Recording of Transactions-II — Class 11 Accountancy Notes

Recording of Transactions-II · Class 11 Accountancy · 8 topics.

These notes are free to read without an account. Work through them in order, or use the chapter list to revise selectively before a test.

Topics covered in Recording of Transactions-II

  1. 1.Introduction of Recording of Transactions-II

    Short Answer

    When the number of business transactions becomes large, the Journal is divided into Special Journals like Cash Book, Sales Book, Purchases Book, etc.
    These special journals record similar types of transactions and make accounting faster, organized, and efficient.

    Long Answer

    In small businesses, all transactions can be recorded in one Journal.
    But when businesses grow, transactions become so many that recording everything in one Journal becomes time-consuming and confusing.

    Thus, the Journal is divided into Special Journals, also called Day Books or Subsidiary Books.

    Special Journals are:

    • Separate books where transactions of similar nature are recorded.

    • They make recording quick, easy, and accurate.

    • They allow division of work among different people (one person handles cash, another handles sales, etc.).

    Types of Special Journals:

    • Cash Book: Records all cash receipts and payments.

    • Purchases Book: Records all credit purchases of goods.

    • Purchases Return Book: Records goods returned to suppliers.

    • Sales Book: Records all credit sales of goods.

    • Sales Return Book: Records goods returned by customers.

    • Journal Proper: Records transactions that cannot be recorded in the above special journals.

    Thus, Special Journals are necessary when the number of transactions is large and repetitive.

    Example

    • When cash is received from a customer, it is recorded directly in the Cash Book.

    • When goods are sold on credit to a customer, it is recorded in the Sales Book.

    Instead of writing everything first in the main Journal, transactions are entered directly into their special books.

    Real-Life Example

    Imagine a big shop like Reliance Smart:

    • Daily thousands of sales happen — they record them directly into the Sales Book.

    • Daily cash received is entered into the Cash Book.

    • If a customer returns an item, it is entered into the Sales Return Book.

    Without Special Journals, they would not be able to manage their records properly.

    Career Relevance

    Understanding Special Journals is important for:

    • Accountants: To manage big data efficiently.

    • Business Owners: To organize business transactions properly.

    • Auditors: To verify transactions easily.

    • Finance Officers and CA Students: As a foundation of systematic accounting work.

    Simple Chart for Easy Revision

    Special JournalPurpose
    Cash BookRecords cash receipts and payments
    Purchases BookRecords credit purchases of goods
    Purchases Return BookRecords return of purchased goods
    Sales BookRecords credit sales of goods
    Sales Return BookRecords return of sold goods
    Journal ProperRecords other transactions

    Key Points to Remember

    • Special Journals = Division of the main Journal for faster work.

    • They are also called Day Books or Subsidiary Books.

    • They improve speed, accuracy, and organization in accounting.

    • Transactions not fitting into special journals are recorded in the Journal Proper.

  2. 2.Cash Book

    What is a Cash Book?

    A Cash Book is a special journal that is used to record all cash transactions — cash received and cash paid — in one place.
    It serves both as a Journal (because it records transactions first) and as a Ledger (because balances are available directly).

    There are mainly three types of Cash Book:

    1. Single Column Cash Book

    2. Double Column Cash Book (with Cash and Discount Columns)

    3. Petty Cash Book

    1. Single Column Cash Book

    Explanation:

    • Contains only one amount column on each side – Cash Debit and Cash Credit.

    • Used to record only cash receipts and payments.

    • Left side: Cash received → Debit

    • Right side: Cash paid → Credit

    Format of Single Column Cash Book

    DateParticularsL.F.Amount (₹)DateParticularsL.F.Amount (₹)
    ReceiptsPayments

    Sample Entries:

    1. April 1: Started business with cash ₹50,000

    2. April 5: Paid rent ₹5,000

    3. April 10: Received ₹10,000 from Ramesh

    4. April 15: Paid salary ₹6,000

    Single Column Cash Book:

    DateParticularsL.F.Amount (₹)DateParticularsL.F.Amount (₹)
    Apr 1To Capital A/c50,000Apr 5By Rent A/c5,000
    Apr 10To Ramesh10,000Apr 15By Salary A/c6,000

    2. Double Column Cash Book (Cash and Discount Columns)

    Explanation:

    • Has two amount columns on each side:

      1. Cash

      2. Discount

    • Records cash received/paid and discounts allowed/received.

    • Left side:

      • Cash received → Debit

      • Discount allowed → Debit

    • Right side:

      • Cash paid → Credit

      • Discount received → Credit

    Format of Double Column Cash Book

    | Date | Particulars | L.F. | Discount (₹) | Cash (₹) | | Date | Particulars | L.F. | Discount (₹) | Cash (₹) |

    Sample Entries:

    1. April 1: Cash received ₹9,800 from Mohan, ₹200 allowed as discount

    2. April 4: Paid ₹4,900 to Sohan, received ₹100 discount

    3. April 10: Received ₹5,000 cash from sales

    Double Column Cash Book:

    DateParticularsL.F.DiscountCashDateParticularsL.F.DiscountCash
    Apr 1To Mohan2009,800Apr 4By Sohan1004,900
    Apr 10To Sales A/c–5,000–

    3. Petty Cash Book

    Explanation:

    • Used to record small day-to-day expenses, e.g., postage, stationery, tea, bus fare, etc.

    • Maintained by a petty cashier under imprest system (fixed amount given at the beginning of period).

    • Expenses are classified under columns for easy posting.

    Format of Petty Cash Book (Columnar Style)

    DateParticularsVoucher No.Total (₹)PostageStationeryConveyanceOthers

    Sample Entries:

    1. April 1: Petty Cash received ₹1,000

    2. April 2: Spent ₹50 on postage

    3. April 3: Bought stationery ₹100

    4. April 5: Paid ₹70 for travel

    5. April 7: Spent ₹30 on tea

    Petty Cash Book:

    DateParticularsVoucher No.TotalPostageStationeryConveyanceOthers
    Apr 1Cash received–1,000––––
    Apr 2Postage stamp015050–––
    Apr 3Pens, sheets02100–100––
    Apr 5Bus fare0370––70–
    Apr 7Tea for visitor0430–––30

    4. Balancing of Cash Book

    Explanation:

    • At the end of the period (daily/weekly/monthly), the Cash Book is balanced.

    • Total debit side (cash received) is added and compared to credit side (cash paid).

    • The difference is the closing balance, written on the credit side as:

    By Balance c/d (carried down)
    Next period, this becomes:

    To Balance b/d (brought down)

    Note: Cash balance can never be negative, so it’s always on the debit side in the next period.

    Example:

    Suppose total receipts = ₹60,000
    Total payments = ₹45,000
    Then, balance = ₹15,000

    Entry:
    On credit side: By Balance c/d ₹15,000
    Next period, on debit side: To Balance b/d ₹15,000

  3. 3.Purchases Book

    Short Answer

    The Purchases Book is a special journal where only credit purchases of goods (meant for resale) are recorded.
    Cash purchases or asset purchases are not recorded in the Purchases Book.

    Long Answer

    In business, goods are purchased either for cash or on credit.

    • Cash purchases are recorded in the Cash Book.

    • Credit purchases of goods (inventory) are recorded in a separate book called the Purchases Book.

    Important Points:

    • Only goods bought on credit are entered.

    • Buying of assets like furniture, computers, etc., is not entered here.

    • The Purchases Book saves time and keeps all purchase records organized.

    Structure of Purchases Book:

    DateParticularsInvoice No.L.F. (Ledger Folio)Amount (₹)

    • Date: Date of transaction

    • Particulars: Name of supplier and details of goods

    • Invoice No.: Bill number given by supplier

    • L.F.: Page number where it is posted in Ledger

    • Amount: Total value of goods purchased

    Example

    Transactions:

    1. April 1: Purchased goods from Ram & Sons on credit ₹10,000.

    2. April 3: Purchased goods from Mohan Traders on credit ₹15,000.

    3. April 7: Purchased goods from Sohan & Co. on credit ₹5,000.

    Purchases Book:

    DateParticularsInvoice No.L.F.Amount (₹)
    Apr 1Ram & Sons10110,000
    Apr 3Mohan Traders10515,000
    Apr 7Sohan & Co.1105,000
    Total30,000

    Real-Life Example

    Suppose a clothing store like Lifestyle buys shirts and jeans on credit from different suppliers:

    • Each purchase is recorded immediately in the Purchases Book.

    • This helps them track how much they owe to each supplier.

    • At the end of the month, total purchases are posted to the Purchases Account in the Ledger.

    Career Relevance

    Understanding Purchases Book is important for:

    • Accountants: To maintain supplier-wise purchase records.

    • Auditors: To check purchase transactions easily during audit.

    • Business Owners: To control and manage purchases and payments properly.

    • Finance Students & CA Students: Foundation for preparing books of accounts correctly.

    Simple Chart for Easy Revision

    FeatureDetails
    What it recordsCredit purchases of goods
    What it does not recordCash purchases and asset purchases
    PurposeSaves time, keeps credit purchases organized
    Final PostingPosted to Purchases Account in Ledger

    Key Points to Remember

    • Only credit purchases of goods are entered.

    • Cash purchases are recorded separately in Cash Book.

    • Buying of assets like machinery is not recorded here.

    • Helps in preparing correct Purchases Account and Final Accounts.

  4. 4.Purchases Return (Journal) Book

    Short Answer

    The Purchases Return Book is a special journal used to record all goods returned to suppliers that were earlier bought on credit.
    It is also called the Return Outwards Book.

    Long Answer

    Sometimes, the goods that a business buys on credit may be:

    • Damaged,

    • Defective,

    • Not as per order, or

    • In excess quantity.

    In such cases, the business returns these goods to the supplier. These transactions are recorded in the Purchases Return Book.

    Key Points:

    • Only goods purchased on credit and then returned are recorded.

    • Returns of cash purchases are not recorded here — they go in the Cash Book.

    • It helps maintain an accurate record of outward returns and reduces the total purchase balance.

    Format of Purchases Return Book:

    DateParticularsDebit Note No.L.F.Amount (₹)

    • Date – Date of return

    • Particulars – Name of the supplier and reason (if any)

    • Debit Note No. – Number of the note sent to the supplier

    • L.F. – Ledger Folio for posting reference

    • Amount – Value of goods returned

    Example

    Transactions:

    1. April 5: Returned goods worth ₹4,000 to Ram & Sons (originally bought on credit).

    2. April 8: Returned goods worth ₹2,000 to Mohan Traders.

    Purchases Return Book:

    DateParticularsDebit Note No.L.F.Amount (₹)
    Apr 5Ram & SonsDN1014,000
    Apr 8Mohan TradersDN1022,000
    Total6,000

    Real-Life Example

    Suppose a furniture dealer receives 20 chairs from a supplier, but 3 of them are broken.
    The dealer sends the 3 chairs back. This return is recorded in the Purchases Return Book with details of the supplier and the value of returned goods.

    Career Relevance

    Understanding the Purchases Return Book is important for:

    • Accountants: To manage proper stock and reduce liabilities.

    • Auditors: To verify purchase adjustments.

    • Business Owners: To track vendor relationships and avoid overpayment.

    • CA & Commerce Students: To understand real-world purchase adjustments in businesses.

    Simple Chart for Quick Revision

    FeatureDescription
    RecordsReturn of goods purchased on credit
    Other nameReturn Outwards Book
    Does not recordReturn of goods purchased in cash
    Linked withPurchases Account and Supplier Account
    Final posting goes toPurchases Return Account (credit side)

    Key Points to Remember

    • Only credit purchases returns are recorded.

    • Debit Note is sent to the supplier as proof of return.

    • Reduces the total value of purchases in the accounts.

    • Helps in maintaining correct payable balance with suppliers.

  5. 5.Sales Return (Journal) Book

    Short Answer

    The Sales Return Book is a special journal used to record goods returned by customers that were earlier sold on credit.
    It is also called the Return Inwards Book.

    Long Answer

    In business, when goods are sold to customers on credit, there may be situations where:

    • Goods are damaged,

    • Goods are defective,

    • Goods are not as per order, or

    • Goods are in excess quantity.

    In such cases, customers may return the goods to the seller.
    These returned items are recorded in the Sales Return Book.

    Important Points:

    • Only returns of credit sales are recorded here.

    • If goods sold in cash are returned, the entry is made in the Cash Book, not here.

    • This book helps reduce the total value of sales and maintain proper customer accounts.

    Format of Sales Return Book

    DateParticularsCredit Note No.L.F.Amount (₹)

    • Date – Date of goods returned

    • Particulars – Name of customer and reason (optional)

    • Credit Note No. – Note sent to customer for return

    • L.F. – Ledger Folio for posting reference

    • Amount – Value of goods returned

    Example

    Transactions:

    1. April 6: Ramesh returned goods worth ₹3,000.

    2. April 9: Suresh returned goods worth ₹2,500.

    Sales Return Book:

    DateParticulars Credit Note No. L.F.Amount (₹)
    Apr 6Ramesh CN1013,000
    Apr 9Suresh CN1022,500
    Total5,500

    Real-Life Example

    Suppose an electronics shop sells 5 mobile phones to a dealer on credit.
    Later, 1 phone is found defective and returned.
    This return is recorded in the Sales Return Book under that dealer’s name, with details and the amount.

    Career Relevance

    Understanding the Sales Return Book is useful for:

    • Accountants: To reduce accounts receivable and update customer balances.

    • Auditors: To verify return transactions and prevent fraud.

    • Business Owners: To track product returns and customer satisfaction.

    • Commerce & CA Students: Essential for handling real business adjustments.

    Simple Chart for Quick Revision

    FeatureDescription
    RecordsGoods returned by customers (credit sales)
    Other NameReturn Inwards Book
    Not Recorded HereReturns of goods sold in cash
    Linked WithSales Account and Customer Accounts
    Final PostingGoes to Sales Return A/c (Debit side)

    Key Points to Remember

    • Only credit sales returns are recorded here.

    • A credit note is sent to the customer for proof.

    • Reduces the Sales Account balance.

    • Helps maintain proper customer account balances.

  6. 6.Journal Proper

    Short Answer

    Journal Proper is the general journal used to record those transactions which cannot be recorded in any special journal like Cash Book, Purchases Book, or Sales Book.

    Long Answer

    In a business, most transactions are recorded in special journals like:

    • Cash Book (for cash transactions),

    • Purchases Book (for credit purchases),

    • Sales Book (for credit sales), etc.

    But some transactions do not fit in any of these special books.
    Such transactions are recorded in a separate journal called Journal Proper or Journal Residual.

    Main Entries Recorded in Journal Proper:

    1. Opening Entries:
      To start a new accounting year, all previous year’s closing balances of assets, liabilities, and capital are recorded.

    2. Adjustment Entries:
      Made at the end of the year for accurate profit calculation under accrual basis.
      E.g. Rent Outstanding, Prepaid Insurance, Depreciation, Commission Received in Advance.

    3. Rectification Entries:
      Used to correct errors made in other journals or ledger postings.

    4. Transfer Entries:
      Used to transfer balances from one account to another.
      E.g. Transfer of drawing to capital account, transfer of expenses/incomes to Trading or Profit & Loss account.

    5. Other Entries:
      These include entries like:

      • Dishonour of cheques

      • Credit purchases/sales of non-goods items (like furniture)

      • Goods withdrawn for personal use

      • Goods given as free samples

      • Dishonour of bills of exchange

      • Consignment or joint venture entries

      • Loss of goods by fire/theft/spoilage

    Example

    Opening Entry:
    Assets: Cash ₹50,000, Stock ₹30,000
    Liabilities: Loan ₹20,000, Capital ₹60,000

    Journal Entry:

    Date ParticularsL.F.Debit (₹) Credit (₹)
    01/04/2025 Cash A/c Dr.50,000
    Stock A/c Dr.30,000
    To Loan A/c 20,000
    To Capital A/c 60,000
    (Being opening balances recorded)

    Real-Life Example

    Suppose a business owner gives some goods as free samples to promote a new product.
    This is not a sale, so it cannot be recorded in the Sales Book.
    It is entered in Journal Proper as:
    Advertisement A/c Dr. To Purchases A/c

    Career Relevance

    Understanding Journal Proper is essential for:

    • Accountants: To handle all non-regular or complex entries.

    • Auditors: To verify uncommon entries and corrections.

    • CA Students & Commerce Learners: To master the complete accounting cycle.

    • Business Owners: To ensure nothing is left unrecorded.

    Simple Chart for Easy Revision

    Type of EntryMeaning / Example
    Opening EntryStart-of-year asset, liability, capital balances
    Adjustment EntryRent due, prepaid insurance, depreciation
    Rectification EntryCorrection of previous journal or ledger error
    Transfer EntryTransfer drawings to capital, expenses to P&L
    Other EntriesCheque dishonour, goods given as sample, etc.

    Key Points to Remember

    • Journal Proper is used when no other special journal is suitable.

    • It includes rare, adjusting, correcting, or end-of-year entries.

    • Always used with careful narration and clear supporting documents.

    • It ensures the completeness of books of accounts.

  7. 7.Balancing the Accounts

    Short Answer

    Balancing an account means finding the difference between the total of debit side and credit side in a ledger account to know the net balance.

    Long Answer

    In accounting, every ledger account has two sides:

    • Left side (Debit) – records increases in assets/expenses

    • Right side (Credit) – records increases in liabilities/incomes

    At the end of a certain period (like a month or year), we need to know:

    • How much value is left in the account?

    • Is it a debit balance or credit balance?

    So, we total both sides and compare:

    • If debit total > credit total, the account has a debit balance

    • If credit total > debit total, the account has a credit balance

    The difference is written on the shorter side to make both sides equal. This is called the balance.

    How to Write the Balancing Entry:

    1. The difference is called:

      • Balance c/d (carried down) on the smaller side at the end of the period

      • Balance b/d (brought down) on the opposite side at the start of the next period

    Example

    Cash Account (Partial)

    DateParticularsAmount (₹)DateParticularsAmount (₹)
    Apr 1To Capital A/c20,000Apr 5By Rent A/c5,000
    Apr 10To Sales A/c10,000Apr 12By Salary A/c3,000
    Apr 30By Balance c/d22,000
    Total30,000Total30,000


    Next Month:

    DateParticularsAmount (₹)
    May 1To Balance b/d22,000

    Real-Life Example

    Imagine you earn ₹10,000 (income) and spend ₹6,000 (expenses) in a month.
    Your remaining balance = ₹4,000.
    Just like this, businesses calculate the leftover value in each account by balancing them.

    Career Relevance

    Balancing accounts is important for:

    • Accountants & Bookkeepers: To prepare Trial Balance and Final Accounts

    • Auditors: To verify correctness of financial records

    • Business Owners: To track how much is receivable, payable, or remaining

    • Commerce & CA Students: It is a core skill in accountancy

    Simple Chart for Quick Revision

    TermMeaning
    Balance c/dCarried down at end of period (to match both sides)
    Balance b/dBrought down at beginning of next period
    Debit BalanceDebit > Credit
    Credit BalanceCredit > Debit
    PurposeTo know closing balance in each account

    Key Points to Remember

    • Always total both debit and credit sides.

    • Find the difference and write it as Balance c/d on the smaller side.

    • Bring the same amount to the opposite side as Balance b/d in the next period.

    • Balancing helps in making Trial Balance and preparing final accounts.

  8. 8.Important Topics

    1. Explain the need for drawing up the special purpose books.
    Special purpose books are used to record specific types of transactions that occur frequently and repeatedly in a business. Instead of recording all transactions in the main journal, it is more efficient to divide the work into separate books like the Cash Book, Purchases Book, Sales Book, etc. This makes recording quicker, reduces errors, and allows for division of work among different employees. It also helps in easy classification of transactions and simplifies the posting into ledger accounts.

    2. What is cash book? Explain the types of cash book.
    A Cash Book is a special journal used to record all cash and bank-related transactions. It works as both a journal and a ledger. All receipts are recorded on the debit side, and all payments are recorded on the credit side. There are three main types of cash books:

    • Single Column Cash Book: Records only cash transactions.

    • Double Column Cash Book: Has two columns on each side – one for cash and one for discount. It records cash and discount transactions.

    • Triple Column Cash Book: Contains three columns on each side – cash, discount, and bank. It is used by businesses that handle many bank transactions.
      There is also a Petty Cash Book maintained for small daily expenses.

    3. What is contra entry? How can you deal this entry while preparing double column cash book?
    A contra entry is a transaction that affects both the cash and the bank columns of the cash book. For example, depositing cash into the bank or withdrawing cash from the bank for office use. These entries appear on both the debit and credit sides of the cash book and are marked with a ‘C’ to show that they are contra entries. While preparing the double column cash book, these entries are not posted into the ledger as they cancel each other out.

    4. What is petty cash book? Write the advantages of petty cash book.
    A Petty Cash Book is used to record small day-to-day expenses such as postage, stationery, refreshments, and transport. These small payments are usually handled by a petty cashier under the imprest system, where a fixed amount is given at the beginning and reimbursed when spent.
    Advantages include:

    • Reduces the burden on the main cashier.

    • Maintains a clear record of minor expenses.

    • Helps in proper control and monitoring of small cash payments.

    • Makes posting to ledger easier and more systematic.

    5. Describe the advantages of sub-dividing the Journal.
    Sub-dividing the journal into special purpose books like Sales Book, Purchases Book, and Cash Book brings several benefits. It saves time and effort in recording transactions, reduces the chances of errors, and allows different people to handle different books (division of labor). It also simplifies the posting to the ledger and provides better control and analysis of specific types of transactions.

    6. What do you understand by balancing of account?
    Balancing an account means totaling both the debit and credit sides of a ledger account and finding the difference between them. This helps to know how much is the remaining balance in the account, whether it is debit or credit. The balance is written on the shorter side to make both sides equal. This balance is then brought forward to the next period. It is important for preparing the trial balance and final accounts.

More Class 11 Accountancy chapters