Special Purpose Books – II (Non-Cash)

In the previous chapter the method of recording transactions in a cash book was
discussed. As discussed, only the cash transactions are recorded in the cash book
whereas non-cash transactions are recorded in other special purpose subsidiary books,
which are as follows:—
1. Purchase Book
2. Sales Book
3. Purchase Return Book
4. Sales Return Book
5. Bills Receivable Book
6. Bills Payable Book
7. Journal Proper
It is not necessary for every business to maintain all the above mentioned special
purpose subsidiary books but any of the above may be kept depending upon the need of
the business.
Bills Receivable Book and Bills Payable Book are not in the Syllabus.
1. Purchase Book or Purchase Journal
All credit purchases of goods are recorded in the purchase book. ‘Goods’ here mean
only those things in which the firm is dealing. In other words, these are the articles
which are purchased for resale. If, for example, a firm dealing in cloth purchases cloth,
it will be treated as purchase of goods and will be-recorded in the Purchase Book. But if
the same firm purchases furniture, it will be treated as purchase of an ‘Asset’ and will
not be recorded in purchase book. Purchase book is also known as ‘Invoice Book’ or
‘Purchase Day Book’.
Following transactions are not recorded in the purchase book :—
(1) Cash Purchases:— Cash purchases are not recorded in this book since these will
be recorded in the cash book.
(2) Purchase of Asset:— Only credit purchase of goods are recorded in this book.
Purchase of assets, such as Machinery, Furniture, and Typewriters etc. are not recorded
in the purchase book. Instead these are recorded in the Journal proper if purchased on
credit or in the cash book if purchased for cash.
Recording of Transactions:— The source documents on the basis of which the
transactions are recorded in the purchase book are invoices or bills received by the firm
from the suppliers of the goods. An invoice contains the quantity of the goods, rate,
amount, trade discount etc.
Trade Discount:— The amount of purchase to be recorded in the purchase book is
always arrived at after deducting trade discount. If, for example, goods of the list price of
₹ 10,000 are purchased at 20% trade discount, only ₹ 8,000 will be recorded in the
purchase book.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 Format of Purchase Book/ Journal

Date Particulars Inv. L.F. Details Purchase Input Input Input Total
(Name of the Supplier) No. Amount Net to T.D. CGST SGST IGST Amount
(Account to be
Credited)
₹ ₹ ₹ ₹ ₹ ₹

Explanation of the columns of the purchase book :—

(1) Date:— The date of purchase of goods on credit is recorded in this column.
(2) Particulars :— The name of the person or firm from whom the goods are purchased
is written in this column. Also it contains the description of the goods purchased, its
quantity, rate, gross amount, trade discount etc.
(3) Invoice Number :— The number of the invoice or bill on the basis of which the
transaction is being recorded in the purchase book is mentioned in this column.
(4) Ledger Folio or L.F. :— Page number of the ledger where the transaction is posted is
recorded in this column.
(5) Details :— This column is used to write the individual amount of different items
purchased from a particular supplier. This column is also used to deduct the amount
of trade discount and for adding the amount of Input CGST, Input SGST and Input
IGST.
(6) Purchase : Net amount of purchase i.e., purchase less trade discount is written in
this column.
(7) Input Central GST (CGST) : This tax is paid on intra-state purchase of goods i.e.,
purchase of goods within the same state. It is charged by the seller from the
purchaser on the net sale value i.e., sale price less trade discount. Total of this
column is posted to the debit of Input CGST A/c in the Ledger.
(8) Input State GST (SGST) : This tax is also paid on purchase of goods within the same
state. It is also calculated on the net sale value i.e., sale price less trade discount.
Total of this column is posted to the debit of Input SGST A/c in the Ledger,
(9) Input Integrated GST (IGST) : This tax is paid on inter-state purchase of goods i.e.,
purchase of goods from outside the state. It is calculated on net sale value i.e., sale
price less trade discount. Total of this column is posted to the debit of Input IGST
A/c in the Ledger.
(10) Total Amount : Total amount of each transaction is shown in this column and the
amount of each transaction is posted to the credit of the Supplier A/c in the Ledger.
Note : Either the CGST + SGST will be levied on a transaction or only IGST will be
levied.
For example, suppose the rate of CGST is 6% and SGST is 6%, then if the goods have
been purchased from within the state then CGST @ 6% + SGST @ 6% will be levied. If
the goods have been purchased from outside the state, then only IGST @ 12% will be
levied.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Example
Enter the following transactions in the Purchase Book of Pawan Electric Store, New
Delhi assuming CGST @ 6% and SGST @ 6%.:

2019

June 2 Purchased goods from Surya Electric Store, Chandni Chowk, Delhi on credit
(Invoice No. 480);

40 Tubelights @ ₹500 each

15 Table Fans @ ₹2,000 each

Trade Discount 20%

10 Bought goods from New Light Traders, Connaught Place, New Delhi on credit
(Invoice No. 2310):—

10 Ceiling Fans @ ₹3,000 each

20 Electric Irons @ ₹500 each

Trade Discount 10%

20 Purchased goods from Ravindra Electric Co., Patel Nagar, New Delhi on credit
(Invoice No. 1508):—

100 Dozen Bulbs @ ₹ 50 per Bulb

20 Water Heaters @ ₹ 1,000 each

Less : Trade Discount 25%

22 Bought from Sunny Lamp, Lajpat Nagar, New Delhi for cash (Invoice No. 705):—
5 Electric Irons @ ₹480 each

28 Bought from Fashion Furniture Co., Chitra Gupta Road, New Delhi on credit
(Invoice No. 3450):—

12 Chairs @ ₹ 1,500 each

2 Tables @ ₹ 8,000 each

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 Books of Pawan Electric Store, New Delhi
PURCHASE BOOK OR PURCHASE JOURNAL

Date Particulars (Name of the Supplier) Invoice L.F. Details Purchase Input Input Input Total
(Account to be Credited) Net to T.D.
No. CGST SGST IGST Amount

2019 ₹ ₹ ₹ ₹ ₹ ₹

June Surya Electric Store, Chandhi 480

Chowk, Delhi
2
40 Tubelights @ ₹500 each
20,000
15 Table Fans @ ₹2,000 each
30,000
List Price
50,000
Less: Trade Discount @ 20%
10,000
Net to T.D.
40,000
Add: CGST @ 6%
2,400
Add: SGST@ 6%
2,400
44,800 40,000 2,400 2,400 --- 44,800
10 New Light Traders, Conn. Place, 2310
N. Delhi
10 Ceiling Fans @ ₹3,000 each 30,000
20 Electric Irons @ ₹ 500 each 10,000
List Price of Goods 40,000
Less : Trade Discount @ 10% 4,000
Net to T.D. 36,000
Add: CGST @6% of ₹ 36,000 2,160
Add: SGST @ 6% of ₹ 36,000 2,160
36,000 2,160 2,160 --- 40,320
40,320
20 Ravindra Electric Co. Patel 1508
Nagar, N. Delhi
100 Dozen Bulbs @ ₹600 per Dozen 60,000
20 Water Heaters @ ₹ 1,000 each 20,000
List Price of Goods 80,000
Less: Trade Discount @ 25% 20,000
Net to T.D. 60,000
Add: CGST @6% 3,600
Add: SGST @ 6% 3,600
67,200 60,000 3,600 3,600 --- 67,200

Total 1,36,000 8,160 8,160 1,52,320

Notes :(1) Purchase on 22nd June will not be recorded in the purchase book because the
goods have been purchased for cash.
(2) Only the purchase of goods (and not an asset) is recorded in this book. The firm is
dealing in electric goods, as such, the purchase of furniture on 28th June will not be
recorded in this book.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Practice Question No.1
Prepare a Purchase Book in the books of M/s Modern Furniture House, Lucknow (U.P)
from the following transactions assuming CGST @ 6% and SGST @ 6% each.

2019

June 5 Bought from Mohan Lai & Co., Kanpur (U.P):—

20 Godrej Chairs @ ₹2,000 each 5 Godrej Tables @ ₹6,000 each
Trade Discount 20%

10 Purchased from Bharat Bhushan & Sons, Varanasi (U.P):—

5 Almirahs @ ₹ 12,000 each 2 Revolving Chairs @ ₹20,000 each
Trade Discount 10%

14 Purchased from Surya Traders, Lucknow (U.P)

80 Desks @ ₹2,500 each 10 Sofa Sets @ ₹20,000 each
Trde Discount @ 15%

20 Purchased for cash from Gopi Chand Haldi Ram, Delhi:—

4 Tables @ ₹5,000 each

25 Bought Furniture for office use from New Furniture House, Faridabad :

5 Chairs@ ₹2,500 per Chair. 2 Tables @ ₹5,000 per Table.

Practice Question No.2

M/s Ram Narain & Sons of Kerala, who are dealers in readymade garments, purchased
the following :—

2019

May 2 Purchased from Fashion House, Mumbai (Maharashtra):—

100 Shirts @ ₹ 1,800 per Shirt 75 T-shirts @ ₹ 1,600 per piece
Less : Trade Discount 20%; and freight charges payable ₹ 10,000.

10 Purchased from Appolo Garments, Kerala :—

65 Shirts @ ₹2,000 per piece 80 T-shirts @ ₹ 1,500 per piece
Less : 20% Trade Discount and freight charges payable ₹2,000.

15 Purchased from Garden Furniture House, Kolkata :—

12 Chairs @ ₹ 5,000 per Chair

25 Purchased from Amitabh Shirts, New Delhi for cash :—

120 Shirts @ ₹ 1,500 per Shirt

Note: Entry for Freight Charges of ₹ 12,000 (₹ 10,000 + ₹2,000) will be recorded in
JOURNAL PROPER

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 2. Sales Book or Sales Journal
All credit sales of goods are recorded in the sale book. Cash sales will be recorded in
the cash book and not in the sales book. Similarly, credit sales of things other than the
goods in which the firm deals in, are not entered in the Sale Book, they are entered in
the Journal. Sales Book is also called Sales Day Book. Following transactions are not
recorded in the Sales Book :—
(1) Cash Sales: It does not record cash sales of goods, as the cash sales are recorded
in the cash book.
(2) Sale of Asset: Only the credit sale of goods is recorded in this book. If, instead of
goods, some asset such as Machinery, Furniture, Typewriter etc. is sold on Credit or for
Cash, it will not be recorded in the Sale Book. Credit sale of an asset will be recorded in
Journal proper, whereas cash sale of the asset will be recorded in cash book.
Recording of Transactions: Entries in the sales book are recorded on the basis of
the sales invoices issued by the firm to its customers at the time of sale. In fact, two or
more than two copies of each sales invoice are prepared. One copy of the invoice is given
to the customer and the other copies are numbered and kept in a file for making entries
in the Sales Book. Sale invoice contains full information regarding the date, name of the
customer, quantity, rate, gross amount, trade discount allowed to the customer, GST
and the net amount of sales.
Format of Sales Book

Date Particulars Inv. L.F. Details Sales Output Output Output Total
(Name of the Customer) No. Net to T.D. CGST SGST IGST Amount
(Account to be Debited) ₹ ₹ ₹ ₹ ₹ ₹

Explanation of the Columns of Sales Book :

(1) Date : The date of sale of goods on credit is recorded in this column.
(2) Particulars : In addition to the name of the customer, this column also contains the
description of goods sold, its quantity, rate, gross amount, trade discount etc.
(3) Invoice Number:
(4) Ledger Folio or L.F.
(5) Details: This column is used to write the individual items sold less trade discount. It
is also used to add the amount of Output CGST, Output SGST and Output IGST.
(6) Sale : Net amount of sale i.e. sale less trade discount is written in this column.
(7) Output Central GST (CGST) : A separate column is provided in the Sale Book to
record Output CGST. This tax is collected by the seller from buyer on intra-state sale of
goods i.e., sale of goods within the same state.
(8) Output State GST (SGST) : A separate column is also provided in the Sale Book to
record Output SGST. This tax is also collected by the seller on sale of goods within the
same state.
(9) Output Integrated GST (IGST): A separate column is maintained to record Output
IGST. This tax is collected by the seller on inter-state sale of goods i.e., sale of goods
outside the state.
(10) Total Amount: Total amount of each transaction is shown in this column and the
amount of each transaction is posted to the debit of the Customer’s A/c in the Ledger.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

EXAMPLE
Prepare a Sales Book from the following transactions of Navketan Furniture House,
Ludhiana (Punjab) assuming CGST @ 6% and SGST @ 6%.

2019

May 1 Sold goods to Five Star Furniture Co., Patiala (Punjab), Vide Invoice No. 140

150 Chairs @ ₹ 1,800 each

36 Tables @ ₹5,000 each

Trade Discount 20%

15 Sold goods to Vishal Furniture House, Amritsar (Punjab) , Vide Invoice No.
120

10 Almirahs @ ₹ 11,000 each

5 Sofa sets @ ₹ 18,000 each

Trade Discount 15%

20 Sold goods to Prakash Furniture House, New Delhi, Vide Invoice No. 420

100 Chairs @ ₹2,000 each

Less : 5%

25 Sold to Moonlight Furniture Co. for Cash, Vide cash memo No.058
50 Chairs @ ₹ 1,900 each

28 Sold on credit to Sunil Machinery Store, Vide Invoice No. 3000

2 Old Machineries @ ₹5,000 per Machine

1 Old Computer for ₹ 1,200

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

SOLUTION: Navketan Furniture House, Ludhiana
SALES BOOK

Date Particulars Inv. L.F. Details Sales Output Output Output Total
(Name of the Customer) No. Net to CGST SGST IGST Amount
(Account to be Debited) T.D.

2018 Five Star Furniture 140 ₹ ₹ ₹ ₹ ₹ ₹

May Co., Patiala
1 150 Chairs @ ₹ 1,800 each 2,70,000
36 Tables @ ₹5,000 each 1,80,000
List Price 4,50,000
Less : Trade Discount 20% 90,000
Net to T.D. 3,60,000
Add: CGST @ 6% 21,600
Add: SGST @ 6% 21,600

4,03,200 3,60,000 21,600 21,600 -- 4,03,200

15 Vishal Furniture 120

House, Amritsar
10 Almirahs @ ₹ 11,000 each 1,10,000
5 Sofa Sets @ ₹ 18,000 each 90,000
List Price 2,00,000
Less : Trade Discount @ 15% 30,000
Net to T.D.
1,70,000
Add: CGST @ 6%
10,200
Add : SGST @ 6%
10,200

1,90,400 1,70,000 10,200 10,200 1,90,400

20 Parkash Furniture 420

House, New Delhi

100 Chairs @ ₹2,000 each 2,00,000

Less : Trade Discount @ 5% 10,000
Net to T.D. 1,90,000
Add: IGST @ 12% 22,800
212,800
1,90,000 --- --- 22,800 2,12,800

31 Total 7,20,000 31,800 31,800 22,800 8,06,400

Notes: (1) Only credit sales are recorded in this book, as such the cash sales on
25th May have been omitted from being recorded. It will be recorded through Cash Book
(2) Similarly, as only the sales of goods are recorded in this book, the sales of old
machinery and Computer on 28th May have been omitted from being recorded.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Practice Question No. 3
Record the following transactions in the Sales Book of Ganesh & Co. of Jaipur
(Rajasthan),- who deal in Furniture. Assume CGST @ 9% and SGST @ 9%:—

2019

June 4 Sold to Gupta Furniture House, Agra (U.P.);

120 Chairs @ ₹ 2,500 per Chair-
25 Tables @ ₹ 8,000 per Table
Less : Trade discount of 5%

8 Sold to Raja Furniture House, Ahmedabad (Gujarat):

8 Almirahs @ ₹ 15,000 each
9 Steel Cabinets @ ₹ 20,000 each
Less : Trade discount of 10%

12 Sold old Computer for ₹ 1,500 to Mohan & Co. on Credit.

20 Sold 4 Sofa sets @ ₹25,000 each to Vanin & Co. for cash

25 Sold to New Furniture House, Jaipur :

5 Sofa sets @ ₹20,000 each
10 Tables @ ₹8,000 each

28 Ram Lal & Co. Jaipur Purchased from Ganesh & Co. on credit:
50 chairs @ ₹2,000 each

Practice Question No. 4

Record the following transactions in the Sales Book of M/s Ajanta Electronics, Ranchi
(Jharkhand) assuming CGST @ 9% and SGST @ 9% :

2020

March 1 Sold to Vandna Electronics, Kolkata (West Bengal) Vide Invoice No. 1255 :
50 Musical Alarm Clocks @ ₹ 800 each
40 Wall Clocks @ ₹500 each
Trade Discount 20%

10 Sold to Mohan Watch Company, Patna (Bihar) Vide Invoice No. 1256 :
25 Deluxe Wall Clocks @ ₹800 each Trade Discount 10%

15 Sold to Superior Watch Company, Ranchi Vide Invoice No. 1257 :

75 Deluxe Wall Clocks @ ₹800 each
40 Super Deluxe Wall Clocks @ ₹ 1,000 each

Trade Discount 15%

20 Sold to Modem Electronics, Ranchi Vide Cash Memo No. 5234 :

100 Musical Alarm Clocks @ ₹800 each Trade Discount 20%

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 3. Purchase Return Book or Purchase Return Journal
This book is used to record the return of such goods as were purchased on credit
basis. The book is also known as Return Outward Book. There may be various reasons
for returning the goods to the suppliers:
(1) When the goods delivered are not according to the sample.
(2) When the goods are not according to the order or the quality of the goods supplied
is inferior.
(3) When the goods are defective or they have been damaged in transit.
(4) When the price charged in the invoice is in excess of the agreed price.
(5) When the goods have not been delivered in time.
When the goods are returned, a debit note is prepared and is sent to the supplier
with the returned goods, A debit note contains the name of the party to whom the goods
have been returned, details of the goods returned and the reason for returning the
goods. Each debit note is serially numbered, dated and is prepared in duplicate. Original
copy is sent to the supplier, informing him the amount for which his account has been
debited on account of return of goods. It is called a debit note because the party’s
account is debited with the amount written in this note. The party to whom the goods
have been returned also prepares and sends a note which is called the credit note.
Duplicate copy of the debit note becomes a source document, on the basis of which
the entries are recorded in the purchase return book.
A debit note is also sent when a sales invoice is under charged by mistake or a sales
invoice is undercast or some particular goods are omitted to be recorded in the sales
invoice.
Format of Purchase Return Book
The form of Purchase Return Book is given below :—

Date Particulars Debit L.F. Details Purchase Input Input Input Total
(Name of the Supplier) Note No. ₹ Return CGST SGST IGST Amount
(Account to be Debited) ₹ ₹ ₹ ₹ ₹

Example:
Enter the following transactions in the Purchases Return Book of Govind Traders, New
Delhi, assuming CGST @ 6% and SGST @ 6%

2019

June 15 Returned goods to Radha Krishan & Sons, New Delhi for ₹ 20,000. Trade
Discount 10%. (Debit Note No. 140)

20 Returned goods to Gopal sons, New Delhi for ₹ 50,000, as the goods were not
according to sample. (Debit Note No. 141)

25 Allowance claimed from Raghubir Parshad, New Delhi, on account of

mistake in the invoice ₹ 10,000. (Debit Note No. 145)

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Solution:
PURCHASE RETURN BOOK OR RETURN OUTWARD BOOK

Date Particulars Debit L.F. Details Purchase Input Input Input Total
(Name of the Supplier) Note Returns CGST SGST IGST Amount
(Account to be Debited) No.

2019 ₹ ₹ ₹ ₹ ₹ ₹

June Radha Krishan & Sons, New Delhi 140 20,000

15 Less : Trade Discount @ 10%
2,000
Net to T.D. 18,000
Add: CGST @ 6% 1,080
Add: SGST @ 6% 1,080

20,160 18,000 1,080 1,080 --- 20,160

June Gopal & sons, New Delhi 141 50,000

20
Add: CGST @ 6% of 50,000 3,000
Add: SGST @ 6% of 50,000 3,000

56,000 50,000 3,000 3,000 --- 56,000

June Raghubir Prashad, New Delhi 145 10,000

25
Add: CGST @6% 600
Add: SGST @ 6% 600

11,200 10,000 600 600 --- 11,200

Total 78,000 4,680 4,680 ---- 87,360

4. Sales Return Book or Sales Return Journal

This book is used to record the return of such goods as were sold to the customers
on credit basis. The book is also known as Return Inwards Book. When the goods are
received back, a credit note is prepared in duplicate and the original copy of the same
is sent to the party from whom goods were received. A credit note contains details
relating to the name of the customer, details of the goods received back and the amount
of return. Each credit note is serially numbered and dated. This note is called a credit
note because the party’s account, from whom the goods are received back, is credited
with the amount written in the note. The same note is called a debit note by the party
who is returning the goods because that party will use this note for debiting the account
of the party to whom it has returned the goods.
Duplicate copy of the credit note sent to the party becomes a source document, on
the basis of which the entries are recorded in the sales return book.
A Credit note is also sent when a sales invoice is over charged by mistake or a sales
invoice is overcast or some special discount is allowed to the customer because of
defective goods.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 Format of Sales Return Book

Date Particulars Credit L.F. Sales Output Output Output Total

(Name of the Customer) Note Details Returns CGST SGST IGST Amount
(Account to be Credited) No. ₹ ₹ ₹ ₹ ₹ ₹

Example
Prepare Sales Return Book in the Books of Ram Lal & Co., Hisar (Haryana) from the
following transactions assuming CGST @ 6% and SGST @ 6%:

April 6 Goods returned by Ganga Parshad & Co., Kama] (Haryana):— 1 Table Fan @
₹ 6,000 Less : Trade Discount 15%

12 Shyam Oil Mills, Yamunanagar (Haryana) returned defective goods valued

₹ 40,000.

18 Allowance allowed to Sanjay & Co., Faridabad (Haryana) on account of

mistake in the invoice ₹2,500.

Solution:
SALES RETURN BOOK OR RETURNS INWARD BOOK (Ramlal & Co.)

Date Particulars (Name of the Credit L.F. Details Sales Output Output Output Total
Customer) (Account to be
Note Returns CGST SGST IGST Amount
Credited)

2019 ₹ ₹ ₹ ₹ ₹ ₹

April Ganga Parshad & Co., Karnal

6
1 Table Fan @ ₹ 6,000 6,000
Less : Trade Discount @ 15% 900
Net to T.D. 5,100
Add: CGST @ 6% of 5,100 306
Add: SGST@ 6% of 5,100 306

5,712 5,100 306 306 ----- 5,712

April Shyam Oil Mills, Yamuna nagar

12 (Haryana)
40,000
Add: CGST @ 6%
2,400
Add: SGST @ 6%
2,400

44,800 40,000 2,400 2,400 ---- 44,800

April Sanjay & Co., Faridabad 2,500

18 (Haryana)
150
Add: CGST @6%
150
Add: SGST @ 6%

2,800 2,500 150 150 2,800

30 Total 47,600 2,856 2,856 53,312

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 5. Journal Proper or General Journal
After the sub-division of journal into various subsidiary books, journal remains only
a residuary book in which only those transactions are recorded which cannot be
recorded in any other subsidiary book. In such a case journal is called journal proper.
For example, if machinery is purchased on credit, it can neither be recorded in cash
book nor in purchase book. The reason is that cash book records only the cash
transactions and the purchase book records only credit purchase of goods and not the
purchase of an asset. The purchase of machinery which is an asset will thus be
recorded in the journal proper. The following types of transactions are recorded in
journal proper:
(1) Opening Entry: This entry is passed to bring the closing balances of various
assets, liabilities and capital appearing in the Balance Sheet of previous accounting
period, to the books of current accounting period.
(2) Closing Entries: At the end of the accounting period, a Trading and Profit and
Loss Account has to be prepared to ascertain the net profit. For this purpose, the
nominal accounts have to be closed by transferring their balances to this account. The
entries passed for this purpose are called closing entries.
(3) Transfer Entries: Transfer entries are passed for transferring an amount or the
balance of one account to another such as transferring the balance of Drawings A/c to
Capital A/c.
(4) Adjustment Entries: At the time of preparation of final accounts, entries are
needed to record certain unrecorded items such as closing stock, outstanding expenses,
prepaid expenses, depreciation on fixed assets, interest on capital etc. Entries for these
are called adjustment entries.
(5) Rectifying Entries: These entries are passed to rectify the errors while
journalising, posting, totalling, balancing etc.
(6) Miscellaneous Entries: In addition to tire above, the following entries will also be
passed in the journal proper :
(i) Purchase of an asset on credit;
(ii) Sale of an asset on credit;
(iii) Writing off bad debts;
(iv) Discount allowed and discount received;
(v) Bills Receivable received;
(vi) Bills Payable issued
(vii) Endorsement of Bill Receivable to a creditor;
(viii) Dishonour of Bills Receivables (not discounted with the bank);
(ix) Cancellation of Bills Payable;
(x) Goods taken by the proprietor for personal use;
(xi) Goods given away as charity or free sample;
(xii) Abnormal loss of stock or other assets by fire, accident, theft etc.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Example
Record the following transactions in the ‘JOURNAL PROPER’ of M/s Mukesh Traders :

2019

March 5 Sunil who owed us ₹50,000 was declared insolvent and 40% is received as
full and Final payment.

March 10 An old machinery was sold to Kailash for ₹ 10,000 on credit.

March 12 Proprietor withdrew for personal use cash ₹ 10,000 and goods ₹4,000.

March 15 Goods worth ₹40,000 was destroyed by fire.

March 20 Insurance company admitted a life insurance claim of ₹25,000.

March 22 A bills receivable for ₹ 10,000 endorsed to Mr. Mehta.

March 31 Wages outstanding for March 2010 ₹ 15,000.

March 31 Insurance Prepaid at the end of the year was ₹2,000.

In the books of Mukesh Traders JOURNAL PROPER

Date Particulars L.F. Dr. Cr.

2018 ₹ ₹

March 5 Bad Debts A/c Dr. 30,000

To Sunil 30,000

(Bad debts written off on Sunil’s insolvency)

March 10 Kailash Dr. 10,000

To Machinery A/c 10,000

(Old machinery sold on credit)

March 12 Drawings A/c Dr. 4,000

To Purchases A/c 4,000

(Goods withdrawn for personal use)

March 15 Loss by Fire A/c Dr. 40,000

To Purchases A/c 40,000

(Goods destroyed by fire)

March 20 Insurance Company Dr. 25,000

- To Loss by Fire A/c 25,000

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 (Insurance claim admitted by insurance company)

March 22 Mehta Dr. 10,000

To Bills Receivable A/c 10,000

(B/R endorsed to Mr. Mehta)

March 31 Wages A/c Dr. 15,000

To Outstanding Wages A/c 15,000

(Adjustment for wages outstanding)

March 31 Prepaid Insurance A/c Dr. 2,000

To Insurance A/c 2,000

(Adjustment for prepaid insurance

premium)

Practice Question no. 5

Write up Return Outward Book of Malthotra & Co., Bhiwani (Haryana) from the
following transactions assuming CGST @ 6% and SGST @ 6% :

2019

August 4 Returned to Saraswati House, Bhiwani 25 Chairs @ ₹ 1,800 per Chair, being
not of specified quality.
Trade Discount 10%

12 Sent back one Dining Table to Navneet Enterprise, Kama] (Haryana) for not
being polished @ ₹l0,000 and 20 Chairs @ ₹2,000 each.

20 Returned to Yadav & Co., Patiala (Punjab), being not according to sample :—

20 Chairs @ ₹ 1,500 each.

2 Dressing Tables @ ₹7,500 each.

28 Allowance claimed from Navneet Enterprise, Ludhiana (Punjab) on account of

mistake in the invoice ₹5,000.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Practice Question no. 6
Enter the following transactions in the Returns Inward Book of Anand Cloth House,
Ajmal Khan Road, Mathura (U.P.) assuming CGST @ 2.5% and SGST @ 2.5%

October 3 Chakravarti & Co. Jaipur (Rajasthan), returned to us being not according to
sample :—

50 Metre Cotton Cloth @ ₹200 per Metre

30 Metre Silk Cloth @ ₹500 per Metre

Trade Discount 20%

12 Narain Rai & Co., Indore (M.P.), returned being not up to the approved
sample:— 25 Metre woollen cloth @ ₹400 per Metre

20 Goods sold to Janaki Das Sita Ram, Agra (U.P.) now returned by them, being
defective valued at ₹8,000.

28 Allowance allowed to Kesari Lai & Sons, Sadar Bazar, Prayagraj (U.P.) on
account of a mistake in the invoice ₹3,000.

Practice Question no. 7

Prepare Return Books of M/s Gupta Brothers, Jaipur (Rajasthan) from the following
transactions assuming CGST @ 6% and SGST @ 6% :—

March 7 Returned to Arora & Co., Nai Sarak, Delhi, being not according to samples :—

10 Chairs @ ₹2,000 each

1 Table for ₹5,000

Less : 20%

10 Subhash Furniture Co., Faridabad (Haryana) returned to us :—

2 Broken Almirahs @ ₹ 11,000 each

Less : 15%

20 Returned to Fateh Chand & Co., Jaipur, the following goods for being
damaged in transit:—

5 Chairs @ ₹ 1,600 each

Less : 10%
Ravi Saxena, Jaipur returned to us the following, being not of specified
25
quality:—
1 Dining Table for ₹ 10,000

5 Chairs @ ₹2,000 each

Less : 15%

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

Comprehensive Example:
Enter the following transactions of Kumar Bros, in appropriate Subsidiary books:

2018

Jan. 1 Assets : Cash in Hand ₹5,400; Due from Bataji & Co. ₹7,000; Due from Manoj
₹20,000; Stock ₹80,000; Furniture ₹25,000.

Liabilities : Bank overdraft ₹36,200; Due to Surender ₹9,200.

Jan. 3 Purchased from Ram Lai & Sons 10 Chests of tea @ ₹720 each less 10% trade
discount.

Jan. 5 Purchased from Ghanshyam Das & Co, 20 tins of coffee @ ₹480 each, less 5%
trade discount. Half the payment is made in cash and half by cheque.

Jan. 6 Purchased machinery for ₹ 10,000 from Parmod & Co. on Credit.

Jan. 8 Received cash from Balaji & Co. ₹6,800 in full settlement of their account.

Jan. 10 Deposited into bank ₹5,000.

Jan. 12 Sold to Sen & Co. goods as follows :

4 Chests of tea @ ₹950 each

12 tins of Coffee @ ₹700 each

Jan. 15 Returned to Ram Lai & Sons 1 chest of tea.

Jan. 16 Sold to Ravi Shankar 20 chests of tea @ ₹ 1,000 each less 5% trade discount.

Jan. 17 Ravi Shankar returned 1 chest of tea.

Jan. 18 Ravi Shankar accepted a bill for 1 month for the amount due from him.

Jan. 18 Paid for wages ₹500 and for stationery ₹200.

Jan. 20 Received a cheque of ₹ 10,000 from Sen & Co. The cheque is immediately
deposited into bank.

Jan. 21 Purchased from Vijay & Co. 20 chests of tea @ ₹800 each and 5 tins of coffee @
₹500 each.

Jan. 22 2 Chests of tea costing ₹700 each are taken by Mr. S. Kumar for his personal
use.

Jan. 24 Returned to Vijay & Co. 2 chests of tea and 1 tin of coffee.

Jan. 25 Acceptance given to Vijay & Co. for 2 months for the amount due to them.

Jan. 27 Acceptance received from Sen & Co. for ₹2,200 for 30 days.

Jan. 28 Withdrew from bank for personal use ₹4,000 and for office use ₹6,000.

Jan. 30 Paid rent by cheque ₹4,000.

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

SOLUTION

Dr. CASH BOOK Cr.

Date Receipts L.F. Cash Bank Date Payments L.F. Cash Bank

2018 ₹ ₹ 2018 ₹ ₹

Jan. 1 To Balance b/d 5,400 Jan. 1 By Balance b/d 36,200

Jan. 8 To Balaji & Co. 6,800 Jan. 5 By Purchases A/c 4,560 4,560

Jan. 10 To Cash A/c C 5,000 Jan.10 By Bank A/c C 5,000

Jan. 20 To Sen & Co. 10,000 Jan. 18 By Wages A/c 500

Jan. 28 To Bank A/c C 6,000 Jan. 18 By Stationery A/c 200

Jan. 28 By Drawings A/c 4,000

Jan. 28 By Cash A/c C 6,000

Jan. 30 By Rent A/c 4,000

18,200 15,000 10,260 54,760

Jan. 31 To Balance c/d 39,760 Jan. 31 By Balance c/d 7,940

18,200 54,760 18,200 54,760

Feb. 1 To Balance b/d 7,940 Feb. 1 By Balance b/d 39,760

Note : (1) Entry for discount allowed to Balaji & Co. will be passed in Journal Proper.

PURCHASES BOOK

Date Name of the Supplier Invoice L.F. Details Purchase Input Input Input Total
(Account to be Credited)
No. CGST SGST IGST Amount

2018 ₹ ₹ ₹ ₹ ₹ ₹

Jan. 3 Ram Lai & Sons

10 Chests of Tea @ ₹720 each 7,200

Less : Trade Discount 10% 720 6,480 6,480

Jan. 21 Vijay & Co.

20 Chests of Tea @ ₹800 each 16,000

5 Tins of coffee @ ₹500 each 2,500

18,500 18,500 18,500

Jan. 31 Purchase A/c Dr. 24,980 24,980

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 SALES BOOK

Date Name of the Customer Inv. L.F. Details Sales Output Output Output Total
CGST SGST IGST
(Account to be Debited) No. Amount

2018 ₹ ₹ ₹ ₹ ₹ ₹

Jan. 12 Sen & Co.

4 Chests of Tea @ ₹950 each 3,800

12 Tins of Coffee @ ₹700 each 8,400 12,200 12,200

Jan. 16 Ravi Shankar

20 Chests of Tea @ ₹ 1,000 each 20,000

Less : Trade Discount 5% 1,000

19,000 19,000 19,000

Jan. 31 Sales A/c Cr. 31,200 31,200

PURCHASES RETURN BOOK

Date Name of the Supplier (Account Debit L.F. Details Purchases Input Input Input Total
to be Debited) Note Return
No. CGST SGST IGST Amount

2018 ₹ ₹ ₹ ₹ ₹ ₹

Jan. 15 Ram Lai & Sons.

1 Chest of Tea @ ₹720 720
Less : 10% Trade Discount 72
648 648 648

Jan. 24 Vijay & Co.

2 Chests of Tea @ ₹800 1,600
1 Tin of Coffee @ ₹500 500
2,100 2,100 2,100

Jan. 31 Purchase Return A/c Cr. 2,748 2,748

SALES RETURN BOOK

Date Name of the Customer Credit L.F. Details Sales Output Output Output Total
Note CGST SGST IGST
(Account to be Credited) Return
No.

Jan. 17 Ravi Shankar

1 Chest of Tea @₹ 1,000 1,000
Less : Trade Discount 5% 50
950
950 950

Jan. 31 Sales Return A/c Dr. 950 950

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917

 JOURNAL PROPER OR GENERAL JOURNAL

Date Particulars L.F. Dr. Cr.

2018 ₹ ₹
Jan. 1 Cash A/c Dr. 5,400
Balaji & Co. Dr. 7,000
Manoj Dr. 20,000
Stock A/c Dr. 80,000
Furniture A/c Dr. 25,000
To Bank Overdraft 36,200
To Surinder 9,200
To Capital A/c (balancing figure) 92,000
(Opening balances brought forward from
previous year’s books)
Dr.
Jan. 6 Machinery A/c 10,000
To Parmod & Co. 10,000
(Machinery purchased on credit)
Dr. 200
Jan. 8 Discount Allowed A/c 200
To Balaji & Co.
(Discount allowed to Balaji & Co. in full
settlement of their account)
Jan. 18 Bills Receivable A/c 18,050
Dr. 18,050
To Ravi Shankar
(Acceptance received for one month)
Jan. 22 Drawings A/c 1,400
Dr.
1,400
To Purchases A/c
(2 chests of tea costing ₹700 each taken for
personal use)
Vijay & Co. Dr. 16,400
Jan. 25
To Bills Payable A/c 16,400
(Acceptance given for 2 months)
Bills Receivable A/c Dr. 2,200
Jan. 27
To Sen & Co. 2,200
(Acceptance received for 30 days)

Total ₹ 1,85,650 1,85,650

PRADEEP VARMECHA / ACCOUNTANCY / XI / 9425104917