While the Journal records every transaction, high-volume businesses find it impractical to record routine transactions individually. Books of Original Entry (also called Subsidiary Books or Special-Purpose Books) are designed to record specific types of transactions, saving time and enabling division of accounting work.
Subsidiary Books (Special Purpose Books)
| Book | Transactions Recorded |
|---|---|
| Cash Book | All cash and bank transactions |
| Purchases Book | Credit purchases of goods only |
| Sales Book | Credit sales of goods only |
| Purchases Returns Book | Goods returned to suppliers |
| Sales Returns Book | Goods returned by customers |
| Bills Receivable Book | Bills received from debtors |
| Bills Payable Book | Bills accepted in favour of creditors |
| Journal Proper | Transactions not covered by other books |
The Cash Book
The Cash Book serves the dual purpose of a Journal (original entry) AND a Ledger account for cash and bank. It eliminates the need for a separate Cash Account and Bank Account in the ledger.
Types of Cash Books:
- 1.Simple (Single Column) Cash Book — records only cash transactions.
- 2.Double Column (Two Column) Cash Book — has separate columns for Cash and Bank (also called Cash-cum-Bank Book).
- 3.Triple Column (Three Column) Cash Book — has columns for Cash, Bank, and Discount (discount allowed to debtors and discount received from creditors).
- Contra Entries: When cash is deposited into or withdrawn from the bank, the transaction affects BOTH the cash and bank columns. Such entries are marked 'C' in the L.F. column and are called Contra Entries.
- Cash deposited into bank: Bank column Dr / Cash column Cr
- Cash withdrawn from bank for office use: Cash column Dr / Bank column Cr
Prepare a Double Column Cash Book for the following:
- Jan 1: Opened business with cash Rs 1,00,000
- Jan 3: Deposited into bank Rs 60,000
- Jan 5: Paid rent by cheque Rs 8,000
- Jan 7: Received from debtor Mohan by cheque Rs 15,000
| Date | Particulars | Cash (Dr) | Bank (Dr) | Date | Particulars | Cash (Cr) | Bank (Cr) |
|---|---|---|---|---|---|---|---|
| Jan 1 | Capital | 1,00,000 | | Jan 3 | Bank (C) | 60,000 | |
| Jan 3 | Cash (C) | | 60,000 | Jan 5 | Rent | | 8,000 |
| Jan 7 | Mohan | | 15,000 | | | | |
| | Balance c/d | | | | | 40,000 | 67,000 |
Triple Column Cash Book — Discount columns
If Mohan pays Rs 14,500 in full settlement of Rs 15,000 (discount allowed Rs 500):
- Bank Dr 14,500; Discount Allowed Dr 500 / Mohan Cr 15,000 (in cash book, discount allowed side Dr column)
Petty Cash Book
- A Petty Cash Book records small, frequent cash payments (stationery, postage, tea, etc.). The Imprest System is used:
- A fixed amount (the imprest) is advanced to the petty cashier at the start of a period.
- At the end of the period, the petty cashier accounts for all spending; the main cashier reimburses the exact amount spent, restoring the imprest to its original fixed amount.
Imprest amount = Rs 2,000. During the week, petty cashier spends Rs 1,350. At week end, the main cashier reimburses Rs 1,350, and petty cashier again has Rs 2,000.
Purchases Book
Records all credit purchases of goods (not assets). The source document is the supplier's invoice.
Format: Date | Supplier Name | Invoice No. | L.F. | Amount (Rs)
At the end of the month, the total is posted as: Purchases A/c Dr (Total) / To Individual Creditor A/cs
Three credit purchases in the month:
- Raj Traders: Rs 25,000
- Mohan Bros: Rs 18,000
- Shyam & Co: Rs 32,000
Total = Rs 75,000. Journal: Purchases A/c Dr 75,000 / To Raj Traders 25,000 / To Mohan Bros 18,000 / To Shyam & Co 32,000
Sales Book
Records all credit sales of goods only. Source document is the sales invoice issued by the firm.
At month end: Individual Debtors A/cs Dr (individual) / To Sales A/c (Total)
Journal Proper (General Journal)
- Used for transactions not covered by any other subsidiary book:
- Opening entries (Assets and Liabilities at start of year)
- Closing entries (transferring nominal accounts to P&L)
- Adjustment entries (accruals, prepayments, depreciation)
- Rectification entries (correcting errors)
- Purchase/sale of fixed assets on credit
- Goods distributed as free samples
Purchase of computer on credit from HP Ltd Rs 60,000:
Computer A/c Dr 60,000 / To HP Ltd A/c 60,000 · (This goes in Journal Proper, NOT Purchases Book, because it is a fixed asset, not goods) ·
Goods distributed as free samples Rs 3,000:
Advertising A/c Dr 3,000 / To Purchases A/c 3,000 · (Free samples are an advertising expense; they go in Journal Proper) ·
Closing entry for transferring Rent Expense:
Profit & Loss A/c Dr (amount) / To Rent A/c (amount) · (Closing entries are in Journal Proper) ·
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Common mistakes
- Recording credit purchases of fixed assets in the Purchases Book — only goods meant for resale go in the Purchases Book.
- Forgetting to mark Contra Entries with 'C' in the L.F. column.
- Treating the discount columns of a Triple Column Cash Book as accounts — discount columns are memorandum columns; they are posted separately to Discount Allowed A/c and Discount Received A/c in the ledger.
- Including cash purchases in the Purchases Book — it records credit purchases ONLY.
Summary
Subsidiary books replace individual journal entries for high-volume routine transactions. The Cash Book is the most important, serving as both a journal and ledger for cash/bank transactions. Special books (Purchases, Sales, Returns) handle credit transactions. Transactions not fitting any special book are recorded in the Journal Proper.