Recording of Transactions – II

Introduction

In the previous chapter, you learned that all business transactions are initially recorded in the journal and then posted to ledger accounts. This process is fundamental to the accounting cycle. However, as a business grows and the number of transactions increases, recording each transaction individually in the journal becomes cumbersome and inefficient. To address this, the journal is subdivided into special journals, each designed to record transactions of a similar nature quickly, efficiently, and accurately. These special journals help in streamlining the recording process, reducing errors, and saving time. For example, transactions related to cash are recorded in the cash book, which serves as both a journal and a ledger for cash transactions. This chapter focuses on the recording of transactions related to cash and bank through various types of cash books and petty cash books, explaining their formats, posting procedures, and balancing methods. **Table on page 1 (5×5)** | Recording of Transactions-II | | | 4 | | | --- | --- | --- | --- | --- | | | | | 4 | | | In chapter 3, you learnt that all th business transactions are first recorded in th journal and then they are posted in the ledge accounts. A small business may be able to recor all its transactions in one book only, i.e., the journa But as the business expands and the number o transactions becomes large, it may becom cumbersome to jour-nalise each transaction. Fo quick, efficient and accurate recording of busines transactions, Journal is sub-divided into specia journals. Many of the business transactions ar repetitive in nature. They can be easily recorded i LEARNING OBJECTIVES special journals, each meant for recording all th After studying this transactions of a similar nature. For example, a chapter, you will be able cash transactions may be recorded in one book, all credi to : sales transactions in another book and all credi • state the need for purchases transactions in yet another book and so on special purpose books; These special journals are also called daybooks o • record the transactions subsidiary books. Transactions that cannot be recorde in cash book and post in any special journal are recorded in journal called th them in the ledger; Journal Proper. Special journals prove economical an • prepare the petty cash book; make division of labour possible in accounting work. I this chapter we will discuss the following special purpos • record the transactions in the special purpose books: books; • Cash Book • post the entries in the • Purchases Book special purpose book • Purchases Return (Return Outwards) Book and to the ledger; | | | | | | | | | | | | | LEARNING OBJECTIVES After studying this chapter, you will be able to : • state the need for special purpose books; • record the transactions in cash book and post them in the ledger; • prepare the petty cash book; • record the transactions in the special purpose books; • post the entries in the special purpose book and to the ledger; | | | | | | • balance the ledger accounts. | | | | **Table on page 10 (12×10)** | Purchases Account Receipts Payment Date Particulars J.F. Amount Date Particulars J.F. Amount ` ` 2017 Sept.04 Bank 12,000 Sept. 17 Cash 17,400 Sales Account Receipts Payment Date Particulars J.F. Amount Date Particulars J.F. Amount ` ` 2017 Sept. 08 Cash 6,000 Sept. 16 Bank 4,500 Machinery Account Receipts Payment Date Particulars J.F. Amount Date Particulars J.F. Amount ` ` 2017 Sept. 13 Bank 5,500 Stationery Account Receipts Payment Date Particulars J.F. Amount Date Particulars J.F. Amount ` ` 2017 Sept.20 Bank 1,100 | | | | | | | | | s | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Date | Particulars | J.F. | Amount ` | Date | Particulars | J.F. | Amount ` | | | | 2017 Sept.04 Sept. 17 | Bank Cash | | 12,000 17,400 | | | | | | | | | | | | | | | | s | | | Date | Particulars | J.F. | Amount ` | Date | Particulars | J.F. | Amount ` | | | | | | | | 2017 Sept. 08 Sept. 16 | Cash Bank | | 6,000 4,500 | | | | | | | | | | | | s | | | Date | Particulars | J.F. | Amount ` | Date | Particulars | J.F. | Amount ` | | | | 2017 Sept. 13 | Bank | | 5,500 | | | | | | | | | | | | | | | | s | | | Date | Particulars | J.F. | Amount ` | Date | Particulars | J.F. | Amount ` | | | | 2017 Sept.20 | Bank | | 1,100 | | | | | | | | | | | | | | | | |

• Journal is subdivided into special journals for efficient recording.
• Cash transactions are recorded in the cash book.
• Special journals reduce the burden of recording repetitive transactions.
• This chapter deals with advanced recording of cash and bank transactions.
• Helps in quick and accurate recording of business transactions.
• 📌 Journal: The primary book of original entry where all transactions are initially recorded.
• 📌 Ledger: A book containing accounts where transactions are posted from journals.
• 📌 Special Journals: Subdivisions of the journal for recording similar types of transactions.

Single Column Cash Book

The Single Column Cash Book is the simplest form of cash book used by businesses where all transactions are made in cash, and there are no bank transactions involved. It records all cash receipts on the debit side and all cash payments on the credit side in chronological order. This cash book serves as a complete record of cash transactions, eliminating the need for a separate cash account in the ledger. The format of the single column cash book includes columns for Date, Particulars, Ledger Folio (L.F.), and Amount on both the debit (receipts) and credit (payments) sides. The debit side records cash inflows such as cash sales, cash received from debtors, and opening cash balance, while the credit side records cash outflows like payments for expenses, purchases, and drawings. Since it records only cash transactions, it is suitable for small businesses or organizations where transactions are primarily in cash. The single column cash book is balanced at the end of the period to ascertain the closing cash balance, which is then carried forward as the opening balance for the next period. **Table on page 2 (6×12)** | transactions of cash are not recorded in the journal, and no separate accoun for cash or bank is required in the ledger. 44444.....11111.....11111 SSSSSiiiiinnnnngggggllllleeeee CCCCCooooollllluuuuummmmmnnnnn CCCCCaaaaassssshhhhh BBBBBooooooooookkkkk The single column cash book records all cash transactions of the business in chronological order, i.e., it is a complete record of cash receipts and cas payments. When all receipts and payments are made in cash by a busines organisation only, the cash book contains only one amount column on eac (debit and credit) side. The format of single column cash book is shown i figure 4.1. Cash Book Dr. C Date Receipts L.F. Amount Date Payments L.F. Amount ` ` Fig. 4.1 : Format of single column cash book Recording of entries in the single column cash book and its balancing i illustrated by an example. Consider the following transactions of M/s Roop Traders observe how they are recorded in a single column cash book. Date Details Amount ` 2017 Nov. 01 Cash in hand 30,000 Nov. 04 Cash received from Gurmeet 12,000 Nov. 08 Insurance paid (Annual Instalment) 6,000 Nov. 13 Purchased furniture 13,800 Nov. 16 Sold goods for cash 28,000 Nov. 17 Purchased goods from Mudit in cash 17,400 Nov. 20 Purchase stationery 1,100 | | | | | | | | | | | t a h s h n r. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Date | Receipts | | L.F. | Amount ` | Date | Payments | L.F. | | Amount ` | | | | | | | | | | | | | | | | | | | | | | | | | | | s a | | | Date | | Details | | | | | | Amount ` | | | | | 2017 Nov. 01 Nov. 04 Nov. 08 Nov. 13 Nov. 16 Nov. 17 Nov. 20 | | Cash in hand Cash received from Gurmeet Insurance paid (Annual Instalment) Purchased furniture Sold goods for cash Purchased goods from Mudit in cash Purchase stationery | | | | | | 30,000 12,000 6,000 13,800 28,000 17,400 1,100 | | | | | Nov. 24 | | Cash paid to Rukmani in full settlement of account | | | | | | | | |

• Records only cash transactions, no bank transactions.
• Debit side records cash receipts; credit side records cash payments.
• Serves as both journal and ledger for cash transactions.
• Suitable for small businesses with cash-only transactions.
• Balanced periodically to find closing cash balance.
• 📌 Single Column Cash Book: A cash book with only one amount column on each side for cash transactions.
• 📌 Debit Side: The left side of the cash book where cash receipts are recorded.
• 📌 Credit Side: The right side of the cash book where cash payments are recorded.