Subdivision of Journals

Journal Proper and Journal Special

Reason

In a big business, recording of all transactions in one journal is not only inconvenient but also cause delay in collecting information required.

Therefore the journal is subdivided into many subsidiary books.

Advantages:

Convenience Division of labour Classified information

Subdivision of Journal

General Journal Special Journal

Journal

Cash Journal Goods Journal Bills Journal

Cash receipt Journal

CashPayment Journal

PurchaseJournal

Sales Journal

Purchases Returns Journal

Sales Returns Journal

Bills Receivable Journal

Bills Payable Journal

General Journals

Opening entries Closing entries Adjustment entries Transfer entries Rectification entries Purchases of fixed assets

Cash Journal

Reason:

Large number of cash transactions Properly maintained cash book is required for

control as well as avoiding the chances of fraud For timely payment to creditors as well as

reminder for receival from the debtors

Types of Cash book

Simple cash book Two columnar cash book Three columnar cash book Multi columnar cash book Cash receipt book Cash payment book Petty Cash book

Simple cash bookDr Cr

EX: Record the following transaction in the cash book and post them in the ledger.

Jan.1 Opening cash balance Rs 5000 Jan.4 Rent paid 2000 Jan.6 Interest received Rs 3000 Jan.15 Cash purchases Rs 4000 Jan. 25 Cash sales Rs 8000 Jan.31 Salaries paid Rs 2000

Date Particulars LF Amount Date Particular LF Amt

Dr Cr

Dr Interest account Cr

Dr Sales account Cr

Dr Rent A/c Cr

Dr Purchases A/c Cr

Date Particulars LF Amt Date Particular LF Amt

Jan1

Jan2

Jan25

To Balance b/d

To Interest

To Sales

To Balance b/d

5000

3000

8000

16000

8000

Jan4

Jan15

Jan31

Jan31

By Rent

By Purchases A/c

By Salaries A/c

By Balance C/d

2000

4000

2000

8000

16000

By Cash a/c 3000

By Cash A/c 8000

To Cash A/c 2000

To Cash A/c 4000

Two Columnar Cash Book

Date Particulars Discout Cash Date Particulars Discount Cash

Dr Cr

Trade Discount and Cash Discount:

•TD is the deduction granted by the supplier from the list price of the goods due to large quantity of sale where as CD is allowed by the creditors to debtors for either buying in cash or for making payment before the stipulated period.

•TD is allowed on sale of goods while CD is allowed on payment of money

•TD is not recorded in the books of accounts, they are recorded on the net price. CD is shown in the books of accounts

•TD may vary with the quantity of goods purchased, while CD may vary with time period.

Three Columnar Cash Book

Dr. Cr.

Illustration: Jan.1 Opening Balance: Cash Rs 3000, Bank Rs 4000

Jan.4 Rent paid by cheque Rs 2000

Jan.6 Received on account of cash sales Rs 3000

Jan.8 Paid to Mohan Bros. by cheque Rs 2000 and earned Rs 200 as cash discount

Jan.10 Received from Suresh by cheque Rs 2000 and allowed him Rs 100 as cash discount

Jan.12 Cash sales 20000

Jan.20 Cash purchases Rs 15000

Jan.31 Salaries paid Rs 5000

Date Particulars Discount Cash Bank Date Particulars Discount Cash Bank

Dr. Cash book Cr.

Dr. SALES ACCOUNT Cr.

Discount Account

Date Particulars Disct Cash Bank Date Particulars Disct Cash Bank

Jan1J 6J 10J 12

To Balance b/dTo Sales A/cTo SureshTo Sales A/c

To Balance b/d

100

100

3000 3000

20000

26000

6000

4000

2000

6000

200

J 6J 8

J 20J 31J 31

By Rent A/cBy Mehta Bros.By Purch. A/cBy Salrs A/cBy Balance c/d

200

200

15000 5000 6000

26000

2000

2000

2000

6000

Date Particulars Amnt. Date Particulars Amnt.

Jan.1Jan.10

By Cash A/cBy Cash A/c

300020000

Date Particulars Amnt. Date Particulars Amnt.

Jan10 To Sundries A/c 100 Jan 8 By Sundries A/c 200

Contra entry

There are certain transactions where both Cash as well as Bank accounts are involved. In such cases the transaction is recorded on both sides of the cash book.

Such an accounting entry which is recorded on both the debit and credit sides of the cash book is known as a contra entry.

In order to give a hint to the ledger-keeper, that no posting is required for such an entry, the word ‘C’ is put in the ledger folio column on both the sides of the cash book.

Cash Receipt and Payment Journal

Cash Receipt Journal: It is meant for recording all cash receipts. The posting is done daily from the Cash Receipt Book to the Ledger. The concerned accounts are all credited with amount mentioned in the Cash Receipts Journal. The total cash received (as shown by the Cash Receipt Journal) is debited to the cash account at the end of the period.

Cash Payment Journal: It is meant for recording all cash payments. The posting is done daily from the Cash Receipt Book to the ledger. The concerned accounts are all debited with amount mentioned in the Cash Payments Journal. The total cash paid (as shown by the Cash Payment Journal) is credited to the cash account at the end of the period.

Petty Cash Book

It is maintained to record petty cash expenses of the business, such as postage, cartage, stationary, cleaning charges etc.

A petty cashier is appointed under the supervision of the chief cashier, who advances money in the beginning of every month/ quarter, to make payments for all such petty expenses.

At the end of the month/ quarter, the petty cashier submits a statement of account of the expenses incurred by him during the month/ quarter and gets a fresh advance.

As the chief cashier gives him the fresh advance equivalent to the amount spent by him, in the beginning of each period, the petty cashier has a fixed balance. This advanced money is termed as ‘Imprest’ or ‘Float’.

Purchases Journal

Also known as Purchases or Bought Day Book, it is meant for recording only credit purchases of goods.

Posting is done in the credit side of the Personal accounts daily from the Purchase Book. At the end of the period (week/month), the total of Purchase book is debited to the purchase account in the ledger.

EX: Record the following transaction and post them in the ledger.

Jan.1 Purchased from Ram & Co. on credit:

38 Immersion Heaters @ Rs 10 and 20 Philips Tube lights @ Rs 20

Jan.4 Purchased from Shyam & Co. on credit:

40 Immersion Heaters @Rs 10 and 20 ECE Tube lights @ Rs 15

Jan.8 Purchased from Bajaj & Co. on credit:

20 Electric Irons @ Rs 40 and 3 Electric Mixer @ Rs 100

Jan.24 Purchased from K.C. & Co. on credit:

30 Electric Kettles @ Rs 20 and 40 Table Fans @ Rs 200

Purchases Journal

Purchase Account

Date Invoice Particulars LF Amount Amount

Jan. 1

Jan. 4

Jan. 8

Jan. 24

Jan. 31

Ram & Co.:30 Immersion Heaters @ Rs 1020 Philips Tube lights @ Rs 20Shyam & Co.:40 Immersion Heaters @Rs 1020 ECE Tube lights @ Rs 15Bajaj & Co. :20 Electric Irons @ Rs 403 Electric Mixer @ Rs 100K.C. & Co.:30 Electric Kettles @ Rs 2040 Table Fans @ Rs 200

Purchase Account Dr.

300400

400300

800300

6008000

700

700

1100

8600

11,100

Date Particulars Amnt. Date Particulars Amnt.

Jan.31 To Sundries 11,100

Sales Journal Also known as Sales or Sold Day Book, it is meant for recording only

credit sales of goods. The posting is done in the debit side of the Personal accounts daily from

the Sales Book. At the end of the period (week/month), the total of Sales book is credited to the Sales account in the ledger.

EX: Record the following transactions in the Sales Day Book and post them into the ledger.

Jan. 1 Sold to Mukesh & Co.:

10 Electric Heaters @ Rs 20 and 10 Table Lamps 2 Rs 30

Jan. 10 Sold to Suresh & Bros.:

10 Table Fans @ Rs 250 and 20 Philips Tube lights @ Rs 30

Jan. 25 Sold to Ramesh & Co.:

10 Electric Kettles @ Rs 50 and 20 ECE Tube lights @ Rs 30

Sales Journal

Mukesh & Co. Account

Sales A/c

Date Invoice Particulars LF Amount Amount

Jan. 1

Jan. 10

Jan. 25

Jan. 31

Mukesh & Co.:10 Electrical Heaters @ Rs 2010 Table lamps @ Rs 30Suresh & Bros.:40 Table Fans @Rs 25020 Philips Tube lights @ Rs 30Ramesh & Co. :10 Electric Kettles @ Rs 5020 ECE Tube lights @ Rs 30

Sales Account Cr.

200300

2500600

500600

500

3100

1100

4,700

Date Particulars Amnt. Date Particulars Amnt.

Jan.1 To Sales 500

Date Particulars Amnt. Date Particulars Amnt.

Jan.31 By Sundries 4700

Sales Returns Journal

The journal is meant for recording return of goods sold on credit. The posting from the Sales Return Journals is done daily in credit side

of the personal accounts. The total of the Sales Return Journal is posted to the debit of Sales Return Account at the end of the period (week/month).

The goods which are sold for cash, if returned, are either exchanged for new goods or parties are paid in respect of them or otherwise are recorded in the memorandum book only.

Ex: In case Ram & Co. returns the following goods on Jan. 10th :

5 Electric Heaters @ Rs 20 and 3 Philips Tube light @ Rs 30

Sales Return JournalsDate Cr. Note No Particulars LF Amnt. Amnt.

Jan.1 Ram & Co.:5 Electric Heaters @ Rs 203 Philips Tube light @ Rs 30

Sales Returns A/c Dr.

10090 190

190

Purchase Returns Journal

The journal is meant for recording return of goods purchased on credit. The posting from the Purchase Return Journals is done daily in debit

side of the personal accounts. The total of the Purchase Return Journal is posted to the credit of Purchase Return Account at the end of the period (week/month).

EX: In case Shyam & Co. is returned 3 Electric Irons @ Rs 40 on Jan. 12th and on Jan.21 3 Electric Mixer @ Rs 300 is returned to Bajaj & Co.

Purchases Returns Journal

Date Dr Note No. Particulars LF Amnt Amnt.

Jan.12

Jan.21

Jan.31

Shyam & Co. :3 Electric Irons @ Rs 40 Bajaj & Co.3 Electric Mixer @ Rs 300

Purchase Returns A/c Cr.

120

900

1020

Bills of Exchange:

It is a documentary evidence in writing, containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

A bills of exchange becomes legally valid only after its acceptance.

A bills of exchange accepted by a customer is called Bills Receivable and a bills of exchange drawn by the supplier on the business entity is called Bills Payable.

Bills Receivable and Bills Payable books record bills, accepted by customer and drawn by supplier, date-wise to help the business unit to easily find out which bill has become matured on a particular date.

Bills Receivable and Bills Payable Books:

It records bills raised on, and accepted by, customers.Bills Receivable Book

It records bills raised by suppliersBills Payable Books

Date of Receipt

Voucher No.

Party from whom received

Date of Bill Due Date

Place of Payment

Amount LF

Date of acceptance

Voucher No.

Party by whom Drawn

Date of Bill Due Date

Place of payment

Amount

LF