Explain various type of Journals

Types of Journals:

In actual practice, Journalisation does not mean recording of transactions in only one format of journal. The transactions are categorized as per their nature and, for each type of transaction, a separate journal is available where the same has to be recorded. These journals can be of the following:

a.	Purchases Day Book	:	It records credit purchase of merchandise.
b.	Sales Day Book	:	It records credit sale of goods.
c.	Return Outward Book	:	It records goods returned to the supplier(s).
d.	Return Inward Book	:	It records goods returned by the customer
e.	Bills Receivable Book	:	It records bills accepted by customers
f.	Bills payable Book	:	It records bills raised by suppliers.
g.	Cash Book	:	It records cash (and bank) receipts and payments.
h.	Journal Proper	:	It records all residual transactions.

a. Purchase Day Book:

It records credit purchase of raw materials (in case of a manufacturing concern), or of goods traded (in case of trading concern). In the illustration given above, only the transaction of January 3 can be recorded in this book as below.

Sales Day Book:

Date	Particulars	Voucher No.	Ledger Folio	Amount
				Rs.
Jan 3	M/s………. Purchased goods			85,000

From this purchase day book, the amount of Rs. 85,000 will be posted subsequently in the secondary book. i.e. ledger. This will be discussed in the next unit.

b. Return Outward Book:

It is also known as purchases return book. It records goods returned to the suppliers. Goods may be returned to the suppliers either because of excess supplies or because of defective supplies.

Examples: Goods returned to the supplier MN Ltd. Consisting of 10 packets of Vanaspati Oil costing Rs. 43 per packet because of defective container design.

Return Outward Book:

Date	Particulars	Voucher No.	Ledger Folio	Amount
				Rs.
Jan 15	M/s MN Ltd. 10 Packets of Vanaspati Oil @ Rs. 43 per packet			430

d. Return Inward Book:

Also known as the sales return book. It records goods returned by customers. Normally customers are given a time during which they can return the goods for any valid reason.

Example: A customer M/s AB & Co., returned 5 pieces of T.V. sets sent in excess of order. The selling price of each T.V. Set was Rs. 11,000.

Return Outward Book:

Date	Particulars	Voucher No.	Ledger Folio	Amount
				Rs.
Jan 15	M/s AB & Co. Ltd. 5 Pcs. Of TV Sets @ Rs. 11,000 each returned			55,000

The above entry in the return inward book will be posted in the ledger by debiting the return inwards Account and crediting the Customer’s Account.

This will be discussed in the next chapter.

e & f. Bills Receivable and Bills Payable Book:

A bill of exchange is documentary evidence in writing, containing an unconditional order signed by the marker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. A bill of exchange accepted by a customer is called bills Receivable and a bill of exchange drawn by a supplier on the business entity is called Bills payable. These books record bills accepted by customers and drawn by suppliers date-wise. These books help a business unit ti easily find out which bill has become matured on a particular date and, therefore, it becomes easier to keep track of the bills.

The format of these books are as below:

Bill Receivable Book:

Date of receipt	V. No.	Party from whom received	Date of Bill	Due Date	Place of payment	Amount Rs.	L.F.

Bill Payable Book:

Date of acceptance	Drawn	Date of Bill	Due Date	Place of Payment	Amount Rs.	L.F.

g . Cash Book:

It records daily cash (including bank) receipts and payments. Its unique feature is that it serves the purpose of both a book of prime entry and a book of secondary entry. In other words, the cash book is a journal as well as ledger. The simplest form of the cash book is a single column cash book which records only cash (no bank) receipts and payments. The double column cash book has two amount columns on either side – one for cash and the other for bank account (which is quite common) , a separate column should be devoted to each bank account. The highest form of cash book is a triple column cash book – one column for cash, the second column for bank and the third column for discount. A typical triple column cash looks like below:

Dr. Cr.

Date

Particulars

V. No.

L.F.

Cash

Bank

Discount

Date

Particulars

V. No.

L. F.

Cash

Bank

Discounts

The cash book is divided vertically into two equal sides – the left hand side (called the debit side) shows cash and bank receipts and discounts allowed, and the right hand side (called the credit side) shows cash and bank disbursements and discounts received. The ledger folio Indicates the folio number of the secondary book where a particular item is subsequently posted to complete the dual effect.

The importance of cash book is paramount. The final balance at the end of an accounting period in the cash column indicates the cash balance in hand and the same should actually tally with the physical cash balance. If physical cash balance does not tally exactly with the balance of the cash book, an inquiry must be made into the discrepancy. There may be a possibility of defalcation of cash. In case of a statutory audit of banks, the first step of audit is cash verification. The auditors are supposed to visit the branch on the first day of the accounting year, before the bank opens its operations for the day. Cash is physically counted – either fully or through test checks – and the auditors should satisfy themselves about the authenticity of the cash balance shown in the cash book.