Business transactions are numerous and it becomes difficult to record all the transactions in one book of prime entry .i.e. Journal Book. 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 of this type is called a book of original entry or prime entry – it is a special form of journal, 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 called a special Journal or 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.

Business transactions are numerous and it becomes difficult to record all the transactions in one book of prime country .i.e. Journal Book.

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.

SUBSIDIARY BOOKS OR SUB-DIVISION OF JOURNAL

1. Cash Book
2. Purchases Book
3. Sales Book
4. Purchases Return Book
5. Sales Return Book
6. Bills payable Book
7. Bills receivable Book
8. Journal Proper

Purchase book

Purchase book records the credit purchases of goods. I.e. goods in which the firm deals with or uses for manufacturing goods are recorded.

The transactions which are not included-

• Cash purchases
• Purchase of fixed assets

It records the credit purchases on the basis of invoice after deducting trade discount plus GST payable.

At the end of specified period (a week, a fortnight or a month) the purchase book is totaled and is posted to Purchase Account.

Posting of entries in Purchase Journal

The transactions recorded in the Purchases Journal are to be posted to their respective personal accounts in the ledger. When a purchase is made on credit, the supplier becomes 1 the creditor for the firm. Hence, every credit purchase recorded in the Purchases Journal is posted on the credit side of the personal account of the supplier by writing 'By Purchases A/c' in particulars column. The Purchases Journal is totaled periodically, say, weekly or monthly. This total is posted to the debit side of Purchases Account in the ledger by writing 'To Sundries-as per Purchases Journal'. Thus, you observe that posting of Purchases Journal involves two steps:

1. posting each purchase to the credit of the respective personal accounts of suppliers, and
2. Posting the total purchases to the debit of the Purchases Account. With this, the double entry for credit purchases is complete

FORMAT OF PURCHASE JOURNAL OR PURCHASE BOOK

It is a document prepared by the seller and sent to the customer. Details of PURCHASE INVOICE

Quantity x Price per Article

Less-Trade discount                        _               

Add- IGST Add-CGST Add-SGST

Add- Expenses (Freight/Cartage etc.)

Total Payable                                                      

Sales Book or Sales Journal

Sales Book records the credit Sales of goods .i.e. goods in which the firm deals with or uses for manufacturing goods are recorded.

The transactions which are not included-

• Cash Sales

• Sale of fixed assets

It records the credit Sales on the basis of invoice after deducting trade discount plus GST payable.

At the end of specified period (a week, a fortnight or a month) the Sales book is totaled and is posted to Sales Account.

The customer to whom the goods are sold on credit becomes debtor to the firm. Hence, each sale recorded in the Sales Journal is posted to the debit of the personal account of the customer concerned by writing 'To Sales A/c' in particulars column. The total of the Sales Journal is posted on the credit side of the Sales Account by writing 'By Sundries-as per Sales Book'.

FORMAT OF SALES JOURNAL OR SALES BOOK

Details of SALES INVOICE

Quantity x Price per Article

Less- Trade discount                                        

Add- IGST Add-CGST Add-SGST

Add- Expenses (Freight/Cartage etc.)          

Invoice Price                                                        

Purchase Return Book or Return Outwards Book

It maintains the record of goods or materials returned to the sellers of the goods that were purchased on credit.

Records excluded

Goods returned which were purchased in cash

Return of goods that are other than merchandise e.g assets.

Goods are returned as sometimes goods are not as per sample, defective, not as per order etc.

When goods are returned to the supplier, a statement called 'Debit Note' is sent to him intimating that his account has been debited on account of the goods returned. The debit note also contains particulars and the value of goods returned. It is also prepared in I duplicate. The original is sent to the supplier and the duplicate is retained by the firm. The entries in the Purchases Returns Journal are made on the basis of the copies of debit notes, I issued, the debit notes bear a serial number which is duly recorded in the third column of, I the Purchases Returns Journal. While recording the amount of purchases returns, you inputs remember that if the original purchases involve some trade discount, it is also adjusted in the, value of goods returned. The transactions recorded in the Purchases Returns Journal, due to, I be posted to their respective personal accounts in the ledger. Separate account in the name of $ *each supplier already exists in the ledger (opened at the time of purchase). The entries made I in the Purchases Returns Journal will be posted to the debit of each supplier's account by writing 'To Purchases Returns A/c'. The total of the purchases Returns Journal is posted t? , the credit side of the 'Purchases Returns Account' in the 'ledger by writing 'By Sundries-as I. ,, per Purchases RetunlsJound'.

FORMAT OF PURCHASE RETURNBOOK

In this case, the purchaser prepares a “Debit note” and sends it to the supplier.

Debit note acts as the Source document to the Purchase returns journal. In other words it is an evidence for the occurrence of a reduction in expenses.

Sales Return Book or Return in wards Book

It maintains the record of goods or materials returned by the purchasers of the goods that were sold by the entity on credit.

Records excluded

Goods returned by customers which were sold in cash.

When a customer returns goods to the business, a statement called 'Credit Note' is issued to him. It contains particulars and the value of goods returned by him. The entries in Sales Returns Journal are made with the help of credit notes issued. While recording the account of sales returns, you must remember that if the original sales involve some trade discount, it is also adjusted in the value of goods returned. The transactions recorded in the Sales Returns Journal are posted to the respective personal accounts in the ledger. Separate accounts in the name of each customer already exists in the ledger (opened at the time of sale). Credit the customers' accounts individually by writing 'By Sales Returns A/c Y and then post the total of the Sales Returns Journal to the debit s3de of the Sales Returns A/c by writing 'To Sundries as per Sales Returns Journal'.

FORMAT OF SALES RETURN BOOK

A credit note or credit memo is a commercial document issued by a seller to a buyer.

Credit notes act as a source document for the sales return journal. In other words the credit note is evidence of the reduction in sales.

Bills Receivable Book

Bills Receivable Book is also known as a B/R book, it is a subsidiary or secondary book of accounting, where all bills of exchange, which are receivable for the business, are recorded.

The total value of all the bills receivable for an accounting period is transferred to the books of accounts.

Bills Payable Book

It is also known as a B/P book, bills payable book is a subsidiary or secondary book of accounting where all bills of exchange, which are payable by the business, are recorded.

The total value of all the bills payable for an accounting period is transferred to the books of accounts.

Journal Proper

A Journal proper in the accounting system is a book of original entry in which all type of miscellaneous credit transactions, which usually do not fit in any other books are recorded. This is why it is also called miscellaneous journal.

FORMAT OF JOURNAL PROPER

Opening entries

The opening balance is usually that balance which is brought forward at the beginning of an accounting year from the end of a previous accounting year. In case of a running business, an opening entry is passed at the commencement of the new accounting year to incorporate the balances of various assets and liabilities brought forward from the previous year into the current year's books. The assets are debited and liabilities and capital are credited.

Rectification entries

These entries are recorded in order to rectify the original entries.

Transfer entries

If an amount is transferred from one account to another account. Such a transfer is also made through journal entry. Drawing account is transferred to capital account at the end of the accounting year. Expenses accounts and revenue accounts which are not balanced at the time of balancing are opened to record specific transactions. Accounts relating to operation of business such as Sales, Purchases, Opening Stock, Income, Gains and Expenses etc and drawing are closed at the end of the year and their Total/balances are transferred to Trading, Profit and Loss account by making the journal entries. These are also called closing entries.

Adjustment entries

In order to update ledger accounts on accrual basis, entries are made at the end of the accounting period. Entry for Rent outstanding, Prepaid insurance, Depreciation and Commission received in advance is made in the journal.

Miscellaneous Entries

Any other entries that cannot be covered in any of the books.

At the time of a dishonor of a cheque the entry for cancellation of discount received or discount allowed earlier.

• Purchase/sale of items other than goods dealt- in on credit.
• Goods withdrawn by the owner for personal use.
• Goods distributed as samples for sales promotion.
• Endorsement and dishonor of bills of Exchange.
• Transaction in respect of consignment and Joint Venture, etc.
• Loss of goods by fire/theft/spoilage.
• For recording amounts which have become irrecoverable.