**Special Purpose Books** (also called **Subsidiary Books** or **Daybooks**) are specialized journals designed to record transactions of a similar nature efficiently. As business expands, recording all transactions in a single journal becomes cumbersome. Special purpose books eliminate this problem by allowing division of labour and faster processing.
**Need for Special Purpose Books:**
**Types of Special Purpose Books covered in this chapter:**
**Key Principle**: When transactions are recorded in a special purpose book, they are NOT recorded in the Journal Proper, and certain accounts are not opened separately in the ledger.
---
**Cash Book** is a book of original entry in which all transactions relating to **cash receipts and cash payments** are recorded in chronological order. It serves **dual purpose** - both as a journal and as the cash account in the ledger.
**Key Features:**
**Structure of Cash Book:**
---
**Format and Definition**: A Single Column Cash Book contains **one amount column on each side** and is used when **all receipts and payments are made entirely in cash** (no bank transactions).
**Format Structure:**
```
Cash Book (Dr./Cr.)
Debit Side (Receipts) Credit Side (Payments)
Date | Particulars | L.F. | Amount Date | Particulars | L.F. | Amount
```
**Recording Principles:**
1. **Receipts** are entered on the debit (left) side with the source of cash
2. **Payments** are entered on the credit (right) side with the nature of expense/payment
3. Cash is always **debited when received** and **credited when paid**
4. Opening balance appears as **Balance b/d** (brought down)
5. Closing balance appears as **Balance c/d** (carried down)
**Worked Example** (Based on NCERT - M/s Roopa Traders, November 2017):
**Transactions:**
**Single Column Cash Book:**
```
ROOPA TRADERS - CASH BOOK
Dr. Side (Receipts) Cr. Side (Payments)
Date | Particulars | L.F. | Amount Date | Particulars | L.F. | Amount
Nov 1 | Bal b/d | - | 30,000 Nov 8 | Insurance | - | 6,000
Nov 4 | Gurmeet | - | 12,000 Nov 13| Furniture | - | 13,800
Nov 16| Sales | - | 28,000 Nov 17| Purchases | - | 17,400
Nov 27| Sales | - | 18,200 Nov 20| Stationery | - | 1,100
| 88,200 Nov 24| Rukmani | - | 12,500
Nov 30| Rent | - | 2,500
Nov 30| Salary | - | 3,500
Nov 30| Bank | - | 8,000
Nov 30| Bal c/d | - | 23,400
Total | | 88,200
```
**Balancing Calculation:**
**Golden Rule for Posting:**
**Ledger Accounts from above example:**
**Gurmeet's Account (Debtor):**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
| Nov 4| Cash | 12,000
```
**Sales Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Nov 16| Cash | 28,000 | | |
Nov 27| Cash | 18,200 | | |
```
**Insurance Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Nov 8 | Cash | 6,000 | | |
```
**Furniture Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Nov 13| Cash | 13,800 | | |
```
**Purchases Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Nov 17| Cash | 17,400 | | |
```
**Bank Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Nov 30| Cash | 8,000 | | |
```
---
**Double Column Cash Book** contains **two amount columns on each side** - one for **Cash** and one for **Bank**. It is used when both **cash and bank transactions** are significant in volume.
**When Required:**
**Bank Account:** A current account opened with a bank for business purposes.
**Pay-in-Slip (Deposit Slip):**
**Cheque:**
**Types of Cheques:**
1. **Bearer Cheque**: Payment made to person presenting it (has printed word "Bearer")
2. **Order Cheque**: Payment made only to named person (word "Bearer" is crossed out)
3. **Crossed Cheque**: Cannot be presented directly to bank; payment only through a bank account
**Types of Crossing:**
**Endorsement**: Writing instructions on the back of a cheque to transfer it to another person, followed by signature.
**Overdraft**: When cash withdrawn from bank exceeds deposits, resulting in a debit balance (negative balance) in the bank account.
**Dishonoured Cheque**: A cheque returned unpaid by the bank, typically due to insufficient funds in the customer's account.
**Key Rules:**
1. **Cash Deposited in Bank**: Debit side (Dr.) in Bank column AND Credit side (Cr.) in Cash column with "C" (Contra) in L.F.
2. **Cash Withdrawn from Bank**: Debit side (Dr.) in Cash column AND Credit side (Cr.) in Bank column with "C" in L.F.
3. **Cheques Received** (deposited same day): Debit side in Bank column only
4. **Cheques Received** (deposited later): Initially in Cash column; on deposit, moved to Bank column with Contra entry
5. **Cheques Paid**: Credit side in Bank column
6. **Bank Charges/Commission**: Credit side in Bank column
7. **Dishonoured Cheque Received**: Credit side in Bank column, restoring previous position
8. **Contra Entries**: Marked "C" in L.F.; NOT posted to ledger (internal transfer between cash and bank columns)
**Format of Double Column Cash Book:**
```
DOUBLE COLUMN CASH BOOK
Dr. Side Cr. Side
Date | Particulars | L.F. | Cash | Bank | Date | Particulars | L.F. | Cash | Bank
```
**Transactions of M/s Tools India, September 2017:**
**Prepared Cash Book:**
```
TOOLS INDIA - DOUBLE COLUMN CASH BOOK
Dr. Side (Receipts) Cr. Side (Payments)
Date | Particulars | L.F.|Cash |Bank Date | Particulars | L.F.|Cash |Bank
Sept | | | | Sept | | | |
1 |Bal b/d |- |15000|42000 4 |Purchases |- |- |12000
8 |Sales |- |6000 |- 13 |Machinery |- |- |5500
16 |Sales |- |- |4500 17 |Purchases |- |17400|-
27 |Bank (Contra)|C |10000|- 20 |Stationery |- |- |1100
| |31000|46500 24 |Rohit |- |1500 |-
27 |Cash (Contra)|C |- |10000
30 |Rent |- |- |2500
30 |Salary |- |3500 |-
30 |Bal c/d |- |10100|13900
| |31000|46500 | | |31000|46500
Oct 1|Bal b/d |- |10100|13900
```
**Explanation of Transactions:**
**Rule for Posting:**
**Ledger Accounts:**
**Purchases Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Sept 4| Bank | 12,000 |
Sept 17| Cash | 17,400 |
```
**Sales Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
| | | Sept 8| Cash | 6,000
| | | Sept 16| Bank | 4,500
```
**Machinery Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Sept 13| Bank | 5,500 |
```
**Stationery Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Sept 20| Bank | 1,100 |
```
**Rohit's Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
| | | Sept 24| Bank | 1,500
```
**Rent Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Sept 30| Bank | 2,500 |
```
**Salary Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
Sept 30| Cash | 3,500 |
```
---
**Petty Cash Book** is a subsidiary cash book maintained by a **Petty Cashier** to record **small repetitive cash payments** such as conveyance, postage, stationery, refreshments, and miscellaneous expenses.
**Why Maintain Petty Cash Book:**
**Imprest System:**
**Advantages of Imprest System:**
**Format Features:**
**Typical Payment Side Columns:**
**Key Principle**: Each amount column represents a specific expense type. Column totals are posted to respective accounts in ledger, not individual items.
**Scenario**: M/s Samaira Traders. Petty Cashier Mohit received ₹2,000 imprest on May 1, 2017. Expenses for May:
**Transactions:**
**Petty Cash Book (Analytical/Columnar Format):**
```
SAMAIRA TRADERS - PETTY CASH BOOK (May 2017)
RECEIPTS SIDE:
Date | Voucher # | Particulars | Amount | Date | Voucher # | Particulars | Amount
May 1| - | Imprest | 2000 | May 31| - | Cash Balance| 85
PAYMENTS SIDE:
Date|Voucher#|Particulars |Postage|Conveyance|Stationery|Refreshment|Cartage|Misc|Remarks
May 2|V001 |Auto fare |- |55 |- |- |- |- |Travel
May 3|V002 |Courier |40 |- |- |- |- |- |Post
May 4|V003 |Postal stamps |105 |- |- |- |- |- |Post
May 5|V004 |Stationery |- |- |225 |- |- |- |Office
May 6|V005 |Speed post |98 |- |- |- |- |- |Post
May 8|V006 |Taxi |- |195 |- |- |- |- |Travel
May 8|V007 |Refreshments |- |- |- |85 |- |- |Food
May 10|V008 |Auto |- |60 |- |- |- |- |Travel
May 12|V009 |Registered post |42 |- |- |- |- |- |Post
May 13|V010 |Telegram |- |- |- |- |- |34 |Comm
May 14|V011 |Cartage |- |- |- |- |25 |- |Delivery
May 16|V012 |Computer stat |- |- |165 |- |- |- |Office
May 19|V013 |Bus fare |- |24 |- |- |- |- |Travel
May 19|V014 |STD charges |- |- |- |- |- |87 |Comm
May 20|V015 |Sanitation |- |- |- |- |- |60 |Cleaning
May 22|V016 |Refreshments |- |- |- |45 |- |- |Food
May 23|V017 |Photostat |- |- |- |- |- |47 |Stationery
May 28|V018 |Courier |40 |- |- |- |- |- |Post
May 29|V019 |Unloading |- |- |- |- |- |40 |Transport
May 30|V020 |Bus |- |15 |- |- |- |- |Travel
TOTAL | |325 |349 |390 |130 |25 |268 |
Opening Imprest: ₹2,000
Total Payments: ₹325 + ₹349 + ₹390 + ₹130 + ₹25 + ₹268 = ₹1,487
Closing Balance: ₹2,000 - ₹1,487 = ₹513
```
**Calculation Verification:**
**1. Saving of Time and Effort of Chief Cashier:**
**2. Effective Control over Cash Disbursements:**
**3. Convenient Recording and Materiality Principle:**
**Posting Rules:**
**Journal Entries for Reimbursement (Based on above example):**
```
Journal Entry (May 31, 2017)
Dr. Postage Account ₹325
Dr. Conveyance Account ₹349
Dr. Stationery Account ₹390
Dr. Refreshments Account ₹130
Dr. Cartage Account ₹25
Dr. Miscellaneous Account ₹268
Cr. Petty Cash Account ₹1,487
(Reimbursement of petty expenses for May 2017)
```
**Ledger Accounts After Posting:**
**Petty Cash Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
May 1| Bank (Imprest) | 2,000 | May 31| Expenses | 1,487
| | May 31| Balance c/d | 513
| | 2,000 | | | 2,000
June 1| Balance b/d | 513
```
**Postage Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
May 31| Petty Cash | 325 |
```
**Conveyance Account:**
```
Dr. Cr.
Date | Particulars | Amount | Date | Particulars | Amount
May 31| Petty Cash | 349 |
```
**Key Exam Points on Petty Cash Book:**
---
**Q1: What is the difference between Single Column and Double Column Cash Book?**
**Answer:**
| Aspect | Single Column | Double Column |
|--------|---------------|---------------|
| Columns | One (Cash only) | Two (Cash + Bank) |
| Use | All transactions in cash | Mixed cash and bank |
| Bank Account | Separate ledger account needed | No separate account needed |
| Contra Entries | None | Yes (marked "C") |
| Modern Business | Rarely used | Universally used |
**Q2: What is a Contra Entry? Why are they marked "C"?**
**Answer:** A **Contra Entry** is an entry where both debit and credit aspects appear within the Cash Book itself (e.g., cash deposited in bank). They represent internal transfers between cash and bank columns. They are marked "C" (Contra) in the L.F. column to indicate they should NOT be posted to the ledger, as they are already within the Cash Book.
**Q3: How do you record a dishonoured cheque in the Double Column Cash Book?**
**Answer:** When a cheque received from a customer is dishonoured (returned unpaid by the bank):
**Q4: What are the advantages of the Imprest System in Petty Cash?**
**Answer:**
**Q5: How is Petty Cash Book different from Main Cash Book in terms of posting?**
**Answer:**
---
**Q1: When cash is withdrawn from bank, how is this recorded in Double Column Cash Book?**
(A) Dr. Cash column only
(B) Cr. Bank column only
(C) Dr. Cash column AND Cr. Bank column (both sides)
(D) Dr. Bank column AND Cr. Cash column
**Answer: (C)** - Cash is debited (increased) in Cash column and Bank is credited (decreased) in Bank column, both with "C" marking.
**Q2: Which accounting principle supports the use of Petty Cash Book?**
(A) Conservatism Principle
(B) Materiality Principle
(C) Matching Principle
(D) Going Concern Principle
**Answer: (B)** - Materiality Principle states insignificant details need not be recorded individually in main books; petty expenses are grouped by category.
**Q3: In a Single Column Cash Book, if opening balance is ₹50,000 and closing balance is ₹35,000, total receipts are ₹80,000, what are total payments?**
(A) ₹95,000
(B) ₹65,000
(C) ₹115,000
(D) ₹45,000
**Answer: (A)** - Opening ₹50,000 + Receipts ₹80,000 - Payments = Closing ₹35,000; Therefore Payments = ₹95,000
**Q4: A cheque marked "A/c Payee Only" can be:**
(A) Transferred by endorsement
(B) Transferred by delivery
(C) Deposited only in the account of the person named on cheque
(D) Given to bearer
**Answer: (C)** - "A/c Payee Only" crossing is the most secure; payment can be made only to the named person's bank account.
**Q5: Petty Cashier receives ₹5,000 on June 1. Spends ₹3,200 in first week. What is the reimbursement amount?**
(A) ₹5,000
(B) ₹3,200
(C) ₹1,800
(D) ₹8,200
**Answer: (B)** - Under Imprest System, reimbursement = Amount actually spent = ₹3,200
---
1. **Special Purpose Books** are subsidiary journals for efficient recording; they eliminate need for certain ledger accounts
2. **Cash Book serves dual purpose** - both journal and ledger account for cash/bank
3. **Single Column Cash Book** - used for cash-only transactions; simple format with one amount column each side
4. **Double Column Cash Book** - has Cash and Bank columns; suitable for modern business; no separate bank account needed in ledger
5. **Contra Entries** in Cash Book (marked "C") - represent cash/bank transfers; NOT posted to ledger
6. **Cheque Types**: Bearer (transferable by delivery), Order (transferable by endorsement), Crossed (through bank only)
7. **Cheque Crossing Provides Security**: General, Special, or Account Payee Only
8. **Dishonoured Cheque** - returned unpaid; recorded on Cr. side of bank column; restores previous cash position
9. **Petty Cash Book** - records small repetitive expenses using **Imprest System**
10. **Imprest System** - fixed amount given; spent amount reimbursed; maintains constant balance
11. **Petty Cash Posting** - only COLUMN TOTALS posted to ledger, not individual items
12. **Advantages of Petty Cash Book**: Saves chief cashier time, improves control, reduces main cash book bulkiness, enables division of labour
13. **Balancing Formula**: Opening Balance + Receipts - Payments = Closing Balance
14. **Materiality Principle** - guides decision to use petty cash book; insignificant details grouped together
---
This comprehensive coverage ensures complete preparation for CBSE Class 11 board examination on Recording of Transactions - II. Every section, definition, formula, journal entry format, and worked example has been covered for full mastery.
Q1. Which of the following is the primary reason for maintaining special purpose books?
Answer: A — Special purpose books classify repetitive transactions by type, reducing journal entries and allowing multiple people to record transactions simultaneously.
Q2. In a single column cash book, if cash is received from a debtor Rajesh, on which side does this entry appear?
Answer: B — Cash receipts appear on the debit side of the cash book; the corresponding account (debtor) is credited in the ledger to reduce the receivable.
Q3. What is the double entry for paying rent of ₹5,000 in cash using a single column cash book?
Answer: B — Rent expense is debited and cash (cash book) is credited; the cash book entry on the credit side automatically reflects the decrease in cash.
Q4. Which of the following statements about the cash book is INCORRECT?
Answer: B — The cash book itself IS the cash (and bank) account in the ledger; no separate posting to a Cash account is required, which is a key distinction from the journal.
Q5. A business has cash receipts of ₹50,000 and cash payments of ₹35,000 during a month. If the opening balance was ₹8,000, what is the closing balance?
Answer: B — Closing balance = Opening balance + Receipts - Payments = ₹8,000 + ₹50,000 - ₹35,000 = ₹23,000.
Q6. In a double column cash book, cheques received are recorded in which column?
Answer: B — Cheques (or bank deposits) are recorded in the Bank column since they represent money received through the bank, not physical cash.
Q7. Which document is issued by a bank to the depositor as proof of cash/cheque deposit?
Answer: B — The counterfoil of the pay-in-slip, signed by the bank cashier, serves as the depositor's receipt for cash or cheque deposits.
Q8. When goods are purchased on credit from supplier Mohit for ₹10,000, why is this NOT recorded in the cash book?
Answer: B — The cash book only records transactions involving actual cash or bank transfers; credit purchases are recorded in the Purchases Book and later posted to the ledger.
Q9. Given: Opening balance ₹20,000, total debit side entries ₹45,000, total credit side entries (excluding balance c/d) ₹32,000. Calculate balance c/d.
Answer: B — Balance c/d = Opening balance + Total receipts (debits) - Total payments (credits) = ₹20,000 + ₹45,000 - ₹32,000 = ₹33,000.
Q10. Which of the following transactions would require posting to the ledger after recording in the cash book? (A) Cash receipt from sales; (B) Payment of rent in cash; (C) Cheque deposited in bank; (D) None of the above, as the cash book is both journal and ledger.
Answer: D — The cash book itself serves as the cash and bank account in the ledger; entries are not posted elsewhere, unlike the general journal entries which must be posted to individual accounts.
What is a special purpose book?
A subsidiary book designed to record transactions of a similar nature (e.g., all cash receipts and payments in the cash book) to reduce journal congestion and enable division of labour.
Why is the cash book considered both a journal and a ledger?
It serves as the book of original entry (journal function) and also maintains the cash account balance (ledger function), eliminating the need for a separate cash account in the ledger.
In a single column cash book, what does the debit side represent?
Cash receipts or inflows — money received by the business from various sources.
When posting a cash receipt from a customer to the ledger, which side of the customer's account is credited?
The credit side, because the debit side of the cash book shows cash received means the customer's account balance is reduced (liability decreases).
What is the main advantage of a double column cash book over a single column cash book?
It separately records cash and bank transactions in two columns, allowing efficient handling of both mediums without confusion.
Define a pay-in-slip in the context of banking.
A form filled to deposit cash or cheques into a bank account; the counterfoil is returned to the depositor as proof of deposit.
What does 'balance c/d' mean in the cash book?
Balance carried down — the closing cash balance at the end of the period, which becomes the opening balance (balance b/d) for the next period.
Which transactions are NOT recorded in special purpose books?
Transactions that do not fit the classification of any special purpose book are recorded in the Journal Proper.
If a payment for rent is made in cash, which account is debited in the ledger after posting from the cash book?
The Rent account is debited, because rent payment appears on the credit (payment) side of the cash book.
What is the significance of 'L.F.' column in the cash book?
L.F. stands for Ledger Folio and records the page number of the ledger account to which each transaction is posted, enabling easy reference.
Define a special purpose book. Give one example and explain why a business maintains such books. [2 marks]
State that special purpose books record similar transactions; give an example (e.g., cash book for cash transactions). Reason: reduces journal congestion and enables division of labour.
Explain the posting of entries from the cash book to the ledger. Give an example of how a cash receipt from a debtor is posted and how a cash payment for expenses is posted. [5 marks]
Clarify that debit side entries (receipts) result in crediting the related accounts, and credit side entries (payments) result in debiting the related accounts. Show with a numerical example: if ₹5,000 is received from debtor X, debit cash book and credit X's account; if ₹2,000 is paid for rent, credit cash book and debit Rent account.
Prepare a single column cash book for M/s Sharma Enterprises from the following transactions for the month of March 2024, and identify which accounts will be credited and which will be debited when posting to the ledger: Opening balance ₹15,000 (Mar. 1); received from customer Priya ₹8,000 (Mar. 5); paid for purchases ₹6,500 (Mar. 10); sold goods for cash ₹12,000 (Mar. 15); paid salary ₹4,000 (Mar. 20); received from customer Arun ₹7,500 (Mar. 25); paid electricity bill ₹1,200 (Mar. 28). Balance the cash book and explain the double entry principle applied. [6 marks]
Prepare cash book with debit (opening balance, sales, customer receipts totalling ₹42,500) and credit sides (purchases ₹6,500, salary ₹4,000, electricity ₹1,200, balance c/d ₹30,800, totalling ₹42,500). Explain: Priya's account is credited (₹8,000), Arun's account is credited (₹7,500), Sales account is credited (₹12,000), Purchases account is debited (₹6,500), Salary account is debited (₹4,000), Electricity account is debited (₹1,200).
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