Elements of Accountancy · Ch 5 — Recording of Transactions - II
Introduction
Introduction
Chapter 3 showed that every business transaction is first recorded in the journal and then posted to the ledger accounts. For a small business, recording everything in a single journal works fine. But as a business grows and the number of transactions increases, journalising each and every entry one at a time becomes slow and cumbersome.
The solution is to split the journal into special journals, each dedicated to one type of repetitive transaction. All cash transactions go into one book, all credit sales into another, all credit purchases into yet another — and so on. These special journals are also called daybooks or subsidiary books. Whatever cannot be recorded in any of the special journals is recorded in a residual journal called the Journal Proper.
Special purpose books make recording faster and more accurate, and they allow the work to be divided among different people instead of funnelling everything through one journal.
This chapter covers the special purpose books one by one: the Cash Book, the Purchases Book, the Purchases Return (Return Outwards) Book, the Sales Book, the Sales Return (Return Inwards) Book, and the Journal Proper — starting with the Cash Book.