1. Special Purpose Books (Subsidiary Books)
For large businesses with high volumes of transactions, recording everything in one Journal becomes cumbersome. Special Purpose Books (SPBs) are used to record specific types of transactions, reducing workload and enabling division of work.
- Purchase Book (Purchase Day Book): Records all credit purchases of goods only. Cash purchases are NOT recorded here.
- Sales Book (Sales Day Book): Records all credit sales of goods only. Cash sales NOT included.
- Purchase Returns Book (Returns Outward Book): Records goods returned to suppliers.
- Sales Returns Book (Returns Inward Book): Records goods returned by customers.
- Bills Receivable Book: Records all bills/promissory notes received from debtors.
- Bills Payable Book: Records all bills/promissory notes accepted in favour of creditors.
- Cash Book: Records all cash and bank transactions.
- Journal Proper: Records transactions that do not fit in any other SPB (e.g., opening entries, closing entries, purchase/sale of assets on credit, rectification entries).
2. Cash Book
The Cash Book is both a Journal (book of original entry) and a Ledger (it serves as the Cash Account and Bank Account). Transactions are recorded in chronological order.
Bank column may show a Credit balance (bank overdraft).
Types of Cash Book
| Type | Columns | What it Records |
|---|---|---|
| Single Column Cash Book | Cash column only | Only cash receipts and cash payments |
| Double Column Cash Book | Cash + Discount OR Cash + Bank | Cash & bank transactions + discount allowed/received |
| Triple Column Cash Book | Cash + Bank + Discount | Cash, bank, and discount (most common in practice) |
Contra Entry
A Contra Entry is one that affects both Cash and Bank columns simultaneously:
- Cash deposited into bank: Bank Dr, Cash Cr → marked 'C' in both Ledger Folio columns.
- Cash withdrawn from bank: Cash Dr, Bank Cr → also a contra entry.
3. Petty Cash Book
The Petty Cash Book records small, routine cash payments (postage, stationery, conveyance, refreshment, etc.) handled by a junior cashier (petty cashier).
Imprest System
Main cashier gives petty cashier a fixed amount (imprest amount) at the start of each period. At end of period, petty cashier submits receipts. Main cashier reimburses the exact amount spent, restoring the imprest amount.
The Petty Cash Book has an Analytical format — separate columns for each category of expense (Postage, Conveyance, Stationery, etc.) to classify expenses at a glance.
4. Purchase Book (Day Book)
Only credit purchases of goods are recorded. Format includes: Date | Supplier Name | Invoice No. | LF | Amount.
At the end of the month, the total of the Purchase Book is posted to the Debit side of Purchases Account in the Ledger. Individual supplier accounts are credited with their respective invoice amounts.
5. Sales Book (Day Book)
Only credit sales of goods are recorded. Format includes: Date | Customer Name | Invoice No. | LF | Amount.
Total is posted to the Credit side of Sales Account. Individual customer accounts are debited.
6. Returns Books
- Purchase Returns Book: Records goods returned to suppliers. Total posted to Debit of Supplier's A/c (individually) and Credit of Purchase Returns A/c (total).
- Sales Returns Book: Records goods returned by buyers. Total posted to Debit of Sales Returns A/c (total) and Credit of Customer's A/c (individually).
7. Journal Proper
The Journal Proper (or General Journal) records transactions not covered by any special purpose book:
- Opening entry (beginning of the year)
- Closing entries (end of year — closing nominal accounts)
- Purchase / sale of fixed assets on credit
- Adjusting entries (depreciation, outstanding expenses, prepaid expenses)
- Rectification entries
- Transfer entries (between accounts)