It is well known that business transactions are first recorded in a journal before being posted in the ledger account. But it holds true for a small business where the number of transactions is less. As the business expands, the number of transactions increase significantly.
The business witnesses a high transaction record and therefore it is not possible to journalise each of the transactions. For this purpose the main journal is divided into some special journals that records the repetitive transactions taking place in the business. Recording of transactions- II deals with the recording of transactions in special books or journals. These special journals are also known as subsidiary books or daybooks.
It may sometimes be seen that some transactions cannot be recorded in any of the special purpose books, such transactions are recorded in the journal proper.
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Importance of Special Journal
- Prompt and Effective Recording – For a small business, the transactions are initially recorded in the journal and then entered in the ledger account. However, for large companies, the number of transactions are more and becomes unmanageable to report each transaction. Therefore, for prompt, effective, and precise recording of a transaction, the journal is divided into special journals.
- Comparable Nature- In an organisation, there are many similar and repeated transactions. It is easier and more helpful to record an identical transaction in one record book and helps in segregating employees work. This can be done with the help of a special journal.
- Economical- The subsidiary book is cost-effective as it saves time and enhances the effectiveness of the workers.
- Easy Posting- All the related transactions are entered in one book so, it makes it easy to repost it in a ledger as it has already been segregated. Such as all sales made on credit are recorded in the credit sales book.
- Comprehensive data in one book- All the similar data, such as a purchase made on a credit sale, cash payment, cash receipts are clearly and promptly available in one book.
Special Journal for Businesses
- Cash Book– The book is managed to register the cash payment and cash receipt. The entire transactions made to the bank and withdrawal from the bank is recorded in the book.
- Sales Book- All the sale of services and goods made on credit by the company is recorded in the book.
- Purchased Book- All the credit purchase of services and goods made by the company is recorded in the book.
- Sales Return Book or Return Inward Book- All goods returned by the customers which have sold to them previously on credit are recorded in the book.
- Purchase Return Book or Return Outward Book- All the goods returned to the vendors which were earlier purchased on credit from them are recorded in the book.
- Journal Proper- In this book, all the transaction which cannot be recorded in any books are filed in this book.
This concludes the article on the topic of Recording of transactions- II, which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.