Recording of Transactions – II — Class 11 (Accountancy)
Journalising every transaction one by one works for a tiny business — but a shop with hundreds of daily sales would drown in entries. So businesses use a ledger to group entries account-by-account, and special books to record repetitive transactions efficiently. This chapter organises the recording system.
1. The Ledger — book of secondary entry
The Ledger is the principal book containing all accounts (cash, capital, each customer, each expense, etc.). It groups every transaction affecting an account in one place, so you can see its balance at a glance.
Posting = transferring entries from the journal to the ledger accounts. Balancing an account = finding the difference between its two sides:
- If the debit total > credit total → debit balance (carried down as "Balance c/d" on the credit side, brought down "b/d" on the debit side).
- Assets and expenses normally have debit balances; liabilities, capital and income have credit balances.
The ledger is the source for the Trial Balance.
2. The Cash Book
The Cash Book records all cash (and bank) transactions. It is both a journal and a ledger (a cash/bank account is not separately kept in the ledger). Types:
- Single-column — records only cash.
- Two-column — cash and bank columns (for cheque transactions).
- Three-column — cash, bank and discount columns (records cash discount allowed/received).
Contra entry: a transaction affecting both cash and bank (e.g. cash deposited into bank) is marked "C" — it appears on both sides and does not go to the ledger again.
3. The Petty Cash Book
Small, routine payments (postage, stationery, conveyance) are handled by a petty cashier through the Petty Cash Book, usually run on the imprest system: the petty cashier is given a fixed float; at period-end the amount spent is reimbursed, restoring the float. This frees the main cashier and controls small expenses.
4. Special-purpose (subsidiary) books
Repetitive transactions are recorded in dedicated books instead of the journal:
| Subsidiary book | Records |
|---|---|
| Purchases (Bought) Book | credit purchases of goods |
| Sales Book | credit sales of goods |
| Purchases Returns / Returns Outward Book | goods returned to suppliers |
| Sales Returns / Returns Inward Book | goods returned by customers |
| Bills Receivable / Bills Payable Books | bills of exchange received/accepted |
| Journal Proper | all other entries (opening, adjusting, rare items) |
Note: these books record only credit transactions in goods (cash purchases/sales go in the Cash Book; buying an asset on credit goes in the Journal Proper).
5. Why this system?
- Division of work — different clerks can maintain different books.
- Efficiency — similar transactions grouped and totalled periodically.
- Easy reference and control — totals posted to the ledger reduce entries and errors.
6. Closing thought
Recording is organised through the ledger (grouping and balancing accounts), the cash/petty-cash books (cash, bank, discount, imprest), and subsidiary books (credit purchases/sales/returns/bills). Learn what goes in each book, how to post and balance, and the contra entry. In the board exam ledger posting, cash book and subsidiary books are heavy practical questions.
