Journal

-also called book of original entry/day book/the basic book of accounting

-journalising:-the process of recording a transaction in a journal

-posting:-the transfer of journal entry to ledger account

-transactions are recorded in chronological order

-the column ledger folio is filled at the time of posting into the ledger and not at the time of journalising

-opening entry:-this is the journal entry through which the closing balances of the previous year are
brought forward in the current years book of account

-businessman close books of account at the end of each year due to accounting period concept.

- in this process nominal accounts are closed by transferring them to trading account or profit and loss
account

-the balances of personal and real accounts are carried forward to the next year. these balances become
the opening balances of the next year. Opening entry is passed to record closing balances of the
previous year

-simple entry:-journal entry in which one account is debited and another account is credited

-compound entry:-journal entry in which one or more accounts are debited and one or more accounts
are credited

- subsidiary books:-

There are lot of transactions and it's very hard to record all entries in journal book. It is convenient to
maintain separate book for each type of specific transactions. It is called subsidiary books.journal entries
not passed for the transactions recorded in such books and are directly posted in the ledger account

-these books of original entry or primary entry are also called special purpose books or special journals

-subdivision of journal:-

1. Cash book-to record receipt and payment of cash and Bank

2. Purchase book-to record credit purchase of goods

3. Sales book:- to record credit sale of goods

4. Purchase return book-to record return of goods purchased on credit

5. Sales return book- to record return of credit sales

6. Journal proper-transactions which not covered in the above subsidiary books example outstanding
expenses,B/R, B/P, bad debts, depreciation, interest on drawing etc

Note: journal proper is the subdivision of journal but it's not a subsidiary book. But all are the book of
original entry

Cash book

-it is also a book of primary entry

- in which cash and Bank transactions are recorded in a chronological order

-it perform the function of both journal and the ledger at the same time

-the balances are entered in the trial balance directly

-it is both = subsidiary book and a principal book

-it is both: a book of journal and ledger

-cash column will either have debit balance or nil balance

-Bank column may have either debit or credit balance (overdraft)

-receipts are recorded in the debit side of the cash book

-while making ledger receipts posted to the credit side

-payments are recorded in the credit side of cash book

-while making ledger payments posted to the debit side

-contra entry:-

The entries which effect both cash and bank. balance of one will decrease and the other will increase.

-Such transactions are recorded on both sides of cash book. once in the cash column And the another
one in bank column

-Contra entries are not posted in the ledger account and mark with the letter C in the ledger folio
column

-Contra entries transactions between cash and Bank are not posted in the ledger

Example- 1. Cash deposited in bank

2. Cash withdrawn from bank for office use

Petty cash book:-

-maintained by petty cashier to record petty expenses

-chief cashier paid some amount to petty cahier at the start of the month. petty cashier make expenses
and remit account at the end of the month

-it is not a subsidiary book because it is not mandatory to maintain

-balance of petty cash book is an assets for the firm

System of petty cash-

1. Simple system

2. Imprest system-opening balance and closing balance should be same

Type of petty cash book:-

1. Simple petty cash book

-it is identical with the cash book

-it is like a statement

2. Analytical petty cash book

-separate column is provided for recording a particular item of expenditure

-petty expenses are classified into appropriate head of expenses

-expenses under different heads can be determined easily