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Financial Accounting
Notes
Did u know? What is meant by the Non-cash transaction?
A non-cash transaction is a transaction in terms of credit and conditions of the enterprise.
The non-cash transactions shall include the following transactions of the enterprise, which
do not involve any cash; they are as follows:
1. Credit sales Book
2. Credit purchases Book
3. Credit Sales Return Book
4. Credit Purchases Return Book
5. Bills Payable Book – Outcome of Credit transaction, and
6. Bill Receivable Book – Outcome of Credit transaction
6.1.1 Advantages of Subsidiary Books
The following are the advantages of having a number of subsidiary books:
1. Classification of transactions becomes automatic: As there is a separate book for each
type of transactions, the transactions of same nature are automatically brought at one
place.
2. Reference becomes easy: If any reference is required, it can be traced easily by referring to
the appropriate subsidiary book. You do not have to go through all the transactions
recorded in the journal.
3. Facilitates division of work: The division of journal into various subsidiary books
facilitates division of work among many persons. This, in turn, facilitates prompt recording
of transactions and saves a lot of time.
4. More particulars: More details about the transactions can be given-in subsidiary books
than would be possible in one book.
5. Responsibility can be fixed: The work of maintaining a particular book can be entrusted to
a particular person. He will be responsible for keeping it up-to-date and in order.
6. Facilitates checking: When the Trial Balance does not agree, the location of errors will be
relatively easy.
6.2 Cash Book
Having outlined various subsidiary books, we shall now discuss the most important subsidiary
book called ‘Cash Book’. Cash book is the book of accounts where most of the transactions are
generally related with the receipts and payment of cash. It may be either purchase of goods for
cash or sale of goods for cash or it may be either payment of expenses or receipts of income. In
any business there would be numerous cash transactions which involve either receipts or
payments of cash. Cash sales, receipt of cash from debtors, cash purchases, and payments to
creditors, payment of various expenses such as salaries, wages, rent, taxes, etc., are some examples
of transactions involving cash. AU these are recorded in cash book, receipts on one side and
payments on the other.
Every business unit, small or big, maintains a cash book. It enables the businessman to know
and verify the amount of cash in hand from time to time. As a matter of fact, cash book plays a
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