Page 118 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes 6.4 Summary

 The regular/frequent occurrence of transactions are recorded only in the separate books
which are known as subsidiary book of accounts or subsidiary journals, instead of being
recorded in the regular journal.
 Subsidiary books are classified on the basis of transactions viz Cash transactions and
Noncash-transactions.
 The purchases book is known in other words as purchase journal. It is a book meant for
credit purchases only for resale.
 Purchase return book is a book of goods returned to the supplier which are out of credit
purchases.

 Sales book is a book maintained by the enterprise only during the moment of selling the
goods on credit. It is known in other words as a sales journal.
 Sales return is a book that registers the goods sold on credit and received from the buyers.

6.5 Keywords

Bill of Exchange: A bill of exchange is an unconditional order signed by the maker which directs
the recipient to pay a fixed sum of money to a third party at a future date.
Journal: The primary book in which the transactions are recorded first time.

Ledger: It is the classification of accounts in which various accounts are maintained.
Non-cash Transactions: A Non-cash transaction is a transaction in terms of credit and conditions
of the enterprise.

Purchase Book: It is known in other words as purchase journal. It is a book meant for credit
purchases only for resale.
Sales Book: It is a book maintained by the enterprise only during the moment of selling the
goods on credit. It is known in other words as a sales journal.
Sales Return Book: Sales return is a book that registers the goods sold on credit and received
from the buyers.

Subsidiary Book: It is a book maintained for routine transactions of the enterprise.
Trial Balance: Trial balance is a list in which all the balances of the accounts of Ledger are
showed to test the arithmetical accuracy of the posting in ledger.

6.6 Review Questions

1. Illustrate the preparation of records for non cash transactions with suitable examples.
2. Explain the nature of petty cash book.
3. What is the difference between a petty cash book and a simple cash book?

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