Class 11 Accountancy Notes

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Recording of Transactions II Class 11 Notes

Chapter 3 recorded one transaction at a time in the journal. This chapter speeds that up. The cash book, the special purpose books and the journal proper each handle a class of transactions, and every one of them posts straight to the ledger. Learn which book takes which transaction and the whole chapter becomes a routing exercise.

Class:11Subject:AccountancyCovers:CBSE · CUETChapter:4

6 Key Formulas

DWritten byDeep Narayan

UpdatedSeptember 2026

Key Concept Summary

What is the difference between a cash book and a cash account in the ledger?

The cash book is both a book of original entry and a ledger account, because every cash or bank transaction is recorded there once and posted straight to the ledger. The cash account in the ledger is a separate account that normally holds only the cash column of the cash book, with the bank column kept separately. The cash book has folio columns so the page can be traced in either direction, which a normal ledger account does not need.

The Cash Book and Its Four Forms

The cash book is a subsidiary book that records all cash and bank transactions. Its distinguishing feature is that it is at once a book of original entry and a ledger, so an entry is made once in it and the ledger is posted directly from it. Cash and bank are reduced to one unit of account in every column, which is why a cash book is called a combined ledger account.

Single column cash book: records only cash transactions, with one cash column and the ledger folio columns.
Two column cash book: has a cash column and a bank column, for a firm that keeps a bank account.
Three column cash book: adds a bank overdraft column, so the debit and credit totals of the bank column are shown separately.
Petty cash book: maintained on the imprest system, with a fixed float, one column for each petty expense, and a weekly or monthly analysis of expenses posted to the ledger.

How the imprest float is replenished

Petty cash balance carried = imprest - \sum actual expenses paid

Consistency is the whole of balancing

A debit balance carried down is entered as balance b/d on the debit side of the next page, because that is the side on which the balance c/d was written in the previous account. Students frequently write balance b/d on the opposite side, which is arithmetically self-consistent but wrong on the page. Before finishing, check each account against the rule: debit balance for asset, debtor, drawing, expense; credit balance for liability, creditor, capital, income.

Which Book Takes Which Transaction

Almost every mark lost in this chapter goes to routing a transaction into the wrong book. The table below settles the question for the transactions that appear in the examination, and it is worth reproducing from memory before the paper.

Cash purchase of goods: cash book, cash column only.
Bank purchase of goods: cash book, bank column only.
Cheque issued to a supplier for goods: cash book, bank column.
Credit purchase of goods: purchases book.
Credit purchase of an asset, such as machinery: journal proper.
Goods returned to a supplier on credit: purchases return book.
Cash sale of goods: cash book, cash column only.
Credit sale of goods: sales book.
Credit sale of an asset: journal proper.
Goods returned by a customer: sales return book.
Opening balance and all adjustments: journal proper.
Amount withdrawn by the owner: journal proper.

The rule behind the table

A subsidiary book exists to group similar transactions so that a single total can be posted. The cash book groups cash and bank transactions, the purchases book groups credit purchases of goods, the sales book groups credit sales of goods, and the journal proper catches everything that fits none of them. Ask which group the transaction belongs to, and the book follows automatically.

The Two Column Cash Book in Full

The two column cash book is the form examined most often, so learn its anatomy precisely. The particulars column sits at the left, followed by the folio columns, the discount column, then the cash column and the bank column, each divided into debit and amount and credit and amount. The folio for a cash entry carries the word 'C' in the discount column position and the folio for a bank entry carries 'B'.

Receipt column: cash received on the debit side, cash paid on the credit side.
Balance c/d is entered in the cash or bank column on the side opposite to the larger total, and the same figure becomes balance b/d at the top of the following page.
The discount column records a discount allowed or received, and the folio of the other party is written in the discount column when the discount relates to a party account.
The cash balance is never shown as a negative figure; if cash is short, the balance c/d is entered on the debit side and the description reads 'By balance c/d'.

A deposit is one entry, not two

When cash is deposited into the bank, the particulars read 'To Bank', the amount appears in the cash column on the credit side and in the bank column on the debit side, and only the cash column folio is written. Counting it as two separate transactions is the single most common cash book error, and the totals of the two columns will not agree if you do.

Special Purpose Books and Journal Proper

A special purpose book is designed to record only one class of transaction, so that a large volume of similar entries can be posted to the ledger in a single daily total instead of entry by entry. Each book has a memorandum column for invoice or document numbers and a posting reference column.

Purchases book: records goods bought on credit only, and never records cash, cheque or bank purchases, nor purchases of assets.
Sales book: records goods sold on credit only, and never records cash, cheque or bank sales, nor sales of assets.
Purchases return book: records goods returned by the business to its suppliers on credit.
Sales return book: records goods returned by customers to the business.
Journal proper: records every credit transaction not entered in any other subsidiary book, such as credit purchases of assets, credit sales of assets, opening balance, adjustments and drawings.

Which book does each transaction go in?

Cash or bank purchase goes to the cash book. Credit purchase of goods goes to the purchases book. Purchase of an asset on credit goes to the journal proper. Credit purchase of goods returned goes to the purchases return book. Cash or bank sale goes to the cash book, credit sale of goods to the sales book, sale of an asset on credit to the journal proper, and sales return to the sales return book. Every cash, cheque and bank transaction is recorded in only one column of the cash book, never in two.

Ledger Posting and the Format of Subsidiary Books

Each subsidiary book carries two extra columns that the journal does not need. The date column carries the document number rather than the date of posting, so that a missing entry can be traced, and the posting reference column carries the ledger folio. A book that omits the folio column cannot be posted, and a book that omits the document number cannot be checked against the source documents.

Purchases book: Date (invoice number), Particulars, L.F., Amount, and a memorandum column for the purchase invoice number.
Sales book: Date (invoice number), Particulars, Party, L.F., and Amount, with a memorandum column for the sales invoice number.
Journal proper: the same three-part particulars format as the journal, with folio columns for debit and credit.
The petty cash book: a date column, an L.F. column, then one column for each petty expense, and finally a total column, with the payment of expenses and the cash balance struck below.
Cash book: the particulars column, folio columns, and a discount column, followed by the cash, bank and bank overdraft columns.

Trade discount and GST in the subsidiary books

A trade discount is recorded in the memorandum column only, so the amount posted is net of the discount. The calculation note in the syllabus also covers freight and cartage for simple GST, so when a purchase invoice shows goods at Rs. 40,000 with freight of Rs. 1,000, the purchases book takes Rs. 41,000 as the purchase. GST itself is recorded as a separate liability to the government and is not added to the purchase price, whereas input tax credit on purchases is deducted from the output tax payable.

Balancing the Accounts

Balancing an account means bringing the two sides to the same figure by entering the difference on the lighter side as balance c/d, ruling the account off, and carrying that balance to the top of the next page as balance b/d. An account is not complete in the ledger until this is done, and the balance carried down must be a debit balance for assets, debtors, drawings and expenses, and a credit balance for liabilities, creditors, capital and incomes.

Which side the balance goes on

If \sum D > \sum C : balance c/d on the credit side If \sum C > \sum D : balance c/d on the debit side

Rule off the account with a line immediately below the last entry.
Write the balance c/d on the next line on the side opposite to the larger total.
Draw a single line under the balance c/d figure, which is the line the total is struck on.
Write the total of both columns on the next line and underline it twice.
Write the total again at the top of the next page as balance b/d, on the same side as the balance c/d appeared.
Leave no blank space: an account with a gap before the total is marked wrong, and ruled-off lines must be drawn to the full width of the column.

Consistency is the whole of balancing

Quick Revision

Key formulas at a glance

Memorise these equations — direct application numericals and derivations in CBSE & JEE frequently hinge on these.

Imprest replenishment

Replenishment = \sum expenses paid + (imprest - cash in hand)

Purchase recorded net of trade discount

P_{n e t} = P_{l i s t} - (P_{l i s t} \times \frac{d}{100})

Trade discount appears only in the memorandum column.

Purchase with freight

P_{b oo k} = P_{n e t} + freight + cartage

Direct cost of bringing goods to the business.

Net sales

N_{s a l es} = S_{cr e d i t} - sales returns \pm returns inward/outward

Debit balance

B_{d} = \sum D - \sum C

Asset, debtor, drawing, expense.

Credit balance

B_{c} = \sum C - \sum D

Liability, creditor, capital, income.

Exam Strategy

How this chapter is asked

High-yield question patterns observed across CBSE boards, JEE Main & Advanced, and NEET.

The cash book is the only book that is both a book of original entry and a ledger. Say this explicitly when the question asks why a cash book is treated differently from the other subsidiary books.
A cash transaction is recorded in only one cash book column. Cash deposited into the bank credits the cash column and debits the bank column in the same entry, and the two columns must agree on every total.
Never record cash, cheque or bank transactions in the purchases book or the sales book. The CBSE examiner watches for this specific error, and it is the first mark lost in a subsidiary book question.
The purchases book takes only credit purchases of goods. A credit purchase of an asset, an opening balance or an adjustment goes to the journal proper, and getting this right is a full mark on its own.
In the petty cash book, post the total of each expense column to its ledger account once, and post the cash in hand balance to the petty cash account. The imprest is restored by one cheque for the amount spent, never for the actual cash balance.
Draw a memorandum column in the purchases and sales books for the document number. Without it the folio column cannot be justified, and CBSE deducts the mark for an incomplete format.
Freight and cartage on a purchase are added to the purchase in the purchases book because they form part of the cost of bringing the goods in. GST is not added to the purchase; it is a liability to the government, offset by input tax credit.
When balancing, remember that an account is ruled off before the balance c/d is written, and the total is written below the single rule. Reversing the order of these two lines is the most frequent last-mark error in the chapter.

FAQ

Frequently asked questions

Why is the cash book called a ledger and a book of original entry at the same time?

It is a book of original entry because the transaction is first recorded in the cash book and not in the journal. It is a ledger because the entries in the cash and bank columns are the final record of those two accounts, and the balances are drawn from the book itself. This is why the cash book has folio columns, letting you move from a cash book entry to the affected ledger account and back, and why the cash account in the ledger normally carries only the cash column.

Which transactions are recorded in the purchases book and which in the journal proper?

The purchases book records only credit purchases of goods for resale. Everything else credit goes to the journal proper: cash and bank purchases are in the cash book, purchases of assets on credit are in the journal proper, and an opening balance or an adjustment is also entered there. The test is simple: if it is a credit purchase of trading goods, use the purchases book; if it is any other credit transaction, use the journal proper.

How does the imprest system of petty cash work?

A fixed float is given to the petty cashier on a fixed day each month. He pays out against written vouchers, which are entered in the analytical petty cash book, one column for each type of expense. At the period end the actual cash in hand is counted, the total of the expense columns is posted to the relevant ledger accounts, and a single cheque for the amount spent restores the imprest to its original figure. Because the float is always restored to the same amount, the cashier can never be left holding the business's money.

How is a trade discount treated in the purchases book, and what about GST?

A trade discount is recorded only in the memorandum column of the purchases book against the invoice number, and the amount actually posted is the invoice value less the discount, because the ledger records the net purchase. Freight and cartage, in contrast, are added to the purchase, since they form part of the cost of bringing the goods to the business. GST is not added to the purchase value at all: it is a liability owed to the government, and the input tax credit on GST paid is set against the output tax on GST collected.

What is the correct format for balancing an account in the ledger?

Rule off the account with a single line below the last entry, then write the balance c/d on the line below it on the side opposite to the larger total. Draw a line under the balance figure, and on the next line write the total of both columns, underlining it twice. The same figure then appears at the top of the next page as balance b/d, on the same side on which the balance c/d was written. No blank space is left anywhere in the account.

Next Chapters

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Class 11 Accountancy Notes Recording of Transactions I Class 11 Notes Trial Balance and Rectification of Errors Class 11 Notes Theory Base of Accounting Class 11 Notes

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