Bills Payable Book

Bills payable book is used to record bill accepted by us. When a bill drawn by our creditor is accepted particulars of the same are recorded in this book.

Posting:

In the ledger, the account of each person whose bill has been accepted is debited with the amount of the bill. The monthly total of the bills accepted is credited to the bills payable account ledger.

Format of Bills Receivable Book:

The following is the ruling and format of bills payable book:

Dr			Bills Payable Book							Cr
No. of Bills	Date	To whom Given	Drawer	Payee	P/ble At	Term	Due Date	L.F.	Amt	Remarks

2)

Dr	Bills Payable Book				Cr
Date	To whom given	Term	Due Date	L.F.	Amount

From the following transactions of a trader let us prepare the bills receivable book and post it into ledger

Date
January 5,2009	Accepted a bill at 3 m/d for $200 drawn by Rahmat & Co
" 20	gave acceptance at 2 m/d for $500 to Kamal.
" 30	Acceptance at 1 m/d for $ 500 given to Feroz & Co.

Solution

Date	From whom received	Term	Due Date	L.F.	Amount
Jan 5,2009	Rahmat & Co.	3 m/d	April 8		200
Jan 20	Kamal	3 m/d	March 23		500
Jan 30	Feroz & Co.	1 m/d	March 30		500
					Total : 1200

Now the individual entries are posted in their respective Ledgers as shown below:

Dr		Purchases Return Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				January 31,2005	By Sundry as per Bills Payable Book		1200

Dr		Rahmat & Co. Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January 8,2005	By Bills Payables		200

Dr		Kamal Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January 20,2005	By Bills Payables		500

Dr		Feroz and Co. Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January31,2005	By Bills Payables		500

Click here to go back to Subsidiary Books

Read More

Bills Receivable book

This book is used to record the bills received from debtors. When a bill is received, details of it are recorded in the bills receivable book.

Posting:

In the ledger the account of the person from whom each bill is received is credited with the amount of that bill and the periodical total of the book is posted to the debit of bills receivable account.
The bills receivable book is ruled according to the requirements of a particular account. The following is the format of bills receivable book:

1)

Dr			Bills Receivable Book							Cr
No. of Bills	Date	R/ved From	Drawer	Aceptor	P/ble At	Term	Due Date	L.F.	Amt	Remarks

2)

Dr	Bills Receivable Book				Cr
Date	From whom received	Term	Due Date	L.F.	Amount

From the following transactions of a trader let us prepare the bills receivable book and post it into ledger

Date
January 5,2009	Drew a bill on Abishek & Co. at 2 m/d for $600
" 10	Acceptance received from Ravi at 3 m/d for $ 900.
" 20	A. Riaz gives his acceptance at 3 m/d for $700.
" 30	Bill at 2 m/d for $100 is drawn on Basker

Solution

Date	From whom received	Term	Due Date	L.F.	Amount
Jan 5,2009	Abishek & Co	2 m/d	March 8		600
Jan 10	Ravi	3 m/d	April 13		900
Jan 20	A. Riaz	3 m/d	April 21		700
Jan 30	Basker	2 m/d	March 30		100
/td>					Total : 2300

Dr		Bills Receivables Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 30,2009	By Sundry as per B/R Book		2300

Dr		Abishek & Co. Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 5,2014	By Bills Receivables		600

Dr		Ravi Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 10,2014	By Bills Receivables		900

Dr		A. Riaz Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 20,2014	By Bills Receivables		700

Dr		Abishek & Co. Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 30,2014	By Bills Receivables		100

Click here to go back to Subsidiary Books

Read More

Cash Book

Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis. This is a very popular book and is maintained by all organizations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. When a cashbook is maintained, transactions of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger.

Single Column Cash Book 

It records all cash transactions of the business in a chronological order, i.e., it is a complete record of cash receipts and cash payments. When all receipts and payments are made in cash by a business organization only, the cash book contains only one amount column on each (debit and credit) side. The format of single column cash book

Double Column Cash Book

In this type of cash book, there are two columns of amount on each side of the cash book. In fact, now-a-days bank transactions are very large in number. In many organizations, as far as possible, all receipts and payments are affected through bank. A businessman generally opens a current account with a bank. Bank, do not allow any interest on the balance in current account but charge a small amount, called incidental charges, for the services rendered.
When the number of bank transactions is large; it is convenient to have a separate amount column for bank transactions in the cash book itself instead of recording them in the journal. This helps in getting information about the position of the bank account from time to time. Just like cash transactions, all payments into the bank are recorded on the left side and all withdrawals/ payments through the bank are recorded on the right side. When cash is deposited in the bank or cash is withdrawn from the bank, both the entries are recorded in the cash book. This is so because both aspects of the transaction appear in the cash book itself. When cash is paid into the bank, the amount deposited is written on the left side in the bank column and at the same time the same amount is entered on the right side in the cash column. The reverse entries are recorded when cash is withdrawn from the bank for use in the office. Against such entries the word C, which stands for contra is written in the L.F. column indicating that these entries are not to be posted to the ledger




Click here to go back to Subsidiary Books

Read More

Journal Proper

A book maintained to record transactions, which do not find place in special journals, is known as Journal Proper or Journal Residual. Following transactions are recorded in this journal:

1. Opening Entry: In order to open new set of books in the beginning of new accounting year and record therein opening balances of assets, liabilities and capital, the opening entry is made in the journal.
2. Adjustment Entries: In order to update ledger account on accrual basis, such entries are made at the end of the accounting period. Such as Rent outstanding, Prepaid insurance, Depreciation and Commission received in advance
3. Rectification entries: To rectify errors in recording transactions in the books of original entry and their posting to ledger accounts this journal is used.
4. Transfer entries: Drawing account is transferred to capital account at the end of the accounting year. Expenses accounts and revenue accounts which are not balanced at the time of balancing are opened to record specific transactions. Accounts relating to operation of business such as Sales, Purchases, Opening Stock, Income, Gains and Expenses etc and drawing are closed at the end of the year and their Total/balances are transferred to Trading and Profit and Loss account by recording the journal entries. These are also called closing entries.
5. Other entries: In addition to the above mentioned entries in the points number 1 to 4, recording of the following transaction is done in the journal proper:

At the time of a dishonour of a cheque the entry for cancellation for discount received or discount allowed earlier.

• Purchase/sale of items on credit other than goods.
• Goods withdrawn by the owner for personal use.
• Goods distributed as samples for sales promotion.
• Endorsement and dishonor of bills of exchange.
• Transaction in respect of consignment and joint venture, etc.
• Loss of goods by fire/theft/spoilage.

Click here to go back to Subsidiary Books

Read More

Sales Return Book

Sales return book is used to record all returns of goods by the customers to the business. The entries in the sales return book are usually on the basis of debit notes issued by the customers or credit notes issued to the customers.

From the following transactions of a trader Let us prepare the sales returns book and post it into ledger

Date		Amount
January 8,2005	Goods returned by Parker & Co.	60
" 20	Goods returned by Ideal Traders	72
" 31	Allowance granted to Ramesh & Co., for short delivery	110

Sales Return Book
Date	Particulars	D/N	L.F.	Amount $
January 8,2005	Parker & Co.			60
January 20	Ideal Traders.			72
January 31	Allowance granted to Ramesh & Co., for short delivery			110
				Total : 242

Now the individual entries are posted in their respective Ledgers as shown below:

Dr		Sales Return Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January 31,2005	By Sundries as per S.R.B		242

Dr		Parker & Co's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				January 8,2005	By Sales returns		60

Dr		Ideal Traders's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				January 20,2005	By Sales returns		72

Dr		Ramesh & Co's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				January 31,2005	By Sales returns		110

Click here to go back to Subsidiary Books

Read More

Purchases Return Book

This book is used to record all returns of goods by the business to the suppliers. The entries in the Purchases Returns Book are usually made on the basis of debit note issued to the suppliers or credit note received from the suppliers. We call it a debit note because the party’s (supplier) account is debited with the amount written in this note. The same note is termed as credit note from the receiving party’s point of view because he will credit the account of the party from whom he has received the note together with goods. The flow of notes is as follows.

From the following transactions of a trader let us now prepare the purchases returns day book and post it into ledger

Date		Amount
January 8,2005	Karim & Sons.	135
" 20	varun & Co.	150
" 31	patil Bros.	250

Purchases Return Book
Date	Particulars	D/N	L.F.	Amount $
January 8,2005	Karim & Sons.			135
January 20	varun & Co.			150
January 31	patil  Bros			250
				Total : 535

Now the individual entries are posted in their respective Ledgers as shown below:

Dr		Purchases Return Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				January 31,2005	By Purchases as per P.R.B		535

Dr		Karim & Sons Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January 8,2005	To Purchases returns		135

Dr		Varun & Co's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January 20,2005	To Purchases returns		150

Dr		Patil Bros Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
January31,2005	To Purchases returns		250

Click here to go back to Subsidiary Books

Read More

Sales Book

The sales book is used to record all credit sales of goods dealt in business. Cash sales, cash and credit sales of assets are not entered in this book. The entries in the sales book are on the basis of the invoices issued to the customers with the net amount of sale. The format of sales book is shown below

• Date Column – shows the date on which the transaction took place.
• Particulars Column – This column includes the name of purchasers and the particulars of goods sold.
• Outward Invoice No. Column – Reveals the serial number of the outward invoice.
• L.F. Column – The page number of the customer’s accounts in the Ledger is recorded.
• Details Column – Contains the amount of goods sold and the amount of trade discount if any
• Total Column – This column shows the net amount which is receivable from the customers.
• Remarks Column – Any other extra information will be recorded

Now Let us understand the Sales Book and post it in ledger with the help of the following illustration
Given the following are the transactions, let us prepare the sales day book of M. Amin and post it into ledger

Date		Amount
January 5,2014	Sold goods to Idea college	200
" 10	Sold goods to Ankith & Co.	100
" 20	Credit sales to Karthik	400
" 31	Sold goods to cheap stores	100

Sales Day Book
Date	Particulars	Inv.No.	L.F.	Amount $
January 5,2014	Sold goods to Idea college			200
January 10,2014	Sold goods to Ankith & Co.			100
January 20,2014	Credit sales to Karthik			400
January 30,2014	Sold goods to cheap stores			100
				Total : 800

Now the individual entries are posted in their respective Ledgers as shown below:

Dr		Sales Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 5,2014	By Sundry as per Sales Book		800

Dr		Idea College Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 5,2014	To Sales		200

Dr		Ankith & Co Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 102014	To Sales		100

Dr		Idea College Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 20,2014	To Sales		400

Dr		Idea College Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 30,2014	To Sales		100

Click here to go back to Subsidiary Books

Read More

Purchase Books

Purchases book also known as Bought Day Book is used to record all credit purchases of goods which are meant for resale in the business. Cash purchases of goods, cash and credit purchases of assets are not entered in this book.

Date Column – shows the date on which the transaction took place.
Particulars Column – This column includes the name of the seller and the particulars of goods purchased.
Inward Invoice No. Column – Reveals the serial number of the inward invoice.
LF. Column – This column shows the page number of the suppliers account in the ledger accounts.
Details Column – Reveals the amount of goods purchased and the amount of trade discount.
Total Column – This column represents the net price of the goods, i.e., the amount which is payable to the creditors after adjusting discount and expenses if any.
Remarks Column – Contains any extra information.
At the end of each month, the purchase book is totaled. The total shows the total amount of goods or materials purchased on credit.

Now Let us understand the Purchases Day book and post it in ledger with the help of the following illustration
Given below are the transactions of a firm

Date		Amount
January 5,2014	Purchased goods from Ravi & Co.	3400
" 15	Purchased goods from Ishan Bros.	7000
" 25	Purchased goods from More & Co.	2500
" 30	Purchased goods from Madhu & Co.	4000

Purchase Day Book
Date	Particulars	Inv.No.	L.F.	Amount $
January 5,2014	Ravi & Co.			3400
January 15,2014	Ishan Bros			7000
January 25,2014	More & Co.			2500
January 30,2014	Madhu & Co.			4000
				Total : 16900

Now the individual entries are posted in their respective Ledgers as shown below:

Dr		Purchases Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Jan 5,2014	To Sundry as per Purchase Book		16900

Dr		Ravi &Co. Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 5,2014	By Purchases		3400

Dr		Ishan Bros Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 15,2014	By Purchases		7000

Dr		More & Co's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 25,2014	By Purchases		2500

Dr		Madhu & Co's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
				Jan 5,2014	By Purchases		4000

Click here to go back to Subsidiary Books

Read More

Subsidiary Books : Accounting Basics Day 4

Businesses do not record a their transactions in one journal. The reason is that, journal can not give periodical data about some important business transactions viz. monthly sales, or purchases. Moreover having only one journal does not facilitate internal check system, since only one person handles journal.
Transactions can be classified and grouped according to their nature when they are repetitive in nature. Transactions are of two types: Cash and Credit. These can be grouped in two different categories viz. cash and credit. Thus journal is divided into separate sub-books for each category of transaction, which are repetitive and sufficiently large in number. Following are the subsidiary books which are special journals.

• Day Books- Purchase book, sales book, purchase return book, sales return book
• Bill books- Bills receivable and bills payable book
• Cash book
• Journal paper

Purpose

1. Purchases Book records only credit purchases of goods by the trader.
2. Sales Book is meant for entering only credit sales of goods by the trader.
3. Purchases Return Book records the goods returned by the trader to suppliers.
4. Sales Return Book deals with goods returned (out of previous sales) by the customers.
5. Bills Receivable Book records the receipts of bills (Bills Receivable).
6. Bills Payable Book records the issue of bills (Bills Payable).
7. Cash Book is used for recording only cash transactions i.e., receipts and payments of cash.
8. Journal Proper is the journal which records the entries which cannot be entered in any of the above listed subsidiary books.

Kinds of Subsidiary Books
The number of subsidiary books may vary according to the requirements of each business. The following are the special purpose subsidiary books.

• Purchases Book records only credit purchases of goods by the trader.
• Sales Book is meant for entering only credit sales of goods by the trader.
• Purchases Return Book records the goods returned by the trader to suppliers.
• Sales Return Book deals with goods returned (out of previous sales) by the Customers.
• Bills Receivable Book records the receipts of bills (Bills Receivable).
• Bills Payable Book records the issue of bills (Bills Payable).
• Cash Book is used for recording only cash transactions i.e., receipts and payments of cash.
• Journal Proper is the journal which records the entries which cannot be entered in any of the above listed subsidiary books

Go Back to Accounting Basics Day 3
Go To Accounting Basics Day 5

Read More

Balancing General Ledger Accounts

Balancing an Account

The difference between total debits and the total credits of an account is balance. As shown above many accounts have entries on their debit as well as credit side. The net result of such debits and credits in an account is the balance.
The writing of the difference between the amount columns of the two sides in the lighter (smaller total) side, so that the grand totals of the two sides become equal is called balancing.
While balancing an account three things may happen depending upon the debit total and the credit total.

• It may be a debit balance or
• A credit balance or
• A nil balance

Debit balance results, when debit total is in excess of credit total. It is first recorded on credit side above the total and then entered on the debit side below the total as first item for next period. It is first recorded on the credit side, above the total. Then it is entered on the debit side, below the total, as the first item for the next period.

Dr		Cash Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 1,2009	To Sales A/c		10000	Mar 5, 2009	By Purchase A/c		5000
Mar 10,2009	To Kumar's A/c		4000	Mar 19, 2009	By Salary A/c		4000
			Total : 14000	April 1, 2010	By Balance c/d		5000
	To Balance b/d		5000				Total : 14000

Conversely excess of credit total over the debit total is called the credit balance. It is first written in the debit side, as the last item, above the total. Then it is recorded on the credit side, below the total, as the first item for the next period.

Dr		Capital Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 31,2009	To Balance c/d		100000	Apr 5, 2008	By Cash		100000
			Total : 100000				Total : 100000
				April 1, 2009	By Balance c/d		100000

Balancing is done periodically, i.e., weekly, monthly, quarterly, half-yearly, or yearly. i. Personal accounts are generally balanced regularly to know the amounts due to the persons (creditors) or due from the persons (debtors). Real accounts are balanced at the end of the financial year, when final accounts are being prepared. Cash account however is frequently balanced to know the cash on hand. Assets accounts always show debit balances and it is the value of the asset owned by business.

Nominal Accounts, not to be balanced as they are to be closed by transfer to final accounts. A debit balance in a nominal account indicates that it is an expense or loss. A credit balance in a nominal account indicates that it is an income or gain. Balances in personal and real accounts are shown in the Balance Sheet and the balances in nominal accounts are taken to the Profit and Loss Account.

Lets understand procedure to balance the accounts.

• Find difference between total amount of debit column and credit column.
• If the debit exceeds credit, enter this difference in the amount column of the credit side, alongwith date of balancing and words “By Balance c/d” (c/d means carried down) in the particulars column. If the credit exceeds the debit , enter this difference in the amount column of the debit side, alongwith date of balancing and words “To Balance c/d” in the particulars column.
• Sum up both the amount columns, and put the total on both the sides
• Enter the date of the beginning of the next period and bring down the debit balance on the debit side along with the words “To Balance b/d” (b/d means brought down) in the particulars column and the credit balance on the credit side along with the words “By balance b/d” in the particulars column.

In place of c/d and b/d, the words c/f or c/o (carried forward or carried over) and b/f or b/o (brought forward or brought over) may also be used.

When the balance is carried down in the same page, the words c/d and b/d are used, while balance is carried over to the next page, the term c/o and b/o are used. When balance is carried forward to some other page either in same book or some other book, the abbreviations c/f (carried forward) and b/f (brought forward) are used.

How would you balance following account in the ledger on March 31,2009?

Dr		Shrikant's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 10,2009	To Sales A/c		100000	Mar 5, 2009	By Sales Return A/c		10000
Mar 10,2009	To Sales A/c		50000	Mar 19, 2009	By Cash A/c		25000
			Total : 150000	April 1, 2010	By Bank A/C		50000
	To Balance b/d		65000		By Balance c/d		65000
							Total : 165000

Next Page :  Subsidiary Books
Go Back to : General Ledger Concepts

Read More