subdivisions of journal / day books – When the size of business, and transactions are large, recording of transactions in one journal will not be convenient and, cause delay in collecting information. Many of the transactions are repetitive in nature. If, separate journals are kept for recording transactions of similar nature, journalizing and posting, will be easier. Therefore, the journal is subdivided into many subsidiary books called special, journals or day books. The journal in which transactions of a similar nature are recorded is, known as special journal or day book., Advantages of day books, 1. Division of work – the accounting work may be divided among different clerks., 2. Specialization – when the same work is done by a person regularly, he will become, more efficient., 3. Availability of information – Information relating to a particular item is available without, much delay., 4. Facility in checking – will reduce the chances of errors., Important day books, 1., 2., 3., 4., 5., 6., 7., 8., , Cash book – for recording all cash transactions., Purchase book – for recording credit purchase of goods., Sales book – for recording credit sales., Purchase returns book – for recording goods returned to the suppliers., Sales returns book – recording goods returned by the customers., Bills receivable book – to record bills received from the customers., Bills payable book – to record the bills given to suppliers., Journal proper – to record all other transactions., , Cash book – All cash transactions are recorded in this subsidiary book. Cash means notes,, coins, bank drafts and cheques. It also serves the purpose of a ledger account, because it is, written in the form of an account with debit and credit sides. Therefore, it is not necessary to, open a separate cash account in the ledger. Thus cash book is both a journal and a ledger., Types of cash book, 1., 2., 3., 4., , Single column cash book or simple cash book, Double column cash book or cash book with cash and bank columns., Triple column cash book or cash book with cash, bank and discount columns., Petty cash book., , Single column cash book – It contains only one column for amount on both sides, the format, of this cash book is similar to a ledger account. The debit side is meant for receipts and credit, side for payments., , Add. 14-A,Anupam Nagar, Govindpuri-Gwl., , ACCOUNTING-11, , CHAPTER -4, , Page 1

Page 2 :
Ranker’s Academy, (A Leading Institute of Accountancy, Business Studies and Economics for XI & XII), Format of single column cash book, Dr., Date, , Particulars, , R.N, , LF, , Amount, Rs., , Date, , (Receipts), , Particulars, , V.N LF, , Cr., Amount, Rs., , (Payments), , R.N – Receipt Number, V.N – Voucher Number, Payment by cheques – Payment by cheques though does not affect the cash balance in the, business, must be recorded in the cash books as it is the book of original entry for showing, bank transactions also. Such payments are assumed to have been made from the business, after withdrawing the amount from the bank. Therefore, cash book is first debited for such, amounts and then credited with the same. By doing so, it will have no effect in the cash, balance, i.e.,, Cash, A/c, Dr, To Bank A/c, (Cash withdrawn from bank), , Rajan, A/c, Dr, To Cash, A/c, (Cash paid to Rajan), , Direct deposits by customers – Direct payments into bank by the customers must also be, treated as if it were received from them into the business and then deposited into bank by us., Hence, cash book is first debited and then credited with the same amount, which will also, show no effect on the cash balance, i.e.,, Cash, A/c, Dr, To Mr. Tom, (Cash received from Tom), , Bank, A/c, Dr, To Cash A/c, (Cash paid into bank), , When cash is withdrawn from bank for personal use, the same treatment is followed. i.e.,, Cash, , A/c, To Bank, , Dr, A/c, , Drawings A/c, To Cash, , Dr, A/c, , The following points are to be kept in mind while preparing a single column cash book:, 1. Cash book is just like a cash account., 2. The opening balance of cash is to be entered on the debit side as “Balance b/d”, 3. The receipt side (debit side) will always be more than or equal to the payment side, (credit side), but never be less than the credit side, because no one can spend more, than they receive., 4. The difference between debit side and credit side totals will be written on the credit side, as “Balance c/d”., , Add. 14-A,Anupam Nagar, Govindpuri-Gwl., , ACCOUNTING-11, , CHAPTER -4, , Page 2

Page 3 :
Ranker’s Academy, (A Leading Institute of Accountancy, Business Studies and Economics for XI & XII), Double column cash book – A cash book with two amount columns such as cash and bank on, both sides is called Double column cash book. A businessman generally opens a current, account with a bank when the number of bank transactions is very large. As such one more, column called Bank column is added on both the sides of the cash book to record the bank, transactions., The opening balance of cash column in the cash book always shows a „debit balance‟, but the, bank column of the cash book may show either a debit balance or credit balance. A credit, balance is shown when the bank allows a customer to withdraw more than what is deposited, into the bank. Such facility is provided by the bank is called as “overdraft”., For depositing cash/cheques in the bank account, a form has to be filled, which is called a, pay-in-slip. It contains a counterfoil also which is returned to the customer with the signature, of the cashier as a receipt., The bank issues blank cheque forms to the account holders for withdrawing money. The, depositor writes the name of the party to whom payment is to be made or to his order., , Crossing – Cheques are generally crossed in practice. The payment of a crossed cheque, cannot be made directly to the party on the counter. It is to be paid only through a bank, account. When two parallel lines are drawn across the cheque, it is said to be crossed. The, various types of crossing provide different safety of payment., In case of an “A/c payee only” crossing, the amount of the cheque can be deposited only in the, account of the person whose name is written on the cheque. When the name of the bank is, written in between two parallel lines, it becomes a special crossing and payment can be made, only through the bank whose name has been written., Contra entry – It is a transaction in between cash and bank. When a transaction is recorded, on both the sides of cash book but in different columns, such entry is called “Contra Entry”. It, is more likely to occur in a double column cash book as it is a combination of cash account, and bank account. To indicate that the entry is a contra entry, the alphabet “C” should be, written in the LF column on both sides., When cash is deposited into bank, , Bank, To Cash, , A/c, A/c, , Dr 1000, 1000, , Add. 14-A,Anupam Nagar, Govindpuri-Gwl., , When cash is withdrawn from bank for office, use, Cash A/c, Dr, To Bank A/c, ACCOUNTING-11, , 2000, 2000, CHAPTER -4, , Page 3

Page 4 :
Ranker’s Academy, (A Leading Institute of Accountancy, Business Studies and Economics for XI & XII), The above will be shown in the double column cash book as follows:, Receipts, Date, , Payments, , Particulars, , LF, , Cash, , C, , Bank, , C, , Cash Rs., , Bank Rs., , Date, , 1000, 2000, , Particulars, , LF, , Cash Rs., , Bank, , C, , 1000, , Cash, , C, , Bank Rs., , 2000, , Petty cash book - A number of small payments, like telephone bills, taxi fares, postage,, cartage etc. have to be made by every organization. In this case a petty cashier is appointed, to make all the small payments and record the same in a separate cash book called „petty, cash book‟., Imprest system of petty cash book – The term imprest means advance. Under this system, of petty cash, a fixed amount is advanced to the petty cahier at the beginning of a period. The, amount advanced to him by the main cashier is called “imprest” and hence this system is, called as imprest system of petty cash., It may be maintained in two ways:a. Simple petty cash book – It is maintained just like a simple cash book. The amount, received from the main cashier is entered on the debit side and all the payments are, recorded on the credit side., b. Analytical / columnar petty cash book – Under this method a number of columns for, the amount on the payment side besides the first total amount column. The other, amount columns are provided for items of repetitive nature. One last column is, designated as „miscellaneous‟ followed by a „remarks‟ column in order to record the, payments for which there is no separate column. The nature of payment is entered in, the remarks column., At the end, all the amount columns will be totaled and the, total amount column will show the total amount spent and to be reimbursed., Example for analytical cash book:, Receipts, Rs., 200, , Date, 2001, Feb, 1, 13, 15, 28, , V., No., , Particulars, Cash, TA, Stationary, Cartage, , 200, , TOTAL, Balance c/d, , 2001, 160 March 1, 40, , Balance b/d, Cash received, , Add. 14-A,Anupam Nagar, Govindpuri-Gwl., , Total, Amt, , TA, , 10, 20, 10, , 10, , 40, 160, 200, , 10, , Cartage, , Stationary Misc. Remarks, , 20, 10, , 10, , ACCOUNTING-11, , 20, , CHAPTER -4, , Page 4

Page 5 :
Ranker’s Academy, (A Leading Institute of Accountancy, Business Studies and Economics for XI & XII), Purchase day book or Purchase journal – This book is used for recording only credit, purchases of goods made by the businessman. Cash purchases and purchases of assets are, not recorded in it. The purchase invoices from the suppliers of goods are the source, documents for recording entries in this book., Sales day book or Sales journal – All credit sales of goods are recorded in this book. Cash, sales and sale of assets are not recorded in the sales day book. The sales invoice or bill acts, as the source document for recording entries in this book., Format of a Purchase day book, Date, 2014, Jan 1, , Particulars, , Inv., No., , L/F, , Bangalore, Cycles, Ltd, (Supplier), 2 Cycles @ Rs. 1500, 3 Cycles @ Rs. 2000, Total, Less Trade discount @ 3%, , Details, Rs., 3000, 4000, 7000, 210, , Amt, Rs., , 6790, , Format of a Sales day book, Date, 2014, Jan 1, , Particulars, , Inv., No., , Swaraj Co Ltd. (Customer), 1 Cycle @ Rs. 1800, 2 Cycles @ Rs. 2500, Total, Less Trade discount @ 2%, , L/F, , Details, Rs., 1800, 5000, 6800, 136, , Amt, Rs., , 6664, , Purchase return book or purchase return journal – This book records the return of goods, purchased on credit to the suppliers. This book is also called return outward book. Debit note, is the source document for recording in this day book., Sales return book or sales return journal – The customers to whom we have sold goods on, credit may return to us. Such returns are recorded in this journal. Credit note is the source, document for recording the same., Bills receivable book – When goods are sold on credit, the seller may insist the buyer to, accept a bill for the value of goods purchased. The seller may record the same in a separate, book called Bills receivable book., Bills payable book – All details of the bills accepted by the buyer are entered in this book., Journal proper – A book maintained to record transaction, which do not have a place in, special journals is called journal proper or journal residual., **********, , Add. 14-A,Anupam Nagar, Govindpuri-Gwl., , ACCOUNTING-11, , CHAPTER -4, , Page 5