Account 9

iii. To know the amount spent on each head of expenditure and losses during a
certain period.

iv. To know the amount earned on each head of income for a certain period.
v. To facilitate to check the arithmetical/numerical errors through the preparation

of trial balance.
vi. To know the final net effect i.e. net balance of each head of expenses, losses,

incomes, gains, assets, capital and liabilities which is the base for ascertaining
the operational result of profit or loss and financial position.
vii. To classify the transactions on different heads according to their nature.

3. Type of Ledger Account

Type of ledger account

Personal ledger account Impersonal ledger account

Real account Nominal account

The accounts affected by the transactions are summarized into ledger account as per
their similarities. Ledger accounts are also classified into two groups. They are as
follows:

A. Personal Ledger Account

Personal account is related with an individual, firm and institution. When the
credit transaction takes place, the name of the person should be mentioned for the
record for future use due to incompleteness of the transactions. The personal ledger
account is maintained to know how much is to be received and paid to the others. For
example, if goods are sold to ABC on credit, we need to prepare the account of ABC.
So ABC’s A/c is personal ledger account.

B. Impersonal Ledger Account

The account which is not related with person is called impersonal account and
these are related with various transactions of other properties, expenses, income,
profit, losses, etc. It is also classified into the following two groups:

i. Real Account

Real account is related with assets, properties, things and real objects. To know
the condition of these properties, assets, etc., the real accounts are used. Machine
A/c, Cash A/c, Furniture A/c, etc. are the examples of real account.

The Ledger 201

ii. Nominal Account

Nominal account is related with income, expenses, profit, loss, etc. It is used to
find the total income and expenditure in different heads as well as gain or loss of the
organization. Salary A/c, Profit A/c, Discount A/c, Rent A/c, Interest Received A/c,
etc. are the some examples of nominal account.

4. Differences between Journal and Ledger

Journal Ledger

1. It is a primary record of financial 1. It is the secondary entry of financial

transactions. transactions.

2. It is prepared in chronological order or 2. It is recorded on ledger on head wise

date wise. basis.

3. It helps to prepare ledger. 3. It helps to prepare trial balance.

4. Recording of transactions in journal is 4. Recording of transactions in ledger

called ‘Entry’. account is called ‘Posting’.

5. It contains the narration of transactions. 5. It is not necessary to give narration on it.

6. It contains only five columns. 6. It contains eight columns.

7. It does not provide the balance of an 7. It shows the balance of an account.
account.

5. Specimen and Ruling of a Ledger

The specimen ruling of a ledger account is given below.

Dr. Particulars Ledger A/c of ....... Cr.
Date J.F. Amt.(Rs.) Date Particulars J.F. Am. (Rs.)

A ledger account is prepared in the shape of English letter ‘T’ having divided into
two sides, i.e. the left hand side, known as ‘Dr. side’ and the right hand side, known
as ‘Cr. side’. It has four columns in each side, i.e. date, particulars, J.F. and amount to
mention the Dr. posting and Cr. posting as necessity.

6. Rules of Posting the Entry

Posting is the act of transferring transactions from journal to ledger accounts.
In other words, the act of classifying the financial transactions under certain title of
account is called posting. Posting takes place with the help of journal entries.

202 Aakar’s Office Practice and Accountancy - 9

Rules of Posting

The rules of posting of a ledger are mentioned below.

i. Journalize the transactions at first.

ii. Name of ledger is to be written on the top.

iii. Left side must be indicated by `Dr.’ and right side by ‘Cr.”

iv. Separate accounts should be opened for posting transaction relating to
different accounts.

v. Ruling into debit side:

a. The date of the transaction is mentioned in the date column.
b. Name of the account credited in the journal is mentioned in the particulars

column on the debit side as, To (name of the account so credited.)
c. Page number of the journal book of the account so posted is mentioned

in the J.F. column, if any. It acts as an indexing.
d. The given amount of the account so posted is mentioned in the amount

column in Dr. side.

vi. Ruling into credit side:

a. The date of the transaction is mentioned in the date column.
b. Name of the account debited in the journal is mentioned in the particulars

column on the credit side as, By (name of the account so debited.)
c. Page number of the journal book of the account so posted is mentioned

in the J.F. column, if any. It acts as an indexing.
d. The given amount of the account so posted is mentioned in the amount

column in Cr. side.

Considering the following example:

On 2075-1-11, Ghana Shyam commenced business with Rs. 12,50,000.

Solution:
The journal entry is:

Date Particulars L.F. Dr. Am t. (Rs.) Cr. Amt. (Rs.)
2075-1-11
Cash A/c Dr 12,50,000/-
To Capital A/c
12,50,000/-
(Being business commenced)

The above journal entry suggests that Rs. 12,50,000/- is debited into Cash A/c and
the same is credited in Capital A/c, as below:

Dr. Cash A/c Cr.

Date Particulars J.F. Amt. (Rs.) Date Particulars J.F. Amt. (Rs.)

2075-1-11 To Capital A/c 12,50,000/-

Dr. Capital A/c Cr.

Date Particulars J.F. Amt. (Rs.) Date Particulars J.F. Amt. (Rs.)

2075-1-11 By Cash A/c 12,50,000/-

The Ledger 203

7. Balancing of Ledger Accounts

When the debit side and credit side of a ledger are completely posted from the
set of journal entries, it is to be totalled by putting necessary amount in the required
side. It is known as balancing ledger. The following are the procedures of balancing
of ledger accounts.

Case -I: Equal Balancing of Ledger Account

Ascertain the totals of both sides. If the totals are equal, it does not need to be balanced.
The totals are determined and mentioned in the straight line horizontally and closed
by two parallel lines as shown below.

Dr. Cash A/c Cr.
Date Particulars
1 To Bank A/c J.F. Amt. (Rs.) Date Particulars J.F. Amt. (Rs.)

20,000/- By Salary A/c 10,000/-

By Hari’s A/c 10,000/-

20,000/- 20,000/-

Case - II: Not Equal Balancing of Ledger Account

Step - 1

When debit total exceeds the credit total, it is called debit balance and the account is
balanced by putting the necessary amount in the Cr. side by mentioning the words
‘By Balance c/d’. or,

When the credit total exceeds the debit total, it is called credit balance and the account
is balanced by putting the necessary amount in Dr. side by mentioning the words ‘To
Balance c/d’.
Note: Simply, the accounts related with assets, expenses and losses have debit balance

and those related with capital, liabilities, incomes and gains have credit balance.

Step - 2

Determine the totals on both sides and close by two horizontal parallel lines.

Step - 3

The debit balance should be brought down on the debit side as “To Balance b/d” in the
particulars column with the 1st date of coming period in the date column. Similarly,
the credit balance should be brought down on the credit side as “By Balance b/d” in
the particulars column with the 1st date of the coming period. The date may also be
the same as the end of the last period as of the closing balance date.

Note: c/d = carried down
b/d = brought down

204 Aakar’s Office Practice and Accountancy - 9

Illustration - 1

Prepare the ledger from the following transactions for the month of Bhadra, 2075:
1, Business commenced with Rs. 1,00,000.
5, Deposited into bank Rs. 70,000.
8, Purchased furniture of Rs. 15,000.
11, Machinery purchased and paid by cheque 25,000.
15, Stationery purchased for Rs. 5,000.
22, Withdrawn from bank Rs. 10,000.
28, Salary paid by cheque Rs. 20,000.
29, Commission received Rs. 5,000.
30, Rent paid to the landlord Rs. 18,000.

Solution:

Necessary accounts to be prepared:

Cash A/c Stationery A/c Capital A/c Salary A/c Bank A/c

Commission A/c Furniture A/c Rent A/c Machinery A/c

Dr. Cash A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-5-1 To Capital A/c 100,000/- 075-5-5 By Bank A/c 70,000/-

075-5-22 To Bank A/c 10,000/- 075-5-8 By Furniture A/c 15000/-

075-5-29 To Commission A/c 5000/- 075-5-15 By Stationery A/c 5000/-

075-5-30 By Rent A/c 18,000/-

075-5-30 By Balance c/d 7000/-

115000/- 115000/-

075-6-1 To Balance b/d 7,000/-

Dr. Capital A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
075-5-30 To Balance c/d
100,000/- 075-5-1 By Cash A/c 100,000/-

100,000/- 100,000/-

075-6-1 By Balance b/d 100,000/-

Dr. Bank A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-5-5 To Cash A/c 70,000/- 075-5-11 By Machinery 25,000/-
075-6-1 To Balance b/d 075-5-22 A/c 10,000/-
075-5-28 20,000/-
075-5-30 By Cash A/c 15,000/-
70,000/-
70,000/- By Salary A/c
15,000/-
By Balance c/d

The Ledger 205

Dr. Furniture A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount
075-5-8 To Cash A/c
15,000/- 075-5-30 By Balance c/d 15,000/-
075-6-1 By Balance b/d
15,000/- 15,000/-

15,000/-

Dr. Machinery A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
075-5-11 To Bank A/c
25,000/- 075-5-30 By Balance c/d 25,000/-

25,000/- 25,000/-

075-6 -1 To Balance b/d 25,000/-

Dr. Stationery A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
075-5-15 To Cash A/c
5,000/- 075-5-30 By Balance c/d 5,000/-

5,000/- 5,000/-

075-6-1 To Balance b/d 5,000/-

Dr. Salary A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
075-5-28 To Bank A/c
20,000/- 075-5-30 By Balance c/d 20,000/-

20,000/- 20,000/-

075-6-1 To Balance b/d 20,000/-

Dr. Commission A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount
075-5-3 To Balance c/d
5,000/- 075-5-29 By Cash A/c 5,000/-

5,000/- 5,000/-

075-6-1 By Balance b/d 5,000/-

Dr. Rent A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
075-5-30 To Cash A/c
18,000/- 075-5-30 By Balance c/d 18,000/-

18,000/- 18,000/-

075-6-1 To Balance b/d 18,000/-

206 Aakar’s Office Practice and Accountancy - 9

Illustration - 2
Prepare the ledger from following transactions for the month of Marga, 2074.

2074-8-1, Krishna Kandel commenced business with Rs. 10,00,000.
2074-8-2, Deposited into bank Rs. 7,50,000.
2074-8-5, Purchased machines and paid by cheque Rs. 50,000.
2074-8-6, Cash purchase for Rs. 25,000.
2074-8-8, Goods purchased from Hari Babu Pariyar Rs. 1,50,000.
2074-8-11, Purchased stationery for Rs 5,000.
2074-8-12, Cash sales made Rs. 50,000.
2074-8-14, Sold to Bhim Gurung Rs. 2,50,000.
2074-8-16, Deposited into bank Rs. 40,000.
2074-8-17, Payment made to Hari Babu Pariyar by cheque.
2074-8-19, Commission received Rs. 7,000.
2074-8-20, Loan taken from bank Rs. 60,000.
2074-8-22, Deposited into bank Rs. 50,000.
2074-8-23, Received from Mr. Gurung in full settlement of his debt Rs. 2,45,000.
2074-8-25, Wage and salary paid by cheque Rs. 40,000 and Rs. 30,000 respectively.
2074-8-29, Rent paid to the landlord for the month Rs. 20,000.

Prepared the necessary ledger accounts

Cash A/c Capital A/c Bank A/c Machinery A/c
Purchase A/c Stationery A/c Sales A/c Bhim Gurung A/c
Commission A/c Bank loan A/c Wages A/c Discount A/c
Salary A/c Rent A/c Hari Babu Pariyar A/c

Solution

Dr. Cash A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-8-1 To Capital A/c 10,00,000/- 074-8-2 By Bank A/c 750,000/-

074-8-12 To Sales A/c 50,000/- 074-8-6 By Purchase A/c 25,000/-

074-8-19 To Commission A/c 7000/- 074-8-11 By Stationery A/c 5,000/-

074-8-20 To Bank loan A/c 60,000/- 074-8-16 By Bank A/c 40,000/-

074-8-23 To Bhim Gurung A/c 245,000/- 074-8-22 By Bank A/c 50,000/-
074-8-29 By Rent A/c 20,000/-
472,000/-
074-8-30 By Balance c/d

1362,000/- 1362,000/

074-9-1 To balance b/d 472000/-

The Ledger 207

Dr. Capital A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-8-30 To Balance c/d 10,00,000/- 074-8-1 By Cash A/c 10,00,000/-

10,00,000/- 10,00,000/-

074-9-1 By Balance b/d 10,00,000/-

Dr. Bank A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount
074-8-2 To Cash A/c
074-8-16 To Cash A/c 750,000/- 074-8-5 By Machinery A/c 50,000/-
074-8-22 To Cash A/c
40,000/- 074-8-17 By Hari Babu’s A/c 150,000/-

50,000/- 074-8-25 By Wages A/c 40,000/-

074-8-25 By Salary A/c 30,000/-

074-8-30 By Balance c/d 570,000/-

840,000/- 840,000/-

074-9-1 To Balance b/d 570,000/-

Dr. Machinery A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount
074-8-5 To Bank A/c
50,000/- 074-8-30 By Balance c/d 50,000/-

50,000/- 50,000/-

074-9-1 To Balance b/d 50,000/-

Dr. Purchase A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount
074-8-6 To Cash A/c
074-8-8 To Hari Babu’s A/c 25,000/- 074-8-30 By Balance c/d 175,000/-

074-9-1 To Balance b/d 150,000/-

175 000/- 175 000/-

175 000/-

Dr. Hari Babu Pariyar’s A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-8-17 To Bank A/c
150,000/- 074-8-8 By Purchase A/c 150,000/-

150,000/- 150,000/-

Dr. Stationery A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-8-11 To Cash A/c
5,000/- 074-8-30 By Balance c/d 5,000/-

5,000/- 5,000/-

074-9-1 To Balance b/d 5,000/-

208 Aakar’s Office Practice and Accountancy - 9

Dr. Sales A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-8-30 To Balance c/d 300,000/- 074-8-12 By Cash A/c 50,000/-

074-8-14 By Bhim Gurung A/c 250,000/-

300,000/- 300,000/-

074-9-1 By Balance b/d 300,000/-

Dr. Bhim Gurung’s A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-8-14 To Sales A/c 250,000/- 074-8-23 By Cash A/c 245,000/-

074-8-23 By Discount A/c 5,000/-

250,000/- 250,000/-

Dr. Commission A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-8-30 To Balance c/d
7,000/- 074-8-12 By cash A/c 7,000/-

7,000/-

7,000/- 074-9-1 By Balance b/d 7,000/-

Dr. Bank Loan A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-8-30 To Balance c/d
60,000/- 074-8-20 By Cash A/c 60,000/-

60,000/- 60,000/-

074-9-1 By Balance b/d 60,000/-

Dr. Discount A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-8-23 To Bhim Gurung A/c 5,000/- 074-8-30 By Balance c/d 5,000/-

5,000/- 5,000/-

074-9-1 To Balance b/d 5,000/-

Dr. Wages A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-8-25 To Bank A/c
40,000/- 074-8-30 By Balance c/d 40,000/-
074-9-1 To Balance b/d
40,000/- 40,000/-

40,000/-



The Ledger 209

Dr. Salary A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount

074-8-25 To Bank A/c 30,000/- 074-8-30 By Balance c/d 30,000/-

30,000/- 30,000/-

074-9-1 To Balance b/d 30,000/-

Dr. Rent A/c Cr.
Date
Particulars J.F. Amount Date Particulars J.F. Amount

074-8-29 To Cash A/c 20,000/- 074-8-30 By Balance c/d 20,000/-

20,000/- 20,000/-

074-9-1 To Balance b/d 20,000/-

Glossary

Scan : look throughly from the beginning
Posting : recording the transaction from journal to ledger
Exceed : be more
Errors : mistakes
Chronological : date wise

Exercise

A. Answer the following questions in one sentence.

1. What is ledger?
2. What is posting?
3. What is balancing of ledger?
4. What is meant by balance b/d?
5. What is meant by balance c/d?
6. What is closing of ledger?

B. Give short questions to the following questions.

7. Write the rules of posting.
8. Describe the balancing of ledger.
9. ‘Journal is a subsidiary book whereas ledger is the principal book of a

business house.’ Comment.
10. Describe, in brief, the importance of a ledger.
11. Explain the types of ledger account with examples.

210 Aakar’s Office Practice and Accountancy - 9

12. Write any five differences between journal and ledger.

13. Classify the following account into personal account, real account, and
nominal account.

Sumita A/c, Cash A/c, Land A/c, Creditors A/c, Capital A/c, Bank
A/c, Debtor A/c, Sales A/c, Purchase A/c, Rent A/c, Commission A/c,
ABC’s A/c, Ram’s A/c.

NUMERICAL PROBLEMS

14. Journalize the following transactions and prepare the necessary ledger
accounts.

On 1-1-2074, commenced business with Rs. 100,000.
On 3-1-2074, deposited into bank Rs. 80,000.
On 5-1-2074, machinery purchased and paid by cheque Rs. 30,000.
On 7-1-2074, paid for stationery Rs. 2,000.

15. Journalize the following transactions for the month of Bhadra, 2075
and post them into the ledger accounts.

1, Business established with cash investment of Rs. 1,50,000.
3, Deposited into bank Rs. 1.00,000.
4, Furniture purchased for Rs. 20,000.
6, Machineries purchased and paid by cheque Rs. 35,000.
7, Goods purchased from Krishna Trading House of Rs. 40,000.
9, Stationery purchased for Rs. 5,000.
10, Paid for sundry expenses Rs. 3,000.
12, Cash sales made for Rs. 35,000.
13, Withdrawn cash from bank Rs. 20,000.
15, Sold goods on credit to Thapa Shopping Centre for Rs. 50,000.

16. The following transactions are given to you.

On 2074-9-5, business started with Rs. 200,000.

On 2074-9-6, deposited into bank Rs. 120,000.

On 2074-9-8, goods purchased for Rs. 30,000 from Bhimsen partial
payment of Rs. 20,000 made through bank.

On 2074-9-10, motor car purchased from CMC Traders of Rs. 50,000.

On 2074-9-11, paid to Bhimsen Rs. 9,500 for the full settlement of his
account.

Required

a. Journal entries b. Ledger posting

The Ledger 211

17. Journalize the following transactions and prepare the necessary ledger:
Chaitra, 2075.

1, Business commenced with Rs. 500,000.
4, Loan taken from bank Rs. 100,000.
5, Deposited into bank Rs. 450,000.
8, Furniture purchased for Rs 50,000.
11, Machinery purchased from ABC Enterprises of Rs. 80,000.
12, Goods purchased from PQR Rs. 70,000.
15, Withdrawn from bank for private use Rs. 10,000.
18, Paid for entertainment expenses Rs. 2000.
19, Sold to XYZ of Rs 140,000.
22, Paid to PQR Rs. 68,000 and discount received Rs. 2000.
26, Paid rent by cheque Rs. 60,000.
29, Received from XYZ Rs. 1,35,000 in full settlement.

18. Post the following transactions in the Ledger account of Khanal and
Bhusal Co. of January, 2019.
January
1, Sold goods to K C Shakya for Rs. 6,000.
10, K C Shakya returned Rs 500 worth of goods being defective.
12, Sold goods in cash to K C Shakya Rs 4,000.
17, Received from K C Shakya Rs 5,300 in full settlement.
19, Sold goods to K C Shakya Rs 5,000.
21, Received Rs 2,000 on account from him.
31, Received information that K C Shakya became insolvent and only
50 paisa in every rupee only was received from him.

19. Prepare a ledger of Aruna from the following transactions in the books
of Roshan Stores Ashadh, 2075.
1, Purchased goods from Aruna for Rs 8,000
12, Returned goods worth Rs 400 to Aruna.
15, Purchased goods from Aruna for Rs 3,000 and paid immediately by
cheque.
16, Purchased Rs 1,400 worth of goods from Aruna.
23, Paid Rs 8,800 to Aruna in full settlement.

20. Open ledger account of Shyamji A/c and Sales A/c for the following
transactions.
On 2075-5-3, Sold goods to Shyamji for Rs. 5,000.
On 2075-5-5, Received cash Rs. 3,000 from Shyamji on account.
On 2075-5-8, Received goods returned by Shyamji worth Rs. 500.

212 Aakar’s Office Practice and Accountancy - 9

21. Prepare: a. Bank A/c b. Mrs Radha A/c c. Hira & Co. A/c, from
the following transactions.

On 2075-6-8, Open a bank account by depositing Rs. 20,000.

On 2075-6-9, Purchased goods for Rs. 5,500 from Hira and Co. and
issued a cheque of Rs. 3,500.

On 2075-6-10, Received Rs. 10,000 from Mrs Radha as loan.

On 2075-6-15, Paid Rs. 6,000 in cash to Mrs. Radha as repayment of
her loan.

On 2075-6-18, Paid Rs. 80. to Hari and Co.

On 2075-6-25, Purchased furniture Rs. 5,000 by cheque no. 005.

22. Following transactions are given to you:

On 2075-7-1, Started business with Rs. 20,000.

On 2075-7-3, Purchased goods for Rs. 22,000 from Upendra and
made partial payment of Rs. 18,000.

On 2075-7-10, Equipment costing Rs. 5,000 were sold for Rs. 5,200.

On 2075-7-15, Paid Rs. 3,800 to Upendra in full settlement of his
account.

On 2075-7-17, Paid salay Rs. 5,000.

Required:

a. Cash A/c. b. Upendra’s A/c

23. Mr. Dinesh’s business transactions are given to you.
2075 Jestha-4, Sold goods to Mr. Pradhan Rs. 30,000.
2075 Jestha-10, Cash paid by Mr. Pradhan Rs. 10,000.
2075 Jestha-10, Discount allowed to Mr. Pradhan Rs. 1,000.
2075 Jestha-15, Returns from Mr. Pradhan Rs. 3,000.
2075 Jestha-16, Paid rent Rs. 1,000.
2075 Jestha-18, Received Rs. 15,000 in full settlement by Mr. Pradhan.
Required: Mr. Pradhan’s A/c, Cash A/c and Sales A/c.

24. Following are the transactions of A to Z Business House.
On Poush, 2075
Poush-6, Sold goods to Kumar and Trade for Rs. 12,000.
Poush-14, Received cash from Kumar and Trade Rs. 5,700.
Poush-14, Allowed discount of Rs. 300 to Kumar and Trade.
Poush-24, Goods returned from Kumar and Trade Rs. 1,500.
Poush - 25, Rs. 5,000 received as a discount.
Required: Kumar and Trade A/c, Discount A/c and Cash A./C

The Ledger 213

25. Following transactions are given to you.

On 2075-8-2, Sold goods to Hari for Rs. 15,000.
On 2075-8-3, Furniture costing Rs, 5,000 was sold for Rs. 4,500.
On 2075-8-5, Received cash Rs. 14,000 from Hari in full settlement of
his account.
On 2075-8-7, Received loan of Rs. 80,000 from the Megha Bank.
On 2075-8-9, Paid Rs. 3,500 for house rent.

Required: a. Journal entries b. Hari’s account c. Cash A/c

26. Following transactions are given to you.

Magh, 2075

Magh-10, Purchased furniture from Kishor Furniture Workshop
Rs. 20,000.

Magh-15, Goods sold to Krishna Mama Rs. 5,000.
Magh-25, Furniture costing Rs. 5,000 has been sold for Rs. 5,500.
Magh-27, Received from Krishna Mama Rs. 4,900 and allowed discount

Rs. 100.
Magh-28, Office expenses Rs. 5,000 paid by cheque.

Required: i. Journalise the transactions ii. Furniture account

iii. Krishna Mama’s A/c iv. Cash A/c

26. Following transactions are given:

On 2075-9-9, sold goods of Rs. 5,000 to Ram on credit.
On 2075-9-11, Ram settled his account and allowed him Rs. 500 discount.
On 2075-9-13, again goods sold to Ram of Rs. 3,000.
On 2075-9-14, goods returned by Ram Rs. 1,000,
On 2075-9-15, cash received from Ram Rs. 2,000.

Required: i. Sales A/c ii. Ram’s Account iii. Discount A/c

27. Following transactions are given:

On 2075-3-1, furniture costing Rs. 4,000 was sold for Rs. 3,500.
On 2075-3-2, sold goods to Shyam Rs. 9,000.
On 2075-3-3, cash withdrawn from bank for office use Rs. 8,000.
On 2075-3-4, received cash from Shyam Rs. 8,000 in full settlement.
On 2075-3-5, paid to Hari Rs. 5,000 for salary in advance.

Required: i. Journal entries ii. Shyam’s account

iii. Furniture account iv. Cash account

Pr oject Work
a. Visit the account section of your school and collect and analyze cash
A/c, expenses A/c, fee A/c, annual charge A/c, salary A/c, assets A/c,
prepared by your school.

214 Aakar’s Office Practice and Accountancy - 9

Unit 11 Subsidiary
Books

CDC Syllabus 10 Periods

11.1 Subsidiary Books: Introduction, ObjeLcetiarvneisng
Types and Use

Purchase Book
Purchase Return Book -

Sales Book
Sales Return Book
Cash Book

Purchase Book After studying this unit, students will
be able to :
Date Particulars Inward L.F. Details Amount
075 -5-8 Invoice No. know the meaning, purpose and
Hiralal & Co.: advantage of subsidiary books,
075-5-9 5 coats at Rs. 1000 each 5,000 15,500
15 shirts at Rs. 300 each 4,500 explain the types of subsidiary books,
075-5-10 15 pants at Rs. 400 each 6,000 know the meaning and types of cash
075-5-12 Sahabir & Bros:
8 coats at Rs. 1300 each 10,400 book,
less: 10% trade discount 1,040 9,360 prepare different types of subsidiary
Himalal & Co:
20 bags at Rs. 250 each 5,000 books.
Saree Palace, Putalisadak Ktm:
12 sarees at Rs. 500 each 6,000
35,860
Total:

SubTshideiaLreydgBeoroks 215

1. Introduction

The general journal is divided into various groups like purchase, purchase
return, sales, sales return, etc. for convenience in recording. As such, subsidiary books
may be defined as the books of original/primary entry of the business transactions
with respect to their nature and kind which help the preparation of the ledger
accounts during a certain period. Purchase book, purchase return book, sales book,
sales return book, etc., are the examples of subsidiary books of account. These are
also known as the sub-division of a journal. The work of journal can be made more
classified by creating separate books to write the records of similar transactions, like
all credit purchases, all credit sales, all cash transactions, etc. These books are called
subsidiary books.

According to D.N. Agarwal, “Subsidiary books of accounts are also called books of original
entry because at the transactions are recorded originally or in the first instance in these
subsidiary books.”

Likewise, J.R. Battiboi, “Subsidiary records are also known as book of original entry, as
transactions are entered there in time first instance is order that they may be subsequently
transferred to their respective accounts in the ledger.”

In conclusion, it is a book which helps to keep the record of primary entry of the
transactions. It helps as parting ledger.

Key Point Subsidiary books are subdivision of journal in which a set of books
are maintained for primary recording of business transactions in
classified way with respect to their nature and kinds.

2. Purpose and Advantages of Subsidiary Book

The subsidiary books of account are gaining popularity among the big and
growing business firms due to their notable advantages. Such advantages are
mentioned below:

i. It makes the division of work among the accounting staff, which leads to the
specialisation in performance.

ii. The system of internal check can be made more effective by subsidiary books
with reduction in frauds.

iii. It saves time and makes easy reference of information.
iv. It makes information of each class of transactions available at one place and

facilitates the auditing works.
v. It helps to find out error quickly through separate books.
vi. It helps to get all information at a place.

216 Aakar’s Office Practice and Accountancy - 9

3. Types of Subsidiary Books

The following figure may help one to classify the books as the classification of
the transactions:

Business Transactions

Cash Transaction Credit Transactions

Cash Book For goods For other than goods
Simple cash book Journal proper
Double column cash book Purchase book
Triple column cash book Purchase return book
Sales book
Sales return book

A. Purchase Book

A purchase book, which is also termed as purchase day book or purchase
journal, is that subsidiary book which is maintained for recording the transactions
related with the purchase of goods on credit. Goods refer to raw materials or final
products; which are used by an undertaking for manufacturing or production
process or for reselling, or trading purpose in a regular way. It only records the credit
purchases of manufacturing or trading goods. It does not record cash purchase and
the purchase of assets.

Specimen Ruling of Purchase Book

The specimen of a purchase book may be designed as the need of a company but

it should contain necessary information. The following is a common specimen of a

purchase book: Purchase book

Date Particulars Inward Invoice No. L.F. No Details Amount

(1) (2) (3) (4) (5) (6)

The ruling of a purchase book is mentioned as below:

i. The date of the transaction i.e. credit purchase of goods is mentioned in the first
column.

ii. The name of the supplier (person or firm) is mentioned in the second column.
The details of the goods purchased on credit like name, quantity, rate, etc. are
also mentioned in this column, if any. The name mentioned in this column
is the supplier’s name. The supplier is the creditor for the purchasing firm,
thus, the supplier mentioned in the purchase book is a credit account and the
purchase is a debit account.

iii. The third column contains the invoice number. Since, an invoice follows the
credit purchase and it is received from the selling company, the purchaser
mentions the inward invoice number. In other words, a purchaser always gets

Subsidiary Books 217

the invoices from the seller/supplier and thus mentions the inward invoice
number in the purchase book.
iv. The fourth column is the L.F. column. It contains the page number of the ledger,
in which the account of the seller or supplier is mentioned but in theoretical
learning it may remain blank or may be filled with an imaginary page number.
v. The fifth and the sixth columns are for the value of the transaction. In the fifth
column, the gross amount and discount, if any, are mentioned with respect to
each type of the goods and the net total amount or value of trade is mentioned
in the sixth and the final columns.

Illustration - 1

Prepare purchase book and purchase account from the following transactions:

On 075-Bhadra 8 : Purchased from Hiralal & Co:

5 coats at Rs. 1000 each

15 shirts at Rs. 300 each and

15 pants at Rs. 400 each

Bhadra 9 : Purchased 8 coats from Sahabir & Bros. of Rs. 1300 subject to 10% discount.

Bhadra 10 : 20 bags are purchased from Hiralal and Co. at Rs. 250 each.

Bhadra 11 : Purchased in cash from Subash Rao & Sons:

5 coats at Rs. 700 each,

15 shirts at Rs. 300 each and

10 pants at Rs. 400 each

Bhadra 12 : Purchased 12 sarees from Saree Palace Putalisadak, Kathmandu at Rs.
500 each.

Solution: Purchase Book

Date Particulars Inward L.F. Details Amount
075 -5-8 Invoice No.
Hiralal & Co.:
075-5-9 5 coats at Rs. 1000 each 5,000 15,500
15 shirts at Rs. 300 each 4,500
075-5-10 15 pants at Rs. 400 each 6,000
075-5-12 Sahabir & Bros:
8 coats at Rs. 1300 each 10,400 9,360
less: 10% trade discount 1,040
Himalal & Co:
20 bags at Rs. 250 each 5,000
Saree Palace, Putalisadak Ktm:
12 sarees at Rs. 500 each 6,000
35,860
Total:

218 Aakar’s Office Practice and Accountancy - 9

Dr. Purchase A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-5-8 To Hiralal & Co. 15,500/- 075-5-30 By balance c/d 35,860/-

075-5-9 To Sahabir & Bros. 9,360/-

075-5-10 To Hiralal & Co. 5,000/-

075-5-10 To Saree Palace 6,000/-

35,860/- 35,860/-

075-6-1 To balance b/d 35,860/-

B. Purchase Return Book

When the purchaser or buyer finds some abnormal defects in the goods like
excess than the quantity demanded or not according to his order, etc., the whole or
part of the goods previously purchased on credit can be returned to the supplier and
creditor. Generally, the supplier doesn’t compensate the goods, so returned, in cash
but he re-supplies the right quality goods according to the order, by accepting the
returns. While returning the goods, the buyer/purchaser prepares a debit note in the
name of the supplier by debiting his name along with the goods and the appropriate
reasons of the returns. Thus, a purchase return book may be defined as the book,
which is maintained for recording the transactions related with the return of goods
to the supplier, which were previously purchased on credit. This book is also termed
as return outward book. The specimen of the purchase return book is given below:

Purchase Return Book

Date Particulars Debit Note No. L.F. No Details Amount

(1) (2) (3) (4) (5) (6)

The first column is for the date, on which the goods were returned to the supplier.

The second column contains the name of the supplier along with the necessary details
of the goods so returned.

The third column is for mentioning the debit note number, which is prepared by the
buyer/purchaser in the name of the supplier to whom the goods are returned. It will
be discussed later, under a separate topic.

The fourth column is for the ledger page number of the supplier, whose name is
debited just regarding the return of the goods.

And fifth and sixth column mention the value of the goods so returned.

The following illustrations may clear the practical concept of a purchase return book.

Subsidiary Books 219

Illustration - 2

Prepare a purchase return book from the following transactions:
On 074 Bhadra:
25, returned to Hiralal & Co:
5 Shirts @ Rs. 300
3 Pants @ Rs. 400
28, returned 2 sarees to Saree Palace, Putali Sadak of Rs. 500 each.
Solution:

Purchase Return Book

Date Particulars Debit Note Na. L.F. Details Amounts
074-5-25 Hiralal & Co
5 Shirt @ Rs. 300 1,500 2,700
074-5-28 3 Peas @ Rs. 400 1,200 1,000
Saree Palace, Putalisadak 3,700
2 Sarees@ Rs. 500

Total:

Dr. Purchase Return A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-5-30 To balance c/d
3,700 074-5-25 By Hiralal & Co. 2,700

074-5-28 By Saree Palace 1,000

3,700 3,700

074-6-1 To balance b/d 3,700

Debit Note:
When the goods are returned to the supplier, a statement called a ‘Debit Note’ is

sent along with the goods so returned. It is an information to the supplier that his
account is being debited with the value of the goods returned to him. Thus, the debit
note is a statement by which the buyer informs his supplier or creditor that his
account is being debited in the book for the goods returned to him.

C. Sales Book

A sales book, also known as sales day book or sales journal, is that subsidiary
book, which is maintained for recording the transactions related with the sales of
goods on credit. Goods refer to the manufacturing or trading goods, which are used
in course of business. Thus, a sales book records only the credit sales of goods. It does
not record the cash transactions and sale of assets.

220 Aakar’s Office Practice and Accountancy - 9

Specimen Ruling of a Sales Book
The following is the specimen ruling of a sales book:

Sales Book

Date Particulars Outward invoice No. L.F. No Details Amount
(5) (6)
(1) (2) (3) (4)

i. The date of the transaction (i.e. the sales on credit) is mentioned in the first
column.

ii. The name of the buyer/customer person or firm is mentioned in the second, i.e.
particulars column. The details of the goods sold on credit like name, quantity,
rate, etc. are mentioned in this column. The name mentioned in the particulars
column is the customer’s name and thus it is a debit account and the sales
account is a credit account.

iii. The third column contains the invoice number. The seller/supplier prepares
the invoice in the name of each buyer and forwards it along with the goods so
dispatched. While maintaining the sales book, he/she mentions the outward
invoice number, in this column.

iv. The fourth column is the L.F. column. It contains the page number of the ledger,
in which the account of the buyer is mentioned. It helps in posting referring the
records when needed.

v. The fifth and sixth columns are for the value of the transactions. In the fifth
column, the gross total amount and the deductible discount, if any, are
mentioned with respect to each type of goods. And the net total amount or the
net value of the respective transactions is mentioned in the sixth i.e. the last
column.

Illustration - 3

From the following particulars, write up the sales book of Ajay, who deals in
furniture goods, and also make the posting from the sales book.

074 -Kartik

1, Sold on credit to Children Academy:

10 tables @ Rs. 700.

25 chairs @ Rs. 400.

10, Sold to Dinesh & Co:

2 almirahs @ Rs. 2500.

1 dining table @ Rs. 1500.

15, Sold in cash to Ram Hari Traders:

5 chairs @ Rs. 400.

3 almirahs @ Rs. 2500.

Subsidiary Books 221

20, Sold to People’s Academy:
15 desks @ Rs. 1000.
15 benches @ Rs. 600.
5 blackboards @ Rs. 800.
21, Sold on credit to Noble Academy:
3 sofa sets @ Rs. 4000.
15 chairs @ Rs. 500.
5 stools @ Rs. 400.
25, An old computer machine is sold to Shrijan Computers at Rs. 20,000.
30, Sold to Home Land Secondary School:
2 dressing tables @ Rs. 1500.
2 tea table @ Rs. 700.

Solution:

Sales Book

Date Particular Outward L.F. Details Amount
074-7-1 invoice No.
074-7-10 Children Academy
074-7-20 10 tables @ Rs. 700 7,000 17,000
25 chairs @ Rs. 400 10,000
074-7-21 Dinesh & Co.
2 almirahs @ Rs. 2,500 5,000 6,500
074-7-30 1 dining table@, Rs. 1500 1,500
People’s Academy
15 desks @ Rs. 1,000 15,000 28,000
15 benches @ Rs. 600 9,000
5 black boards @ Rs. 800 4,000
Noble Academy
3 sofa sets @ Rs. 4000 12,000 21,500
15 chairs @ Rs. 500 7,500
5 stools @ Rs. 400 2,000
Home Land Secondary School
2 dressing tables @ Rs. 1500 3,000 4,400
2 tea tables Co. Rs. 700 1,400 77,400

Total

222 Aakar’s Office Practice and Accountancy - 9

Dr. Sales A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-7-31 To balance c/d 86,900 074-7-1 By Children Academy 17,000

074-7-10 By Dinesh & Co. 6,500

074-7-15 By Cash A/c 9,500

074-7-20 By People’s Academy A/c 28,000

074-7-21 By Noble Academy A/c 21,500

074-7-30 By Home Land Sec. School A/c 4,400

86,900 86,900

074-8-1 By Balance b/d 86,900

Dr. Children Academy A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-7-31 To Sales A/c 17,000 074-7-31 By Balance c/d 17,000

17,000 17,000

074-8-1 To Balance b/d 17,000

Dr. Dinesh Co.’s A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-7-10 To Sales A/c
6,500 074-7-31 By Balance c/d 6,500

6,500 6,500

074-8-1 To Balance b/d 6,500

Dr. People’s Academy A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-7-20 To Sales A/c
28000 074-7-31 By Balance c/d 28000

28000 28000

074-8-1 To Balance b/d 28000

Dr. Noble Academy A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-7-21 To Sales A/c
21,500/- 074-7-31 By Balance c/d 21,500/-

21,500/- 21,500/-

074-8-1 To Balance b/d 21,500/-

Subsidiary Books 223

Dr. Home Land Secondary School A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-7-30 To Sales A/c 4,400/- 074-7-31 By Balance c/d 4,400/-

4,400/- 4,400/-

074-8-1 To Balance b/d 4,400/-

Dr. Cash A/c Cr.
Date Particulars
J.F. Amount Date Particulars J.F. Amount
074-7-30 To Sales A/c
9,500/- 074-7-31 By Balance c/d 9,500/-

9,500/- 9,500/-

074-8-1 To Balance b/d 9,500/-

D. Sales Return Book

Sometimes a buyer/customer may return the whole or part of the goods,
supplied to him/her because of their excess quantity, difference in brand, quality,
colour, size, price, etc. or any kind of defects in them. The buyer sends a debit note
to the seller along with the goods to return. After the goods returned by the buyer
are received along with a debit note, the seller accepts them and makes the necessary
adjustments. The supplier immediately prepares a credit note by crediting the buyer’s
name and informing about the necessary adjustments.

The specimen of the sales return book is as given below:

Sales Return Book

Date Particulars Credit Note No. L.F. No Details Amount

(1) (2) (3) (4) (5) (6)

In the first column, the date on which the goods returned from the buyer were
received, is mentioned.

In the second column, i.e. the particulars column mentions the name of the buyer
along with the necessary details of the goods so returned.

In the third column mentions the number of the credit note, which is prepared by the
seller himself in the name of the buyer from whom the goods are returned. A credit
note will be discussed later, under a separate topic.

In the fourth column, the page number of the ledger in which the account of the
buyer appears, is mentioned. It helps as indexing to refer to the buyer’s account.

224 Aakar’s Office Practice and Accountancy - 9

In the fifth and sixth columns, the value of the goods so received is mentioned. This
should be reduced from the earlier invoice price or the goods may be resupplied as
per the buyer’s previous order only to the extent of the goods so returned.

The following illustration will further clear about the sales return book:

Illustration - 4
Prepare sales return book and sales return account from the following transactions.

074 - Mangsir:

5, Children Academy returned us 3 chairs @ Rs. 400 each, Credit Note no. 15
7, People’s Academy returned us:
2 desks @ Rs. 1000
2 benches @ Rs. 600, Credit Note No. 16
10, Obtained from Noble Academy 3 chairs @ Rs. 500, Credit Note No. 17.

Solution:

Sales Return book

Date Particulars Credit Note No. L.F. Details Amounts
074-8-5 Children Academy 15 1200
3 chairs @Rs. 400

074-8-7 People’s Academy 16
2 desks @ Rs. 1000
2 banches @ Rs. 600 2000
1200 3200

074-8-10 Noble Academy 17
3 Chairs @ Rs. 500
1500
Total: 5900

Credit Note:
After the goods returned are received by the seller, he prepares a statement by crediting

the buyer’s/customer’s name to the extent of the value of the goods so returned, which
is known as a credit note. A credit note thus is a statement, by which the seller informs
his buyer that his account is being credited in the book of account to the extent of the
goods returned by him. It is a proof of the acceptance of the goods. After preparing
the credit note, the goods returned is recorded in a separate book called sales return
book. Then the seller makes necessary adjustments of the goods so returned either by
reducing the invoice price or by resupplying the quality goods.

Subsidiary Books 225

E. Cash Book

A business firm deals with hundreds of transactions in a regular course of
its operation. Purchase of furniture, machineries, equipment, vehicles, building,
goods, materials, stationeries, etc., making payments of expenses like wages, rent,
salary, commission, lighting and heating, interest, tax, etc., receiving incomes like
commission, interest, rent from sublet, dividends and sales of goods, materials
and other old properties are some of the examples of business transaction. Most of
the purchases and sales transactions are performed on credit but they will result
payment or receipt of cash in the near future. Purchase of furniture, machineries,
equipment, vehicles, buildings, etc. is performed in cash but usually through banks
or if performed on credit then cash is paid in the near future through a reliable way.
Payment of expenses like wages, rent, salaries, etc. are done in cash or through
banks. Similarly, the incomes are also received in cash or through banks. In this way,
a business firm receives cash/cheque through a number of sources and pays it for a
number of expense heads. It is a cash book, which records all the transactions related
with the receipt and payment of cash for business purposes. Thus, a cash book may
be defined as the book of account, which records all the cash transactions i.e. receipt
and payment of cash during a given period of time. It records all receipts on Dr. side
and all payments on Cr. Side.

Since, a cash book is the original entry of all the cash transactions, other ledger
accounts are prepared on the basis of this book, it is said to be a subsidiary book of
account. On the other hand, it is prepared in the ledger form and cash transactions are
straight-way posted in the cash book and So, it is also termed as the principal book of
account. Thus, truly a cash book is a subsidiary as well as principal book of account.
Cash transactions refer to the receipt and payment of hard cash and through banks
as well. Because of the misusable nature of cash, most of the receipts and payments
are done through banks. Thus, both the cash and bank dealings are termed as cash
transactions. The cash book of a business firm gives the net effect (a single figure) of
cash as well as bank transactions during a given period of time.

Key Point A cash book is the original entry of all the cash and bank
transactions in which, all the cash received is recorded in debit
side and all the cash payment in credit side to find the net effect
of cash as well as bank transactions during a given period of time.

The following are the salient features of a cash book:

i. Cash book begins from the opening balance of cash or bank on the Dr. side as:
To Balance b/d

ii. All the receipts of cash or through banks are recorded on the Dr. side.
iii. All the payments of cash or through banks are recorded on the Cr. side.

226 Aakar’s Office Practice and Accountancy - 9

iv. It is ended with the closing balance of cash or bank on the Cr. side as
‘By balance c/d’.

v. The Dr. side of a cash book is always heavier than its Cr. side. But sometimes
both the totals may be equal. The Dr. side total shows the total of receipt and
the Cr. side total shows the total of payment. In cash dealing, payment can
never exceed the receipt.

Types of Cash Book

Cash transactions refer to cash as well as bank transactions. Different types of cash
book are maintained for recording hard cash transactions, bank transactions i.e.
cheques, drafts, etc. and discount related transactions. Discount means cash discount
and it is always associated with hard cash or bank dealings. Thus, cash books
are maintained for hard cash, bank and cash, bank and discounts as the case and
requirement. Different types of cash books are briefly introduced below.

Types of Cash Book

Single column Double column Triple column

With cash and With discount and With cash and
discount column bank column bank column

i. Single Column Cash Book

A single column cash book records only the receipts and payments of cash. Its
format is similar to cash account i.e. cash ledger with one amount column on each
side. The left hand side known as `debit’, records receipts of cash and the right hand
side known as `credit’, record payments. Its format is given below:
Dr. Single Column Cash Book Cr.

Date Particulars L.F. Amount Date Particulars L.F. Amount

From the above format, it is clear that the columns are similar to that of cash or bank A/c.

i. In the date column, on both sides, the day, month and the year of the transaction
are recorded.

ii. In the particulars column, on both sides, the account with respect of which cash
has been received or paid is recorded.

iii. In the L.F. column, the page number of the ledger, where the posting of the
amount has been made is written.

iv. The amount of the transaction is mentioned in the amount column to the
respective heading.

Subsidiary Books 227

Enter the following transactions in a simple cash book:

Illustration - 5
Prepare a simple cash book from the following transactions.

075 - Baishakh:

1, Cash in hand 9500

4, Received cash from Khanal Bros. 4000

6, Paid to Basyal Book Depot. 5000

10, Cash sales 3200

11, Goods purchased from Ravan on credit 5000

17, Bought furniture 1000

20, Cash purchases 5000

21, Goods sold to Hanuman, on credit 4000

27, Cash sales 2500

30, Paid rent 2000

31, Paid salaries 1500

31, Paid wages 500

Solution:

Dr. Single Column Cash Book Cr.
Date
075: Particulars L.F. Amount Date Particulars L.F. Amount
1-1
1-4 075:
1-10
1-27 To Balance b/d 9500 1-6 By Basyal Book A/c 5000

075: To Kianal Bors. A/c 4000 1-17 By Fumiture A/c 1000
2-1
To Sales A/c 3200 1-20 By Purchase A/c 5000

To Sa1as A/c 2500 1-30 By Rent A/c 2000

1-31 By Salaries A/c 1500

1-31 By Wages A/c 500

1-31 By Balance c/d 4200

19,200 19,200

To Balance b/d 4200

Note: i. Transactions of 11th and 21st Baisakh will not be recorded in the cash book as
these are the credit transactions.

ii. Instead of totalling the credit side separately, it may be directly balanced.

228 Aakar’s Office Practice and Accountancy - 9

ii. Double Column Cash Book

Cash transactions refer to the hard cash as well as bank receipts and payments.
While remitting money by a debtor to his/her creditor before or on the due date, the
creditor may allow him/her a cash discount, to some extent, as a rebate for the timely
payment. Therefore, cash discount is a kind of rebate offered by the creditor to his/
her debtor to encourage for timely payment. Most of the payments, especially of the
bulk amount, are remitted through banks. Thus, cash discount is always associated
with cash or bank dealing and accordingly the double column cash book is also of
three types.

a. Double column cash book with cash and discount columns,
b. Double column cash book with bank and discount columns and
c. Double column cash book with cash and bank columns.

Before the study of different types of double column cash book, it will be helpful here
to introduce some important terms associated with this book.

Contra Entry

Every business transaction has two side effects, one on debit side and another on
credit side with the equal amount. While making the posting, the amount of the same
transaction is debited in one account and credited in another account. But in case of
double column cash book with cash and bank columns and triple column cash book
with discount cash and bank columns, the amount of cash deposits and withdrawals
are debited in one column and credited in the another column of the same book
completely i.e. there remains no account to post in another ledger or book and it is
denoted by ‘C’ alphabet in L.F. columns to indicate the double posting or two-side
posting or contra entries. Thus, a contra entry refers to the condition of recording the
amount of a transaction, completely on both debit and credit sides of the same book
or account i.e. in the double column cash book with cash and bank columns and
triple column cash book.

There are two transactions, which require contra entry i.e. cash paid to the bank and
cash withdrawn from the bank for office use.

The following posting will clear the concept of contra entry ‘C’.

i. Cash paid into the bank Rs. 10,000

Bank A/c ................................... Dr 10 000

To Cash A/c ............................. 10,000

It is debited in Bank Column and credited in Cash Column in the same book as below:

Dr. Cash Book Cr.

Date Particulars L.F. Cash Bank Date Particulars L.F. Cash Bank
(Rs.) (Rs.) (Rs.) (Rs.)

To Cash A/c C 10,000 By Bank A/c C 10,000

Subsidiary Books 229

ii. Cash withdrawn from the bank for office use Rs. 5000.

Cash A/c .................................... Dr. 5000
To Bank A/c ............................. 5000

It is debited in Cash Column and credited in Bank Column as below:

Dr. Cash Book Cr.

Date Particulars L.F. Cash Bank Date Particulars L.F. Cash Bank
(Rs.) (Rs.) (Rs.) (Rs.)

To Bank A/c C 5,000 By Cash A/c C 5,000

a. Double Column Cash Book with Cash and Discount Columns

It is the one, which contains discount and cash columns on both of its sides to
record the transactions related with cash and discounts. It does not contain the bank
dealings, as there’s no provision of bank column. The following illustration will clear
the practical concept of this type of cash book.

Illustration - 6
Enter the following transactions in a cash book having cash and discount columns.

On 075, Bhadra: (Rs.)
1, Opening balance of cash 7,000
5, Purchased goods from Ganesh in cash 1,500
7, Received cash from Hiralal & Co. 8,800
Discount allowed to them 200
10, Paid to Himalal & Co. 950
Discount received from them 50
16, Purchased goods for cash 1,200
20, Paid to Sharma and Sons 1,800
Discount received 200
21, Cash sales made 5,000
25, Furniture purchased for cash 3,000
27, Paid wages 4,000
28, Rent paid to the landlord 3,000
30, Paid to Shiva Shankar 450
Discount received from him 50

230 Aakar’s Office Practice and Accountancy - 9

Solution:

Dr. Cash Book with Cash and Discount Columns Cr.

Date Particular L.F. Dis. Cash Date Particular L.F. Dis. Cash
(Rs.) (Rs.) (Rs.) (Rs.)

075 075

5-1 To Balance b/d 7000 5-5 By Purchase A/c 1,500

5-7 To Himlal & Co. A/c 200 8800 5-10 By Hanalal & Co. A/c 50 950

5-21 To Sales A/c 5000 5-16 By Purchase A/c 1,200

5-20 By Sharma & Son’s A/c 200 1,800

5-25 By Furniture A/c 3,000

5-27 By Wages A/c 4,000

5-28 By Rent A/c 3,000

5-30 By Shiva Shankar A/c 50 450

5-30 By Balance c/d 4,900

075 200 20800 300 20,800

6-1 To Balance b/d 4900

Note: Since, discount does not flow cash, it is a non-cash income and non-cash expenses
but just a gain or loss; thus, in cash book this column is just totalled, not balanced.

b. Double Column Cash Book with Bank and Discount Columns

It is the one, which contains discount and bank columns on both of its sides
to record the transactions related with, banks and discounts, i.e. the receipts and
payments through banks along with the discount therein. It does not record the
hard cash transactions, as there’s no provision of cash column in it. The following
illustration will clear its practical concept.

Illustration - 7
Enter the following transactions in double column cash book with bank and discount
columns.
075, Ashwin

1, Paid into bank Rs. 20,000.

3, Purchased goods and paid by cheque Rs. 4,000.

7, Sold goods for cash and collected by bank Rs. 15,000.

10, Purchased goods from Sundar Bros. on credit Rs. 2,000.

11, Paid for stationery by cheque Rs. 1,000.

13, Sold goods to Sunita & Co. on credit Rs. 4,000.

15, Withdrawn from bank for office use Rs. 2,000.

Subsidiary Books 231

17, Paid to Sundar Bros. Rs. 1800 by a cheque in their full settlement.

19, Directly paid into bank by Ram Bilash, a previous debtor Rs. 2,300 and allowed
him discount of Rs. 200.

22, Bank directly collected from Sunita & Co. Rs. 3,700 as per outstanding
instruction in full settlement of their account.

25, Paid to Ram Singh, a previous creditor by cheque Rs. 1,800 and availed discount
of Rs. 200.

27, Paid wages by issuing a cheque Rs. 7,000.

29, Paid salaries by bank Rs. 10,000.

30, Issued a cheque for rent Rs. 5,000.

31, Paid insurance premium by cheque Rs. 1,000.
Solution:

Dr. Cash Book with Bank and Discount Columns Cr.

Date Particular L.F. Dis. Bank Date Particulars L.F. Dis. Bank
(Rs.) (Rs.) (Rs.) (Rs.)
075:
6-1 075:
6-7
6-19 To Cash A/c 20,000 6-3 By Purchase A/c 4,000
6-22
To Sales A/c 15,000 6-11 By Stationery A/c 1,000

To Ram Bilash A/c 200 2,300 6-15 By Cash A/c 2,000

To Sunita & Co A/c 300 3,700 6- 17 By Sunder Bros. A/c 200 1.800

6-25 By Ram Singh A/c 200 1,800

6-27 By Wages A/c 7,000

6-29 By Salaries A/c 10,000

6-30 By Rent A/c 5,000

6-31 By Insurance A/c 1,000

6-31 By Balance c/d 7,400

500 41,000 400 41,000

075: 7,400
7-1 To Balance b/d

c. Double column cash book with cash and bank columns

It is the cash book, which manages two columns cash and bank on its both Dr.
and Cr. sides to record cash receipts and payments and bank deposits and withdrawals
respectively. It doesn’t have any provision for discount. The contra entry takes place
in this sort of cash book while depositing cash into banks and withdrawing cash
from the bank for office use. The contra entry is denoted by ‘C’ letter in L.F. column
on both sides.

232 Aakar’s Office Practice and Accountancy - 9

The following is the accounting record of this sort of cash book.

Illustration - 8

Enter the following transactions in a double column cash book with cash and bank
columns.

075, Kartik: (Rs.)

1, Cash in hand 12,000

l, Cash at bank 15,000

2, Wages paid 1,500

3, Salaries paid by cheque 2,500

5, Goods purchased and paid by cheque 1,200

6, Purchased in cash 1,000

7, Received a cheque from Khanal Bros. and

immediately paid into bank 2,000

8, Paid to Ganesh through a cheque 1,600

9, Withdrawn cash from bank for office use 1,500

10, Received from Hari. 500

I2, Interest allowed by bank 400

14, Paid into bank 1,000

Solution:

Dr. Cash Book with Cash and Bank Columns Cr.

Date Particular L.F. Cash Bank Date Particulars L.F. Cash Bank
(Rs.) (Rs.) (Rs.) (Rs.)
075
7-1 075
7-7
79 To Balance b/d 12,000 15,000 7-2 By Wages A/c 1,500 -
7-10
7-12 To Khanal Bros A/c 2000 7-3 By Salary A/c - 2500
7-14
To Bank A/c C 1,500 - 7-5 By Purchase A/c - 1200
075
7-1 To Hari’s A/c 500 - 7-6 By Purchase A/c 1,000 -

To Interest A/c - 400 7-8 By Garesh’s A/c - 1,600

To Cash A/c C 1,000 7-9 By Cash A/c C - 1,500

7-14 By Bank A/c C 1,000 -

7-15 By Balance c/d 10,500 11,600

14,000 18,400 14,000 18,400

To Balance b/d 10,500 11,600

iii. Triple Column Cash Book

In the modern day business world, it becomes very difficult and almost
impossible to carry out any business without having any dealing with banks.
Normally, the bulk of its fund is kept by the business in a bank in a current account

Subsidiary Books 233

where frequent deposits and withdrawals are permitted. The bank transactions are
more numerous than cash transactions. Therefore, cash book may be prepared with
three columns, i.e. discount, cash and bank, on both of its sides in order to cover all
the cash and bank dealings. It overcomes the condition of maintaining discount, cash
and bank accounts separately.

The following illustration will clear the practical concept of the triple column cash
book.

Illustration - 9
From the following transactions, prepare the cash book with three columns:

On Marga, 075

1, Commenced business with cash Rs. 60,000 and bank deposit 1,00,000.

2, Incurred general expenses 2,000

3, Paid to Bikram by cheque Rs. 4,800 and discount allowed

by him 200

4, Bought furniture by cheque 12,000

8, Received cheque from Rabindra 6,900

Discount allowed to him 100

9, Cash sales 10,000

10, Deposited into bank 5,000

12, Purchased by cheque 10,000

Cash purchases 5,000

14, Commission received 1,000

17, Advertising expenses paid 1,500

20, Withdrawn from the bank for office use 1,000

22, Received cheque from Rajesh 2,450

Discount allowed 50

24, Drawn from office for private use 1,000

26, Deposited into bank 10,000

27, Paid office expenses 2,000

28, Salaries paid by cheque 5,000

30, Paid rent by cheque 3,000

31, Purchased a typewriter and paid by cheque 10,000

234 Aakar’s Office Practice and Accountancy - 9

Solution:

Triple Column Cash Book

Date Particular L.F. Dis. Cash Bank Date Particulars L.F. Dis. Cash Bank
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

2075 2075

8-1 To Capital A/c 60,000 1,00,000 8-2 By General expenses A/c 2,000 -

8-8 To Rabindra’s A/c 100 6,900 - 8-3 By Bikram’s A/c 200 - 4,800

8-9 To Sales A/c - 10,000 - 8-4 By Furniture A/c - - 12,000

8-10 To Cash A/c C - - 5,000 8-10 By Bank A/c C - 5,000 -

8-14 To Commission A/c - 1,000 - 8-12 By Purchase A/c - 5,000 10,000

8-20 To Bank A/c C - 1,000 - 8-17 By Advertising A/c - 1,500 -

8-22 To Rajesh’s A/c 50 2,450 - 8-20 By Cash A/c C - - 1,000

8-26 To Cash A/c C - - 10,000 8-24 By Drawing A/c - 1,000 -

8-26 By Bank A/c C - 10,000 -

8-27 By Office expenses A/c - 2,000 -

8-28 By Salaries A/c - - 5,000

8-30 By Rent A/c - - 3,000

8-31 By Typewriter A/c - - 10,000

2075 8-31 By Balance c/d - 54,850 69,200

9-1 To Balance b/d 150 81,350 1,15,000 200 81,350 1,15,000

54,850 69,200

Journal Proper

Some transactions do not occur repeatedly, to record such transaction, a separate book
is maintained known as journal proper. It records all those transactions in chronological
order which cannot be recorded in other subsidiary books. It is similar to journal. Sale
of assets, bad debts, depreciation, outstanding expenses, advance incomes, etc. are the
some examples of transactions which are recorded in journal proper.

Glossary

Retention : preservation
Overcome : rise above, settle
Reselling : not for use for sale

Exercise

A. Answer the following questions in one sentence. 235

1. What is subsidiary book?
2. What is purchase book?

Subsidiary Books

3. What is purchase return book?
4. What is sales book?
5. What is sales return book?
6. What types of transaction are recorded in sales book?
7. What is meant by debit note?
8. What is meant by credit note?
9. What is meant by cash book?
10. What is meant by journal proper?

B. Give short answers to the following questions.

11. What do you mean by subsidiary book? Mention its advantages.
12. Write in brief the objectives of maintaining the subsidiary books.
13. Mention the specimen ruling of a purchase book.
14. Mention the specimen ruling of a sales book.
15. “A cash book is a subsidiary as well as a principal book of a businessman.”

Justify this statement.
16. What is contra entry? Explain with a suitable example.

C. Give long answers to the following questions.

17. What are the different types of subsidiary books? Introduce all of them
along with their specimen.

18. What is meant by a cash book? Mention the prominent features of a cash
book.

19. What are the types of cash book? Explain its types with specimen.
20. What are the types of double column cash books? Introduce them with

their specimen, respectively.

NUMERICAL PROBLEMS

21. From the following transactions, prepare the purchase book of XYZ
Books Store for Ashwin, 2075. Also prepare necessary ledger accounts.
7, Purchased books on credit from Kalyani Publishers.
30 Advanced Accounts by T. S. Grewal @ Rs. 350.
35 Financial Management by I.M. Pandey @ Rs. 300.
Trade discount for both the books 10%.
12, Purchased from Kitab Mahal.
30 Statistics by K.N. Shrestha @ Rs. 300.
25 Marketing Mgmt. By K.D. Koirala Ca) Rs. 200.

236 Aakar’s Office Practice and Accountancy - 9

18, Purchased books from Ekta Publishers.
20 Junior School Dictionary @ Rs. 150.
30 High School Grammar by Madhav Sharma @Rs. 175.
22, Purchased on credit from Sajha Prakashan.
25 Mitho Nepali Rachana by Ramesh Parajuli @ Rs. 100.
20 Nepali Shabda Kosh by Dhruba Sharma @ Rs. 200.
30, Purchased on credit from Podrej Furniture.
5 books cases @ Rs. 5000.
2 office chairs @ Rs. 1500.

Ans: Purchase book total: 47650
22. Enter the following transactions in the purchase book and prepare the

necessary ledgers during Marga, 075.
1, Purchased on credit from Ram Sahu.
100 metres coating @ Rs. 500 per metre.
200 metres shirting @ Rs. 200 per metre .
7, Purchased from Hari Sahu.
50 Banarasi sarees @Rs. 500.
60 Janta sarees @ Rs. 300.
9, Purchased 5 showcases @ Rs. 3500 from Baghbazar Furniture.
16, Purchased from Balaju Textiles.
200 metres of polyster @ Rs. 50.
300 metres of cotton @ Rs. 75.
200 metres of nylon @ Rs. 100.
22, Purchased from Ram Hari Merchantiles in cash.
75 metres shirting @ Rs. 190.
50 metres coating @ Rs. 475.
30, Purchased from Hetauda Textiles.
200 metres poplin @ Rs. 350.
200 metres terylene @ Rs. 150.

Ans: Purchase book total: 285500
23. Enter the following transactions in the purchase books of Purnaman

Electronics for Poush, 075.
5, Purchased on credit from Akbar Electronics.
5 ‘Janta Model’ TV sets @ Rs. 3500.
10 ‘Delex Model’ TV sets @ Rs. 5500.
22, Purchased on credit from Modern Furniture.
1 office showcase @ Rs. 1200

Subsidiary Books 237

1 office table @ Rs. 2300.
3 office chairs @ Rs. 600.
26, Purchased from Bajaj Electronics.
15 electronic iron @ Rs. 500.
15 heaters @ Rs. 1000.
5 table lamps @ Rs. 300.
28, Purchased from Sunita Bros. in cash.
5 toasters @ Rs. 1000.
3 table lamps @ Rs. 300.

Ans: Purchase book total: 96,500
24. From the following transactions, prepare the purchase book of Gyan

Electronics for Ashwin, 075. And prepare the necessary ledgers.
5, Purchased on credit from Kailash & Co.
50 Electric irons @ Rs. 200.
10 Toasters @ Rs. 300.
6, Purchased for cash from Sharma Bros.
25 Table lamps @ Rs. 150.
10, Purchased from Lamsal & Sons.
20 Electric stoves @ Rs. 500.
10 Heaters @ Rs. 400.
15, Purchased on credit from PQR Electronics.
15 Heaters @ Rs. 450.
10 Mixer grinders @ Rs. 600.
22, Purchased on credit a typewriter from Shivam Electronics for Rs.

10,000.
Ans: Purchase book total: 39,750

25. Prepare purchase return book, return outward (purchase return)
account from the following transactions.
075-7-2, Return to Kalyani Publishers.
2 Advanced Accounts by T.S. Grewal @ Rs. 350.
being defective (original trade discount 10%)
075-7-3, Returned 2 Marketing Management by K.D. Koirala @ Rs.
200 to Kitab Mahal.
075-7-4, Returned to Sajha Prakashan.
3 Mitho Nepali Rachana by Ramesh Parajuli @ Rs. 100.
2 Nepali Shabda Kosh by Dhurba Sharma @ Rs. 200.
Ans: Purchase returned book total: 1730

238 Aakar’s Office Practice and Accountancy - 9

26. Enter the following transactions in the Purchase Return Book for
Shrawan, 2075.
1, Returned to Gyan Bahadur Pun., Pokhara.
5 tins of local butter @ Rs. 1,000 per tin.
20 bags of Mansuli Rice @ Rs. 500 per bag .
Less: 10 % Trade Discount.
2, Returned to Pawan Stores., Dhangadi.
4 bags Chana @ Rs. 300 per bag.
1 bag Sugar @ Rs. 600 per bag.
1 bags of wheat @ Rs. 600 per bag.
Less: 10 % Trade Discount.
15, Returned to Ramesh Shrestha., Lagan Tole.
10 bags Sugar @ Rs. 110 per bag.
30 tins Ghee @ Rs. per 80 tin.
Ans: Purchase Return Book Total : Rs. 19,160

27. Prepare sales book, sales account and other personal ledgers, from the
following transactions for Magh 075.
3, Sold 50 quintals of Hulas Basmati @ Rs. 3000 per quintal to Makalu
Consumers’ Cooperative.
4, Sold to Raktim Stores.
10 quintals of Mansuli Rice @ Rs. 2000 per quintal
5 quintals of Hulas Wheat Flour @ Rs. 1200 per quintal
8, Sold to Suman Traders.
50 packets Everyday Milk @ Rs. 160 per pack.
100 hrs of Dhara Oil @ Rs. 80 per ltr.
50 bottles of Meizan Sun Flower Seed Oil @ Rs. 110 per bottle.
12, Sold on credit to ABS National Hostel.
100 jars of boost @ Rs. 180 per jar.
5 quintals of Mansuli @ Rs. 2000 per quintal.
8 tins of ghee @ Rs. 3000 per tin.
Ans: Sales book total: 2,49,500

28. Prepare sales book, sales account and necessary personal ledgers
during Magh, 075.
1, Sold to Basyal Shoes Company.
15 pairs of leather shoes @ Rs. 800 per pair.
20 pairs of sandals @ Rs. 100 per pair.
5, Sold to Kamal Shoes Centre.

Subsidiary Books 239

20 pairs of ladies chappals @ Rs. 75 per pair.
25 pairs of white canvas shoes @ Rs. 125 per pair.
12, Sold to Mahendra Police Club.
50 pairs of leather boot @ Rs. 1500 per pair.
40 pairs of sport shoes @ Rs. 700 per pair.
20, Purchased 20 pairs of leather shoes and 50 pairs of sport shoes from

Fit Rite sales depot @ Rs. 600 and 500 respectively.
24, Sold in cash to Harihar & Friends.
3 pairs of white canvas shoes @ Rs. 150 per pair.
3 pairs of sandals @ Rs. 120 per pair.
Ans: Sales book total: 1,21,625
29. Prepare sales book, sales account and the debtors account from the
following transactions:
075, Falgun:
3, Sold to Lama Cycle Traders, Solu, on credit.
20 Atlas Bicycles (@ Rs. 4000.
10 Auto Bicycles @ Rs. 8000.
(Less trade discount 10%)
4, Sold to Basyal Cycle Stores, Butwal.
50 Rambo Cycles @ Rs. 3500.
35 Child Bicycles @ Rs. 2500.
5, Sold in cash, to Bahirab Advertising Agency:.
3 Atlas Bicycles @ Rs. 3500.
4 Auto Bicycles @ Rs. 7000.
7, 30 Child Bicycles were sold to Shrestha Cycle Shop @ Rs. 2500 on

credit
Ans: Sales book total: 4,81,500

30. Enter the following transactions in the sales book of National Books
and Stationery, Thamel for the month of Mangsir, 2075.
l, Sold to Mitra Stationers.
15 dozen register @ Rs. 20 per dozen
12 dozen pencil @ Rs. 25 per dozen
7, Sold to Green Field School, Sitapaila.
10 reams of white paper @ Rs. 15 per ream.
3 reams of Nepali Kagaj @ Rs. 10 per ream.

240 Aakar’s Office Practice and Accountancy - 9

12, Sold 20 dozen exercise books @ Rs. 100 per dozen to Shikhar B.
School.

18, Sold old 2 almirahs of Rs. 300 each to Kantipur Language Institute.

22, Sold to XYZ Book Centre.

20 Elementary Accountancy part-1 By B.P. Sharma @ Rs. 125.

10 Social Studies for grade (ix) by L.P. Sharma @ Rs. 125.

12 Active English (Book 4) by L.P. Sharma @ Rs. 150.

26, Sold in cash to Jyoti Academy, Sitapaila.

15 pens @ Rs. 45.

5 markers @ Rs. 75.

31, Sold a second hand motorcar, on credit to Shree Ram Enterprises of
Rs. 200,000.

Ans: Sales book total: 8,330

31. Prepare sales return book and sales return account.

074-11-10, Makalu Consumers’ Cooperative returned to us 2
quintals of Hulas Basmati @ Rs. 3000 per quintal

074-11-11, Returned from Suman Traders.

5 packets of Everyday Milk @ Rs. 160 per packet

3 bottles of Meizan Sun Flower Seed Oil @, Rs. 110 per
bottle

074-11-12, The whole 5 quintals of Mansuli Rice @ Rs. 2000 per
quintal was returned from ABS National Hostel being
of high price.

Ans: Sales return book total: 17,130

32. Enter the following transactions in the Sales Return Book of Rabindra
Stationery, Bafal for Baisakh, 2075

1, Ganesh Stationery, Ganabahal returned.

45 dozens pencils @ Rs. 7 per dozen.

1 Gross registers @ Rs. 100 per gross.

8, Suchi Books & Stationery, Lazimpat returned to us the following.

5 Dozen pencils @ Rs. 48 per dozen.

10 reams of Cyclostyle Paper @ Rs. 40 per ream.

Less : 10 % Trade Discount.

15, Returned by Basundhara Public School, Basundhara.

10 gum bottles @ Rs. 75 per bottle.

5 dozen rulers @ Rs. 30 per dozen.

Less: Trade Discount 5 %.

Ans: Sales Return Book Total Rs. 1,846

Subsidiary Books 241

33. From the following transactions, prepare necessary subsidiary books
in the books of Shree Ram Enterprises.

075-Falgun:

1, Purchased goods from Samjhana Store of Rs. 15,000 less 10% trade
discount.

2, Bought from Prabha Trading House of Rs. 20,000 less 10% trade
discount.

3, Sold to Basudev & Sons of Rs. 35,000.

4, Sold in cash to Hari Shankar & Co. of Rs. 15,000.

5, Returned to Prabha Trading House of Rs. 5,000 subject to 10%
original trade discount.

8, Goods purchased from Subash & Bros. of Rs. 30,000 subject to 12%
trade discount.

10, Purchased from Kabi Raj & Co. Rs. 10,000 in cash.

12, Sold goods to ABC Co. Ltd. of Rs. 55,000, subject to 10% trade
discount.

15, Sold on credit, to XYZ Pvt. Ltd. of Rs. 25,000.

16, Basudev & Sons returned to us goods of Rs. 3,000 being defective.

20, An old typewriter was sold to PQR Typing Centre for Rs. 15,000.

21, Goods returned to Subash & Bros. of Rs. 3,000 being defective.

25, ABC Co. Ltd returned to us goods of Rs. 5,000. (subject to original
trade discount 10%)

27, Invoiced goods to Tripathi Concern of Rs. 10,000 less 10% trade
discount.

29, Purchased a second hand computer from Media Computer Centre
of Rs. 25,000.

30, Returned to us goods of Rs. 3,000 from Tripathi Concern subject to
10% original trade discount.

Ans: Purchase book total: 57,900.

Sales book total: 1,18,500

Purchase Returns book total: 7,500

Sales Returns book total 10,200

34. Enter the following transactions in a simple cash book for Bhadra, 075

(Rs.)

1, Started business with cash 15,000

3, Deposited into bank 4,000

5, Bought goods for cash 2,500

9, Sold goods to Harihar Bros. 1,500

242 Aakar’s Office Practice and Accountancy - 9

12, Purchased goods form Jagat & Co. 1,000

15, Sold goods to Bihari Lal in cash 1,200

18, Received cash from Harihar Bros. 1,500

22, Paid to Jagat & Co. 1,000

23, Cash sales 1,700

25, Trade expenses paid 500

27, Withdrew cash from bank for office use 1,500

28, Rent paid 2,000

30, Commission received 500

31, Wages paid 500

Ans: Cash book Total: 21,400 Cash Closing figure (Dr.) 10,900

35. Maintain a single column cash book and record the following
transactions in it for the month of

Ashwin, 075. (Rs.)

1, Cash in hand 50,000

4, Furniture purchased 10,000

7, Purchased machinery from Shree Ram Traders 2,500

10, Paid for repairs 500

11, Bought goods of 5,000

13, Withdrawn cash from office for private use 1,000

14, Sold goods to Rajendra, on credit 2,500

18, Purchased goods from Mahendra 2,000

20, Received from Rajendra 2,500

22, Paid to Mahendra 2,000

27 , Paid insurance premium 500

28, Rent paid to the landlord 3,000

29, Wages paid for the month 1,500

31, Salary paid 5,000

Ans: Cash book Total: 52,500 Closing Balance of Cash: 24,000

36. Prepare a double column cash book with discount and cash column
and enter the following transactions in it.

075, Kartik: (Rs)

1, Ram Chandra commenced business with 1,00,000

2, Paid into bank account 75,000

4, Received from Khanal Bros. 900

Discount allowed to them 100

8, Cash purchases made 2,000

Subsidiary Books 243

9, Paid to Udas Co. a previous creditor 8,000

Discount received 50

11, Paid for stationery 500

12, Purchased from ABC Ltd. on credit 8,000

14, Paid for advertising 1,000

16, Paid water and electricity charges 500

18, Sold goods to XYZ Ltd. of 13,000

20, Settled A/c with ABC Ltd. by paying Rs. 7,500 on account.

22, Withdrawn from bank for office use 15,000

23, Lok, who owed Rs. 1,500 settled his account by paying Rs. 1,350

25, Bought a second hand typewriter of 10,000

27, Paid salaries 15,000

28, Paid rent 8,000

29, Received a cheque from XYZ Ltd. Rs. 12,500 for full settlement of
account.

Ans: Cash book Total: 1,29,750 Debit Balance: 2,250

37. Enter the following transactions in a cash book with discount and bank
columns.

075, Bhadra:

1, Balance at bank Rs. 30,000

3, Purchased goods and paid by cheque Rs. 15,000

4, Sold goods to Sundar & Co. Rs. 25,000

5, Directly received by bank from Shankar & Sons,

a previous debtor, Rs. 4,900 for the full payment of Rs. 5000

7, Bank charges charged by bank and settled from bank A/c

Rs. 1,000

8, Purchased, on credit from Sarita Traders Rs. 12,000

10, Received from Sundar & Co. a cheque of Rs. 24,500

for the full settlement of the account and immediately deposited
into the bank.

11, Sold goods for cash and received by bank Rs. 10,000

13, Paid to Sarita Traders through a cheque Rs. 11,600

Discount availed Rs. 400

14, Paid to Kedia Co. by cheque Rs. 19,500 for the full settlement of the

account of Rs. 20,000

Ans: Cash book Total (bank column): 69,400
Bank Balance (Dr.): 22,300

244 Aakar’s Office Practice and Accountancy - 9

38. From the following transactions, compile a cash book with discount
and bank column, assuming that all the transactions are done through
the bank.

075, Marga (Rs.)

1, Cash at bank 15,000

3; Sold goods and received a cheque for the same 60,000

4, Received from Chundal Bros. Rs. 20,500 and allowed

them discount 500

6, Paid Rs. 5,800 to Bhola Nath, in full settlement of his 6,000
account of

10, Bought goods 5,000

12, Paid for stationery 1,000

13, Ram Hari settled his account of Rs. 10,000 by paying 9,500

15, Cash withdrawn from the bank for office use 5,000

18, Received a cheque from Ram of Rs. 3,750 for the

full settlement of 4000

20, Settled Krishna’s account of Rs. 5,000 by sending a

cheque of 4,900

21, Remitted to LMN Enterprises for Rs. 5,000 by sending

a cheque of 4,700

28, Paid wages 10,000

29, Salary of the staff paid for the month 15,000

30, Dividend from PQR Co. Ltd., collected by the bank 3,500

Ans: Bank Total: 1,12,250 Bank Balance (Dr.): 60,850

39. Enter the following transactions in double column cash book with cash
and bank column for 075, Poush.

075, Poush (Rs.)

1, Commenced business with cash 35,000

and bank 60,000

6, Received cash from Mohan 2,000

10, Bought goods and paid by cheque 10,000

15, Withdrawn from bank for office 5,000

16, Sold goods to Sarala of Rs. 15,000 and received a cheque

for the same

22, The cheque of Sarala was deposited into the bank.

23, Insurance premium paid by cheque 1,500

26, Advertisement expenses paid by cheque 5,000

Subsidiary Books 245

28, Wages paid 10,000

29, Paid to Arun by cheque 7,000

30, Received cash for sales 12,000

31, Withdrawn from bank for office use 10,000

Ans: Cash column total: 79,000
Bank column total: 75,000
Cash Balance (Dr.): 54,000
Bank Balance (Dr.): 36,500

40. Enter the following in three columnar cash book, during Falgun, 075.

1, Balance of cash in hand Rs. 5,000 and in bank Rs. 10,000

2, Received cash from Mohan Rs. 970 and discount

allowed to him Rs. 30.

3, Paid into bank Rs. 2,000

4, Paid to Dinesh & Co. by cheque Rs. 320 in full

settlement of their account of Rs. 350

5, Received from cash sales Rs. 300

15, Cash purchases paid by cheque Rs. 700

17, Paid by cheque to Radha & Co. Rs. 725 in full

settlement of Rs. 800

21, Drawn from bank for office use Rs. 1,500

23, Paid cash for advertisement Rs. 1500

25, Jagat Bros. paid us Rs. 525 in full settlement of Rs. 600

27, Paid salaries to the staff by cheque Rs. 2,500

28, Paid rent Rs. 1,500

30, Purchased of furniture and paid by cheque Rs. 2000

30, Received a cheque from Maya & Co. of Rs. 580 in full

settlement of their account for Rs. 600

Ans: Cash column total: 8,875
Bank column total: 12,000
Cash Balance (Dr.): 3,875
Bank Balance (Dr.): 4,255

246 Aakar’s Office Practice and Accountancy - 9

Unit 12 Trial Balance

List of possible items shown in trial balance

S.N. Particulars L.F. Debit Credit Reasons
amount amount
1 Opening stock Expenses
2 Purchase ×××× Expenses
3 Sales return Decrease in sales
4 Traveling expenses ×××× Expenses
5 Cash Assets
6 Bank ×××× Assets
7 Commission expenses Expenses
8 Bad debt ×××× Loss/Expenses
9 Wages Expenses
10 Rent ×××× Expenses
11 Salary Expenses
12 Allowance ×××× Expenses ObjeLcetiarvneisng
13 Land & building Assets
14 Machinery and plant ×××× Assets
15 Furniture Assets
16 Motor ×××× Assets
17 Adm. & office expenses Expenses
18 Patent ×××× Assets
19 Bills receivable Assets
20 Investment ×××× Assets After studying this unit, students will
21 Depreciation Expenses be able to :
22 Custom, tax &fees ×××× Expenses
23 Debtor Assets write the meaning of trial balance,
24 Interest expenses ×××× Expenses know the objectives and advantages of
25 Insurance & Advertisement Expenses
26 Phone & post expenses/ ×××× Expenses trial balance,
know the types of trial balance,
electricity ×××× write the difference between journal
27 Printing, transportation & fuel
28 Capital ×××× and ledger,
29 Purchase return know the rules of posting,
30 Sales ×××× know the balancing and closing of trial
31 Interest received
32 Bank overdraft ×××× balance,
33 Commission received prepare different types of trial balance.
34 Rent received ××××
35 Discount received
36 Creditor ××××
37 Loan and bills payable
38 Reserves ××××
39 Advance income
40 Carriage inward ××××
41 Cartage
42 Audit fees ××××
43 Legal charges
44 Sampling expenses ××××
45 Discount
46 Commission ××××
47 Export duty
48 Repair & maintains ××××
49 Charity donation
50 Bank charge ××××
51 Sales tax
52 Loss by incident ×××× ×××× Expenses
53 Drawings ×××× Capital
54 Goodwill ×××× ×××× Decrease in purchase
55 Accrued income ×××× ×××× Revenue
56 Income from investment ×××× ×××× Income
57 Dividend received ×××× ×××× Liabilities
58 Miscellaneous receipts ×××× ×××× Income
59 Outstanding expenses ×××× ×××× Income
×××× ×××× Income
Total ×××× ×××× Liabilities
×××× ×××× Liabilities
×××× ×××× Capital
×××× Liabilities
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
Expenses
×××× Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Loss
Decrease in capital
Assets
Assets
Income
Income
Income
Liabilities

SuTbrsiaidliaBraylaBnocoeks 247

1. Introduction

The duality concept is one of the fundamentals of accounting theory. According
to double entry system, the total of debit and the total of credit should be equal. So
at the end of month, quarter, half year and year, a statement is prepared with the
help of ledger balances to find out/see whether or not the two totals are equal, such
a statement is called trial balance.

A trial balance is a list of the ledger accounts prepared at a specified date showing
their debit or credit balances and thus to see the sum totals of debit side and credit
side respectively. It should be noted that this list of ledger balances can only be
prepared when they are completed. It is the way of checking arithmetical accuracy
of the books of accounts.

In the words of M.S. Gosav, “ Trial balance is a statement containing the balances of all
the ledger accounts as at any given date arranged in the form of debit and credit columns,
placed side by side and prepared with the object of checking the arithmetical accuracy of the
ledger posting.”

In the words of Dr. A. N. Agrawal, “A trial balance is a statement of the debit and credit
balances of the various ledger accounts, which is prepared to check their arithmetic accuracy.”

From the above meaning and definitions, it is learnt that a trial balance possesses the
following essentials:

i. It is the list of all the ledger balances of a business house during a certain period.
ii. It is prepared on a specified date.
iii. It is prepared to check the arithmetical accuracy of the books of account.
iv. Debit and credit totals must be equal. If it is not equal, there may be mistakes.
Even though it helps to check the arithmetical accuracy of the books of account, it is
not a conclusive proof of their overall accuracy.

Hence, a trial balance may be defined as a statement of the ledger accounts of a
business in terms of their balances on a certain specified period which helps to check
the arithmetic accuracy of the books of account.

Key Point Trial balance may be defined as a statement of the ledger
accounts of a business in terms of their balances on a certain
specified period to check the arithmetic accuracy of the books
of account.

2. Objectives of Trial Balance

A trial balance is an important tool of the financial administration in checking
the arithmetical accuracy of the subsidiary and the main books of account. It is an

248 Aakar’s Office Practice and Accountancy - 9

important base for the preparation of the final accounts. The important objectives of
a trial balance are briefly discussed below:

i. To check the Arithmetical Accuracy of the Subsidiary Books

A trial balance is prepared with a view to check the accuracy of the totals in the
subsidiary books like purchase book, sales book and other sub division of journal so
that they can be compared with the creditors, debtors, etc.

ii. To Check the Arithmetical Accuracy of Posting

A trial balance is viewed to check the arithmetical accuracy of the postings
made in the ledger accounts. If correct postings, numerically, have been made from
the journal book or sub division of journal, the debit and credit totals of the trial
balance must tally.

iii. To Facilitate the Preparation of the Final Accounts

Trial balance collects all the ledger balances related with incomes and gains,
expenses and losses, assets, capital and liabilities separately for a certain period i.e.
for a certain fiscal year. Thus, it serves as a base for preparing final accounts. Incomes
and gains and expenses and losses determine the profit or loss by means of profit
and loss account and assets, capital and liabilities determine the financial position by
means of balance sheet.

iv. To Serve as an Aid to the Management

By comparing the trial balances of various periods, especially of the series of
years in the past with present, certain important changes in different figures can be
notified and its analysis can be made. It serves as an aid to the management in taking
various decisions.

v. To minimize Errors and Frauds

The trial balance helps to minimize errors and frauds. If it does not agree, it helps
to locate and rectify the errors as well as it gives moral presence to the accountant to
maintain the books of accounts with due care and honesty.

3. Advantages of Trial Balance

i. It helps to check the accuracy of journal & ledger.
ii. It helps to correct the arithmetical errors.
iii. It helps to find out errors of double posting.
iv. It helps for internal audit making it easier by supplying the necessary

information.
v. It helps to prepare final account.

Trial Balance 249

vi. It helps to take effective decision at the right time.
vii. It provides the summary of all ledger accounts in the same sheet.
viii. It also helps in rectification of accounting errors.

4. Specimen and Ruling of a Trial Balance

Simply, a trial balance is a statement of the ledger balances taken for a specified
period. It is prepared on a plain paper, not specific. The debit balances are mentioned
in the debit column and the credit balances in the credit column. The specimen ruling
of a trial balance is as follows:

“Trial Balance of Co.
As on ........................”

S.N. Particulars L.F. Dr. Balance Cr. Balance

(1) (2) (3) (4) (5)

Total

i. Since, a trial balance is prepared at any given date, its heading should always
be mentioned as:

“Trial Balance of ................. Co.
As on .........................”

ii. The serial numbers of the ledger heading are respectively mentioned in the
first column.

iii. The ledger accounts in respect of the serial number are mentioned in the 2nd
column irrespective of the debit or credit balances on them.

iv. Page numbers of the respective ledger accounts are mentioned in the 3rd
column, if any.

v. The amount of the debit or credit balance is respectively mentioned in the 4th
and 5th, columns. But sometimes the debit and credit totals may be mentioned
in the respective 4th and 5th columns when trial balance is prepared on total
method.

vi. Finally, the totals of debit side and credit side are determined to see whether
the two totals are equal.

5. Considerations of a Trial Balance

Even though a trial balance is a simple list or statement of ledger balances on a
certain specified date, one should consider the following important points.

i. Since, a trial balance is completely based on the ledger accounts, all the ledgers
should be duly prepared.

250 Aakar’s Office Practice and Accountancy - 9