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Recording of Transactions – II – Class 11 Accountancy Chapter 4 Notes & NCERT PDF

Class 11AccountancyChapter 4NCERT book: Financial Accounting Part I - Accountancy Class 11

Notes and a simple summary of Chapter 4 of the NCERT Class 11 Accountancy book, with the official chapter PDF, flashcards, an MCQ quiz and an AI tutor for your doubts.

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Chapter 4: Recording of Transactions – II

Introduction

A small business can record everything in one journal, but as transactions grow, journalising each one becomes cumbersome. Many transactions repeat, so the journal is split into special journals (also called day books or subsidiary books), each for one kind of transaction. What does not fit any special journal goes to the Journal Proper. Special journals save time and allow division of labour. The books covered are: cash book, purchases book, purchases return book, sales book, sales return book and journal proper.

4.1 Cash Book

The cash book records all cash receipts and cash payments, starting with the opening cash/bank balance; it is usually monthly. It is both a book of original entry and a ledger account – when it is kept, cash transactions are not journalised and no separate cash (or bank) account is opened in the ledger.

4.1.1 Single Column Cash Book

One amount column on each side: receipts (Dr., left) and payments (Cr., right). It always shows a debit balance, because payments cannot exceed cash in hand plus receipts.

  • Posting: accounts on the debit side of the cash book are credited in the ledger (e.g. "cash received from Gurmeet" → Gurmeet's A/c credited "By Cash"); accounts on the credit side are debited in the ledger.
  • Source documents: duplicate receipts for cash received; invoices, bills and receipts for payments.

    • 4.1.2 Double Column Cash Book (Cash and Bank)

    Two amount columns on each side – cash and bank.

  • Contra entry: a transaction affecting both columns (cash deposited in bank, or cash withdrawn from bank for office use). Marked "C" in the L.F. column and not posted to the ledger.
  • A cheque deposited the same day goes in the bank column; if deposited later, it is first shown as cash and then as a contra entry on the day of deposit.
  • Dishonoured cheque: recorded on the credit side in the bank column with the customer's name, restoring the customer's debt.
  • Bank charges and interest debited by the bank → credit side, bank column. The bank column may show a credit balance = bank overdraft.

    • 4.1.3 Petty Cash Book

    Small repetitive payments (conveyance, cartage, postage, sanitation, miscellaneous) are handled by a petty cashier under the Imprest System: a fixed sum (the imprest, e.g. ₹2,000) is given at the start of the period; when most of it is spent (e.g. ₹1,780), the head cashier reimburses the amount spent, restoring the full imprest. The payment side has analytical columns for each common expense plus "Miscellaneous" and "Remarks".

  • Advantages: saves the chief cashier's time, gives effective control over small payments, and makes recording and posting convenient (only column totals are posted).
  • Posting: Petty Cash A/c is debited with money given; each expense A/c is debited with its column total; Petty Cash A/c is credited "By Sundries" with total spent.

    • 4.2 Purchases (Journal) Book

    Records only credit purchases of goods. Cash purchases go to the cash book; credit purchases of assets (furniture, equipment) go to the journal proper. Entries are made at the net invoice amount (after trade discount). Individual supplier accounts are credited (usually daily) and the periodic total is debited to Purchases A/c.

    4.3 Purchases Return (Journal) Book

    Records goods returned to suppliers (return outwards). Source document: debit note (prepared by the buyer). Supplier accounts are debited; the periodic total is credited to Purchases Return A/c.

    A debit note debits a party (e.g. goods returned to supplier); a credit note credits a party (e.g. goods received back from a customer), often in red ink.

    4.4 Sales (Journal) Book

    Records only credit sales of goods; cash sales go to the cash book. Source document: the sales invoice. Customer accounts are debited (daily) and the periodic total is credited to Sales A/c.

    4.5 Sales Return (Journal) Book

    Records goods returned by customers (return inwards). Source document: credit note (prepared by the seller). Customer accounts are credited; the periodic total is debited to Sales Return A/c.

    4.6 Journal Proper

    Records transactions that do not fit any special book:

  • Opening entry – opening balances of assets, liabilities and capital.
  • Adjustment entries – outstanding rent, prepaid insurance, depreciation, commission received in advance.
  • Rectification entries – correcting errors.
  • Transfer entries – drawings to capital; closing revenue and expense accounts to the trading and P&L account.
  • Other entries – discount cancelled on dishonour of a cheque, credit purchase/sale of items other than goods, goods withdrawn by the owner, goods distributed as free samples, bills of exchange, consignment and joint venture.

    • 4.7 Balancing the Accounts

    Total both sides, write the difference on the shorter side as "Balance c/d" so the totals agree, and bring it down as "Balance b/d" on the opposite side for the next period. If debits exceed credits, the account has a debit balance (assets, debtors); if credits exceed, a credit balance (liabilities, creditors, capital). Expense and revenue accounts are not balanced – they are closed by transfer to the trading and profit and loss account.

    Worked Examples

  • Purchases book (Kanika Traders): from M/s Neema Electronics, 20 mini TVs @ ₹2,000 and 15 tape recorders @ ₹12,500 = ₹2,27,500; less trade discount 20% = ₹1,82,000 entered as the net amount. Posting: Neema Electronics A/c credited ₹1,82,000; the monthly total is debited to Purchases A/c.
  • Sales book (Koina Supplies): Raman Traders – 2 purifiers @ ₹2,100 + 5 buckets @ ₹130 = ₹4,850; Nutan Enterprises – 5 containers @ ₹4,200 = ₹21,000; Raman Traders – 100 big buckets @ ₹850 = ₹85,000. Monthly total ₹1,10,850 is credited to Sales A/c; customers are debited individually.
  • Sales return: one purifier (₹2,100) returned by Raman Traders against a credit note → Raman Traders A/c credited ₹2,100; Sales Return A/c debited with the periodic total.
  • Petty cash: imprest ₹2,000; petty cashier spends ₹1,780 → balance ₹220 in hand; head cashier reimburses ₹1,780, restoring ₹2,000.
  • Balancing (modelled example): a debtor's account shows debits ₹12,000 + ₹8,000 = ₹20,000 and credits ₹5,000 + ₹9,000 = ₹14,000 → write "Balance c/d ₹6,000" on the credit side; next period "Balance b/d ₹6,000" appears on the debit side (debit balance = amount receivable).

    • Key Facts Sheet

  • Cash book = journal + cash (bank) ledger account.
  • Contra entries → "C" in L.F., not posted.
  • Credit balance in bank column = overdraft.
  • Purchases/sales books record credit goods transactions only, at net amount.
  • Debit note → purchases return book; credit note → sales return book.

    • Exam Focus

  • Prepare a double column cash book and balance it – mark contra entries; handle cheques deposited later and dishonoured cheques.
  • Prepare a petty cash book on the imprest system – analytical columns, totals, reimbursement.
  • In which book will each transaction be recorded? – credit purchase of furniture → journal proper; cash sales → cash book; credit sale of goods → sales book.

    • Key Terms

    Cash book (रोकड़ बही), Contra entry (विपरीत प्रविष्टि), Bank overdraft (बैंक अधिविकर्ष), Petty cash book (लघु रोकड़ बही), Imprest system (अग्रदाय प्रणाली), Purchases book (क्रय बही), Sales book (विक्रय बही), Debit note (नाम पत्र), Credit note (जमा पत्र), Journal proper (मुख्य जर्नल), Opening entry (प्रारम्भिक प्रविष्टि), Balancing (शेष निकालना), Balance c/d (शेष आगे ले जाया गया).

    Common Mistakes

  • Entering cash purchases or credit purchase of furniture in the purchases book.
  • Posting contra entries to the ledger.
  • Recording invoices at gross value instead of the net amount after trade discount.
  • Balancing expense and revenue accounts instead of closing them to the P&L account.
  • Showing a credit balance in the cash column (only the bank column can have one).

    • 💡 Key Learning Points

    • ✓Special journals (cash book, purchases, sales and return books) save time and allow division of labour.
    • ✓The cash book is both a book of original entry and a ledger account; contra entries are marked C and not posted.
    • ✓The petty cash book works on the imprest system: the amount spent is reimbursed to restore the imprest.
    • ✓Purchases and sales books record only credit transactions in goods, at net invoice value; returns use debit and credit notes.
    • ✓The journal proper records opening, adjustment, rectification and transfer entries; ledger accounts are balanced with c/d and b/d.

    👨‍🏫 Teaching Tips

    • →Show a real bank passbook and cash memo to link the double column cash book to daily life.
    • →Sort a mixed list of transactions into the correct special book as a team race.
    • →Run a class 'petty cashier' simulation with an imprest of ₹2,000 and small expense slips.
    • →Draw debit note and credit note specimens side by side and ask who prepares each.
    • →Practise balancing with three short ledger accounts and highlight the shorter-side rule.
    • →Stress with examples why credit purchase of furniture is not entered in the purchases book.

    📋 Assessment Questions

    1. Can the student prepare and balance a single and double column cash book?
    2. Can the student identify and record contra entries and dishonoured cheques?
    3. Can the student prepare a petty cash book under the imprest system?
    4. Can the student record transactions in purchases, sales and return books and post them?
    5. Can the student balance a ledger account and explain debit and credit balances?

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    All chapters in Financial Accounting Part I - Accountancy Class 11

    1. 1. Introduction to Accounting
    2. 2. Theory Base of Accounting
    3. 3. Recording of Transactions – I
    4. 4. Recording of Transactions – II
    5. 5. Bank Reconciliation Statement
    6. 6. Trial Balance and Rectification of Errors
    7. 7. Depreciation, Provisions and Reserves