CHAPTER 10

Special Purpose Books -Cash Book

LEARNING OBJECTIVES
This Chapter would enable you to understand:
OMeaning of Practical System of Accounting
Meaning of Subsidiary Books of Accounting
Classification of Subsidiary Books
OAdvantages ofSubsidiary Books
Meaning and Features of Cash Book
Kinds of Cash Book
Balancing and Posting ofCash Book
Petty Cash Book

Business transactions are numerous and it becomes difficult to record all the
transactions in one book of prime entry, i.e., Journal Book. For example, in a business,
most ofthe transactions may relate to receipts and payments of cash, sale of goods
and their purchase. It is convenient to maintain a separate book for each such class of
transactions one to record cash transactions, another to record purchase of goods
and yet another to record sale of goods. Book ofthistype is calleda hook of original
entry or prime entry it is a special form of Journal, a sub-division of it. Journal
entry is not passed for the transactions recorded in such books. They are posted to the
ledger accounts. The system is called the Practical System of Accounting,
These books of original or prime entry are alsocalled a Special Journalor Subsidiary
Books since Ledger Accounts are prepared from the transactions recorded in them
and without this process of Ledger posting, Trial Balance cannot be drawn.

SUBSIDIARY BOOKS OR SUB-DIVISION OF JOURNAL

We had discussed earlier that it is practically difficult to record all the transactions in
one book of prime entry, i.e., Journal. For convenience, the Journal is divided into a
number of Subsidiary Books. These are:
1. Cash Book: To, record receipts, and payments,of cash, including receipts into and
payments out of the bank.
2. Purchases Book: To record credit purchases of goods dealt in by the firm. All
credit purchases of goods are recorded in this book.
3. Sales Book: To record the credit sales of goods dealt in by the firm.
4. Purchases Return Book: To record the return of goods previously purchased on credit.
5. Sales Return Book: To record the return of credit sales made by customers.
6. Journal Proper: To record the transactions which cannot be recorded in any of
the books mentioned above.
lt may be noted that in all the above cases the word 'Journal' may be used for the
word 'Book'
 Double Entry Book
KeepingCBSE X SP
Spee

10.2
Cas
Books
Advantages of Subsidiary advantages.
Cas
has the following rec
The use of subsidiary books Subsidiary Books a o
in the place of one Journal, also the
Division of Worh: Since c a n be
divided among
a n u m b e r of persons
ns.
fact
work
maintained, accounting work 1s h a n d l e d by a parti

(10) Specialisation and Efficiency:

When the same ticular par

knowledge and expertise in i Sub

person for a
considerable time, he acquires
is done more efficion
and
efficient in handling it. Thus, accounting Kin
becomes more
be undertaken simultanea.
processes
can
ously The
(1) Saving of Time: Various accounting it leads to saving of time,
because of the use of number of books. Thus,
maintained for each clasa
separate book is ss of 2
(iu) Availability of Information: Since a place,
each class is available at one
transactions, information relating to
() Facility in Checking: In case, the Trial
Balance does not agree, locating the ero
or errors 1s facilitated by the existence of separate books. Since the number d
transactions is less in each Subsidiary Book as compared to only one Journal, i
In
is easy to locate the errors.
(ui) Responsibility: Division of work results in assigning a particular job,to a particula: (1)
person. If an error is committed in recording, responsibility can be easilyfixe Sir
SIO
In this Chapter we shall discuss Cash Book while other Subsidiary Books shall be
ru
discussed in the next Chapter.
Dr.
CASH BOOK Dat

Cash transactions in firm are generally

a
large in number, therefore, it is convenien'
to maintain separate Cash Book.
n
Cash Book is a book
of prime entry in which cash and bank transactions are recordeu
in a chronological order, i.e., in the order
they occur. Receipts are recorded on the deu
side of Cash Book while payments are recorded on the credit side.
Cash transactio
are recorded
in the cash column and bank
transactions
Column. A balance is struck by deducting total are recorded in the Bank
Da0w
the cash in hand and balance at bank. payments from total receipts tO

Features of Cash Book

1, Only cash and bank transactions are
recorded in the Cash Book.
2. Cash and cheque receipts are
recorded on the debit heque
payments are recorded on the credit side while cash and
side.
3. It records only one aspect of the
4. Cash and bank transactions transaction,
i.e., cash.
are
order, i.e., in order they take recorded in the onologi
Cash Book in
5. It
place. a
chron
performs the function ot both
Journal and the
Ledger at the same
time
 Purpose oks -Cash Book
Special
Speo 10.3
ash Book-A Subsidiary Book and a Principal Book
h and bank transactions are
recorded in the Cash Book and on the basis of
Ledger Accounts such
record, are prepared. Therefore, Cash Book is a Subsidiary Book. At
me time,
the same tim Cash Book by itself is Cash
Account and Bank Account. As a matter of
alances are entered in the Trial Balance
fact, the bala
directly. Cash Book,
of the
partof the Ledger-alse-Hence, it is also a Principal Book, Cash Book is,therefore, is a,
Subsidiary Book and a Principal Book. thus, both a

Kinds of Cash Books

Sly There are three types of Cash Books:
1 Simple Cash Book or Single Column Cash Book: For recording cash transactions
only.
. Two-column or Double-column
Of
Cash Book (Cash Book with cash and bank columns):
For recording cash and bank transactions.

Note: Discount Received, Discount Allowed, and Cancellation of Discount

Allowed (in case of dishonour of cheque) will be recorded Received or Discount
Journal through Proper.
In addition to the main Cash Book, firms sometimes also maintain a Petty Cash
Book.
(1) Simple Cash Book or Single Column Cash Book

Simple Cash Book looks like an account, with one column on each side. On the left-hand
side receipts of cash are recorded and on
the right-hand side payments are recorded. The
ruling is as follows:

pr.
SIMPLE CASH BOOK Cr.
Date Particulars V. No. LF. Date Particulars V. No. LF.
R ec e i pt s Sd e P ay m e nt s Sde
In the column for:
) Date: Date of transaction is written.
(1) Particulars: The name of the account under which cash has been
received or paid
1s written: In an existing business, Cash Book starts with the Opening Balance of
cash written on the receipts side as To Balance bld. A new business will not have
an opening balance.
u) Voucher No. (V. No.): The document supporting a transaction is called a
Voucher.
here are two types of cash vouchers: (1) Receipt Voucher and (2) Payment Voucher
Generally, a Voucher has a serial number which is written in this column.
Ledger Folio (L.F,); In the column for 'LF:', page number of the Ledger, where
the amount is
posted, is written.
Amount: The amounts received are written on the Debit side and amounts paid
are
written on the Credit side.
CCOunt is an asset account. Therefore, at the time of recording cash transactions
Credeash Book the rule followed is "Increases in assets are debited and decreases are
redited." For exa
xample, cash is received froma customer. Cash is debited, i.e., cash is
recorded in Cash Column in the receipts (debit) side of the Cash Book.
 CHAPTER11
Special
Special Purpose Books II-Other Books

LEARNING OBJECTIVES
This Chapter would enable you to understan d:
Sub-Division of Journal
OPurchases Book
Sales Book
OPurchases Return Book

n Sales Return Book, its Role and Importance in Practical System of

Book-keeping
Journal Proper
O Mechanics of Posting of Subsidiary Books or Special Journals

Iournal is sub-divided into Books of Original Entry as there are number of

transactions in a large-sized business firm. It is sub-divided into:
() Cash Book;
(i) Purchases Book;
(i) Sales Book;
iv) Purchases Return (or Returns Outward) Book;
() Sales Return (or Returns Inward) Book; and
(ui) Journal Proper.
The above Books are also called Subsidiary Books or Special Journals or the
Books ofOriginal Entry,
Sub-Division of Journal

Journal Proper
Special or
Journals General Journal

Cash Purchases Sales PurchaseS Sales Return

Book Book Book Return Book Book

We
Ve already discussed Cash Book in the previous Chapter. In this Chapter, we
shall discuss other subsidiary books.
11.2 Entry ook
Double
Keeping-CB X

PURCHASES BOOK OR PURCHASES JOURNAL

Purchases Books is a subsidiary book in which credit purchases of goods, i.e., good
which the firm deals or uses for manufacturing goods are recorded. Thus, cash purchas
of goods and non-goods like fixed assets are not recorded in Purchases Ra hases
oices receivsook
The entries in the Purchases Book are recorded on the basis of Invoices recejv
from the suppliers with the amount net of trade discount plus GST (CGST
SGST or IGST) payable.
and
Rulling of Purchases Book or Purchases Journal
The ruling of a Purchases Book or Purchases Journal is as follows:

PURCHASES BOOK OR PURCHASES JOURNAL

Date Particulars Invoice LF. Details Cost Input Input Input Freight, Total
No. CGST SGST IGST Catage
etc.(
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
totc

Fea

The Purchases Book has eleven columns:

1. Date: The date of transaction is written.
2. Particulars: The name of the seller of goods, name of the articles and quantities
purchased are written.
3. Invoice No.: Invoice number of the goods purchased is written.
4. Ledger Folio (L.F); When the Purchases Book is posted to the ledger, the
pa
number of the ledger is written.

5. Details: The amount in

respect of each article is written in this column. It u
discount is allowed by the seller, it is deducted from the ount

gross amo
Thereafter, GST (IGST or CGST and SGST) is levied. It is shown as follow
Quantity x Price per Article
Less: Trade Discoun

Add: IGST; or
CGST; and
SGST
Add: Expenses (Freight/Cartage, etc.)
Total Payable
 Books Il-Other Books 11.3
Purpose
Spec
al

Cost: Cost of goods purchased, i.e., excluding GST IGST or CGST and SGST)
6.
p a y
ble and expenses payable, if any.
a b l e

TnDut CGST: The amount of CGST payable on intra-state (i.e., within the state)
7 purchases is written.

QTnput SGST:
The amount of SGST payable on intra-state (i.e., within the state)
purchases is written.

IGST: The amount of 1GST payable on inter-state (i.e., outside the state)
9. Input
a
purchases is written.
etc.,
The expenses say freight, cartage and/or packing material,
10, Expenses:
payable to the seller of goods is written.
CGST and SGST)
The amount of invoice including GST (IGST or
11. Total Payable:
and expenses payable is written.
Book is
fortnight or a month) the Purchases
At the end of a specified period (a week, a

to the Purchases Account.

totalled. This total is posted
Purchases Book or
Purchases Journal
Features of
manufacture a r e recorded
traded in or material used for
1. Credit purchases of goods a s office
items not dealt in, such
Credit purchases of
in the Purchases Book. Purchases Book.
recorded in the
furniture or computers
for office use, a r e not
recorded in
Purchases Book since they are

are not recorded in the

2. Cash purchases
Cash Book. received from
made on the basis of invoices
Purchases Book are
3. The entries in the
amount after trade discount.
the seller of goods with
the net
customer. It shows the' goods sold.
the
seller and sent to
lt is document prepared by CGST
with GST (IGST
Volce: a or
along
quantities, prices and trade discount
with description,
payable.
and SGST) and expenses

Utilities of Purchases BooK each credit purchase.

Journal entry for
t reduces the volume of work required to pass are recorded in a
credit purchases
since all the
becomes easier
edger posting
single book. purchases of goods.
total of credit
3. It is Sible to have
periodic
possi a
and calculations.
other
4. It becon the price charged
Decomes easier to check without levy of GST.
Purchases
Book is written
Let r s t understand
how
 Double Entry Book Keeping-CBse
11.4 BSE SoeC

the following information

of M/s. Narain k.
of M/s.
lustration 1 (Without GST),. From &C In ce

month of February, 2018:

Delhi, the Purchases Book for the
prepare 1evy
2018 inte
credit:
Purchased from M/s. Brown&Co., Kolkata
on
February 1
at
5 gross pencils 1,200 per gross
2dozen registers500 per dozen CG
Less:Trade Discount@ 10% ACC
February 2 Purchased for cash from the Stationery Mart:
10 dozen exercise books 7 300 per dozen pu
Office Goods Co. on credit for 20,000
February 3 Purchased computer printer for office use from M/s.
February 4 Purchased on credit from The Paper Co., Delhi
8 reams of white paper @ T 500 per ream fo
10 reams of ruled paper@ 600 per ream Te

Less: Trade Discount 10%

Purchased 80 Reynolds Pens 5 each from M/s. Verma Bros., Delhi on credit
February 5
In the Books of M/s. Narain&Co., Delhi
Solution:
PURCHASES BOOK

Date Particulars
InvoiceNo. LF. Details Amount

2018
Feb. 1 Mis. Brown& Co., Kolkata
5 gross Pencils 1,200 per gross 6,000
2dozen Registers@500 perdozen 1,000
7,000
Less: Trade Discount @ 10% 700 6,300
Feb. 4 The PaperCo., Delhi
8 Reams White Paper 7 500 per ream 4,000
10 Reams Ruled Paper 7 600 per ream 6,000
10,000
Less:Trade Discount 10% 1,000 9.00
Feb. 5 M/s. Verma Bros., Delhi
400
80 Reynolds Pens@75 per pen
15,700
Feb. 28 Purchases Alc .Dr
sonal
Note: Purchases for cash are recorded in the Cash Book. Purchase ofLa computer-printer Isa
entered in the Purchases Book since ihefirm doas not trada init.
Important Items
1. Goods and Services Tax (GST); It is a tax levied and paid on supply otgoods

and/or services or both. It is charged by the seller on the net sale value, i.e., salev
and

less trade discount. The seller is responsible to charge GST on sale made by him
ota
in the Government Paid 1s
depositit Account. For the purchaser of goods, GST
it GST
cost of purchase because GST Paid on Purchases Input GST) is set off against
Collected on Sales (Output GST)
 11.5
Books I-Other Books
Purpose
Shecial
will
i.e., within the state) purchase of goods, the seller of goods
intra-state
of at half the prescribed rate of GST each. And, in
case of
C G S T and SGST
levy
both
seller of goods will levy IGs
eyate (e, outside the state) purchase of goods, the
inter-sta
rate.
p r e s c r i b e d

the CGST
at on intra-state purchase goods
of is debited to Tnput
CGSTand SSGST Paid
and inter-state
SGST Account' respectively,. And, IGST Paid on
Account' a n d
nt' and Tnput
of goods
urchasee of
is debited to Input IGST Account'
in the invoice
Freight orCartage:
C The seller of goods may include freight chargesmaintained to
In the Purchases Book, a separate column is
the goods.
for sending divided between cost and freight.
charges. Thetotalinvoice price is
eord the freight
r e c o r

Purchases Account and the total of freight

of cost
Thetotal of column is debited to to
invoice price is credited
Account. The total of
enolumn is debited to Freight Inwards
Seller's Account.
include
Like freight, the seller of goods may
Packing and Forwarding Eaxpenses:
2
expenses in the invoice. In the Purchases Book, a separate
forwarding
Dacking and expenses.
The total
maintained to record
such packing and forwarding
column is expenses. The total of
among cost, packing and
forwarding
divided
invoice price is and forwarding
and the total of packing
debited to Purchases Account
cost column is The total of invoice
Forwarding Expenses Account.
expenses is debited to Packing and
63 to Seller's Account.
price is credited Narain & Co.,
information of M/s.
From the following
Illustration 2 (With GST). of February, 2018:
Purchases Book for the month
Delhi, prepare the
2018
Kolkata on credit:
February 1 Purchasedfrom M/s. Brown &Co,
5gross pencils @ 1,200pergross
2 dozen registers@ 500 per dozen
Less:Trade Discount 10%
Mart:
the Stationery
FeDruary 2 Purchased for cash from dozen 7300 per
10 dozen exercise books @ Goods Co. on credit for 20,000
from M/s. Office
Fe Purchased computer printer for office use

Delhi:
The Paper Co.,
0 ebruary 4 Purchased on dit from
500 per ream
8 reams of white paper7
600 per ream
of ruled paper @7
10 reams
10%
Less:Trade Discount Delhi on credit
each from M/s. Verma Bros.,
Pens@5
February 5 Purchased&
d 80 Reynolds 5%.
IGST is levied
Note: CGST and SGST 2.5% each and
is levied @