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C H A P T E R

Sub-Division of Journal—Cash Book

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Special Purpose Books Sub-division of the Journal into various books recording transactions
or Subsidiary Books of similar nature are called subsidiary books.
2. Cash Book Cash Book is a Special Purpose Subsidiary Book or Journal in which cash
receipts and cash payments are recorded.
Kinds of Cash Book
(i) Simple Cash Book It is a Cash Book in which only cash transactions are recorded. It has only
one column on each side.
(ii) Triple-Column It is a Cash Book which has three columns, one column each for
Cash Book cash, bank and discount on each side of the cash book. In this book both
cash and bank transactions are recorded together with discount allowed
and received.
(iii) Petty Cash Book It is a Cash Book maintained for recording petty expenses.
3. Cash Discount Cash discount is the amount of discount received or allowed on cash
payments and cash receipts. Discount received is an income for the
business while discount allowed is an expense.
4. Contra Entry It means a transaction involving both cash and bank. Such
transactions though recorded in the Cash Book are not posted into
ledger. In the column for ledger folio letter ‘C’ is written to show that
it is a contra entry.

CHAPTER SUMMARY

• Subsidiary Books (Sub-Division of Journal)
When the volume of transactions of a business firm becomes voluminous, a single Journal becomes
inadequate as the sole book of original entry. It is better to have separate books for different activities like
cash, purchase, sales, purchase return, sales return, and so on. In other words, for convenience, the Journal
is, therefore, divided into a number of subsidiary books. The subsidiary books used are:
Subsidiary Book/Special Journal Category of Business Transactions Recorded
1. Cash Book All cash and bank transactions.
2. Purchases Book All Credit purchases of goods only.
3. Sales Book All Credit sales of goods only.
4. Purchases Return Book All returns of goods purchased by us from suppliers, i.e., Returns Outward.
(Returns Outward Book)
5. Sales Return Book All returns of goods sold by us to customers, i.e., Returns Inward.
(Returns Inward Book)
6. Journal Proper All such transactions which cannot be recorded in the above five books.