CHAPTER

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CHAPTER 8

• SUB-DIVISION OF JOURALCASHBOOK

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JOURNAL ?

• Journal is the book of prime entry. It means all
  Business transactions are to be first recorded in
  the journal.
• When the number of transactions is large,
  recording of all transactions in one journal will
  not only be inconvenient but also cause delay in
  collecting information required.
• Where transactions are numerous and particularly
  of repetitive and similar nature, It is
  practicable to divide the main journal in to sub
  journal or in various subsidiary books

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Subsidiary books and their types

• Generally transactions can be classified into
  broad groups, namely cash and non-cash
• Cash receipts and payments can be grouped in one
  category where credit purchases in another
  category
• Credit sales is yet another category.
• Journal is subdivided in to such a way that a
  separate book is used for each category of
  transactions which are repetitive in nature and
  are sufficiently large in number.
• This separate books are popularly known as
  subsidiary books.

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Following are the subsidiary books

• Cash book It is used for recording only cash
  transactions i.e. Receipts and payments
• Purchase book It records only credit purchases
  of goods in which trader deals.
• Sales book It means for writing only credit
  sales of goods dealt in by the trader.
• Purchases return book It meant for recording all
  returns of goods purchase on credit
• Sales return book It means for recording all
  returns of goods sold on credit.

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Following are the subsidiary books

• Bills receivable book It meant for recording all
  bills of exchange or promissory note received by
  the business from its debtors.
• Bills payable book It is meant for recording all
  bills of exchange or promissory notes issued by
  the business in favour of its creditors.
• Journal proper It meant for recording all such
  transactions for which no special journal has
  been kept by the Business.

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Bill of exchange

• A bill of exchange or "draft" is a written order
  by the drawer to the drawee to pay money to the
  payee. A common type of bill of exchange is the
  cheque defined as a bill of exchange drawn on a
  banker and payable on demand. Bills of exchange
  are used primarily in international trade, and
  are written orders by one person to his bank to
  pay the bearer a specific sum on a specific date.
  Prior to the advent of paper currency, bills of
  exchange were a common means of exchange. They
  are not used as often today.
• It is essentially an order made by one person to
  another to pay money to a third person.
• A bill of exchange requires in its inception
  three partiesthe drawer, the drawee, and the
  payee.
• The person who draws the bill is called the
  drawer. He gives the order to pay money to the
  third party. The party upon whom the bill is
  drawn is called the drawee. He is the person to
  whom the bill is addressed and who is ordered to
  pay. He becomes an acceptor when he indicates his
  willingness to pay the bill. (Sec.62) The party
  in whose favor the bill is drawn or is payable is
  called the payee.

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Advantages of subsidiary book and subdivision of
journal

• Facilitates division of work
• Protection from fraud
• Facility in checking business transactions.
  (sales return purchase return)
• Increase in efficiency (interest in particular
  work)
• Less time more work( making entries in subsidiary
  books is easy, posting takes less time. Thus
  there is a saving of much time and labour).
• Full information at one place
• Flexible (necessary to keep all subsidiary book,
  the number of books may increase or decrease)
• Responsibility of the work.

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Cash Book

• Cash book is the special journal which is used
  for recording all cash transactions. It may be
  defined as the book in which transactions are
  recorded in detailed particulars of all money
  received and paid.
• Cash book is divided in to two
• A) Cash receipt
• B) Cash payment

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FEATURES OF CASH BOOK

• To keep record of only cash transactions
• All receipts are recorded in debit side
• All payments are recorded in credit side
• Chronological (date wise) transaction recording
  of all transactions.
• Performs function of both journal and ledger.

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Objects or Need of cash book

• To find out the total cash receipts and cash
  payments during a given period.
• To ascertain the balance of cash in hand and at
  bank at any time without actually counting cash
  and examining Bank passbook
• To verify the correctness of cash in hand and
  bank.

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IMPORTANTS OF CASH BOOK

• This is a very popular book and it is maintained
  in all organisations.
• Big or small ,profit and non trading concerns
• It helps the trader to understand the cash in
  hand and cash at bank.
• It is easy to find out any fraudulent activities
  inside the organisation.