Unit 2 put every transaction through one journal. That works for a month of a small firm and collapses immediately for a real one: a shop with two hundred credit sales a month would write two hundred nearly identical entries, each debiting a different customer and crediting Sales, and then post two hundred credits to the Sales account one at a time.
The fix is to group transactions of the same kind into their own book. All credit sales go in a sales book; at month end the book is totalled once and that one total is posted to Sales. Two hundred postings become one, and the customers are still posted individually because that is the part you actually need per-customer.
This changes nothing about double entry. The same debits and credits happen; they are merely collected before posting. Anything that does not fit a specialised book still goes through the journal, which is now called the journal proper or general journal.
| Book | Records | Never records |
|---|---|---|
| Purchases book | Credit purchases of goods for resale | Cash purchases; purchase of an asset |
| Sales book | Credit sales of goods | Cash sales; sale of an asset |
| Purchase returns book | Goods returned to suppliers | — |
| Sales returns book | Goods returned by customers | — |
| Cash book | All receipts and payments, cash and bank | Anything not involving money |
| Bills receivable / payable books | Bills of exchange accepted and drawn | — |
| Journal proper | Everything else — opening entries, depreciation, rectification, closing entries | — |
The two restrictions in the third column are where marks are lost. A credit purchase of furniture is not a purchase in this sense — furniture is not goods for resale, so it goes in the journal proper. A cash purchase of goods is not in the purchases book either, because it is already in the cash book and putting it in both would double-count it.
Four credit purchases in a month:
| Date | Supplier | Invoice no. | Amount (₹) |
|---|---|---|---|
| Apr 5 | Mehta & Co. | 412 | 60,000 |
| Apr 11 | Nanda Stores | 087 | 24,500 |
| Apr 19 | Mehta & Co. | 455 | 16,000 |
| Apr 27 | Kiran Agencies | 219 | 31,500 |
| Total posted to Purchases A/c | 1,32,000 |
The posting is two-sided but asymmetric, and that asymmetry is the whole point of the book:
Totals still agree — one debit of 1,32,000 against credits of 60,000 + 24,500 + 16,000 + 31,500 = 1,32,000.
The purchase returns book (also called returns outward) is totalled and the total credited to Purchase Returns, with each supplier debited individually. The sales returns book (returns inward) is totalled and debited to Sales Returns, with each customer credited.
Remember the direction by asking who ends up owing less. Goods going back to a supplier means the firm owes less — so the supplier is debited.
Every other subsidiary book is only a journal: its entries still have to be posted to a ledger account. The cash book is different. It is written up like a journal and it is the cash account — there is no separate Cash A/c in the ledger, because the cash book already is one.
So a receipt written on the debit side of the cash book needs only one further posting, to the credit of whatever account gave the money. Half the double entry is already done by the act of writing it down.
Three columns on each side: discount, cash, bank. The discount columns are memorandum columns — they are totalled and posted, but they are not balanced, because discount is not money the firm holds.
| Dr. (receipts) | Cr. (payments) | ||||||
|---|---|---|---|---|---|---|---|
| Date | Particulars | Disc. | Cash / Bank | Date | Particulars | Disc. | Cash / Bank |
| Apr 2 | To Capital | Cash 50,000 | Apr 14 | By Purchases | Cash 12,000 | ||
| Apr 6 | To Sales | Cash 18,000 | Apr 20 | By Anil | 250 | Bank 14,750 | |
| Apr 9 | To Ravi | 400 | Bank 19,600 | By Balance c/d | Cash 56,000 · Bank 4,850 | ||
| Discount allowed | 400 | Discount received | 250 | ||||
Working the balances. Cash: 50,000 + 18,000 − 12,000 = 56,000. Bank: 19,600 − 14,750 = 4,850.
Working the discounts. Ravi owed 20,000 and settled for 19,600, so ₹400 was allowed to him — an expense, posted as a debit to Discount Allowed. Anil was owed 15,000 and accepted 14,750, so ₹250 was received — an income, posted as a credit to Discount Received.
Note the crossing-over: the discount column on the debit side of the cash book is totalled and posted to the debit of Discount Allowed. The columns are not part of the cash book’s own double entry; they are a list waiting to be posted.
Trade discount is a reduction in the list price, given at the time of sale. It never appears in the books at all — the invoice is simply recorded net of it.
Cash discount is given for paying early. It is recorded, in the discount columns above, because it is a real expense or income arising after the sale was made.
Goods listed at ₹20,000 with 10% trade discount and then settled early with 2% cash discount are recorded as a sale of \( 20000 \times 0.90 = 18{,}000 \), and the early settlement records a discount allowed of \( 18000 \times 0.02 = 360 \). The trade discount of ₹2,000 is never written anywhere.
When cash is paid into the bank, or drawn out of it, both the debit and the credit fall inside the cash book itself — bank up, cash down, or the reverse. Nothing needs posting to the ledger, because the cash book is the ledger for both columns.
Such an entry is marked with C in the L.F. column and is called a contra entry. The letter is an instruction to the person posting: stop, this one is already complete.
The Apr 2 transaction of Unit 2 — ₹1,20,000 of cash paid into a new bank account — is exactly this. In a two-column cash book it is one line with an entry in the bank column on the debit side and the cash column on the credit side, marked C.
Small payments — postage, autos, tea — would swamp the main cash book. A petty cashier is given a fixed float, spends it, and is reimbursed exactly what was spent, so the float returns to its original size at the start of every period. That fixed float is the imprest.
Float of 2,000 at the start of the week, with these payments:
| Head | Amount (₹) |
|---|---|
| Postage | 340 |
| Conveyance | 515 |
| Stationery | 270 |
| Refreshments | 195 |
| Sundries | 160 |
| Total spent | 1,480 |
Cash left with the petty cashier is \( 2,000 - 1,480 = \) 520, and the reimbursement at the end of the week is 1,480 — the amount spent, not a round figure — which restores the float to 2,000 exactly.
Why the system is used: the reimbursement always equals the total vouched-for spending, so the arithmetic itself is the control. If the cashier asks for 1,580 when the vouchers total 1,480, the difference is visible before the money is handed over.