📘 Introduction: The Foundation of Accounting
Recording business transactions is the backbone of any accounting system. Every organization — from small startups to large corporations — deals with daily financial activities like cash receipts, payments, credit purchases, sales, and returns. For accounting professionals and aspirants preparing for competitive exams like EPFO/APFC, mastering how these transactions are recorded is crucial.
Accurate recording not only helps businesses track their financial performance but also ensures compliance, supports decision-making, and provides transparency. This guide covers all the essential books of the original entry — including the cash book, purchases book, sales book, journal proper, and more — in a practical, exam-oriented way.
💰 Cash Book: Recording All Cash and Bank Transactions
One of the most fundamental books in accounting is the cash book, which records all cash and bank transactions. Instead of recording cash receipts and payments in a journal and then posting them to the ledger, businesses directly record them in the cash book. This saves time and ensures accuracy.
Types of Cash Book
There are two main types:
1. Single Column Cash Book
This is the simplest form and records only cash transactions.
Left side (Debit): Cash received
Right side (Credit): Cash paid
Since cash payments cannot exceed cash receipts, the cash book typically shows a debit balance.
Example:
Cash received from a customer → Debit
Cash paid for rent → Credit
2. Double Column Cash Book
This includes cash and bank columns on both sides. It records both cash and bank transactions in one place.
Contra Entries: When money is transferred between cash and bank (e.g., depositing cash into a bank), it affects both columns. These are marked with a ‘C’ and are not posted to the ledger.
Key Points for EPFO Exams:
No separate cash or bank accounts are prepared in the ledger when a cash book is maintained.
Contra entries are not posted to the ledger.
Balancing the cash book is essential to know available cash and bank balances.
🛒 Purchases Book: Recording Credit Purchases
The purchases book (also known as the purchases journal) records all credit purchases of goods. Cash purchases are entered in the cash book, while purchases of non-trading items like machinery or furniture on credit are recorded in the journal proper.
Key features:
Records only credit purchases of goods.
The supplier’s name is recorded in the “Name of Supplier” column.
At the end of the month, the total is posted to the Purchases Account (debit side), and individual suppliers are credited.
Example:
Purchase goods worth ₹12,000 on credit from Raman Traders:
Purchase A/c Dr. ₹12,000
To Raman Traders A/c ₹12,000
Exam Tip: Remember that the purchases book is not the same as the purchases account. The purchases account includes both cash and credit purchases, while the purchases book records only credit purchases of goods.
🔄 Purchases Return Book: Handling Returned Goods
Sometimes, goods purchased on credit are returned due to defects or not meeting quality standards. These are recorded in the purchases return book (also known as the return outwards book).
Debit Note:
When goods are returned, a debit note is sent to the supplier, informing them that their account is being debited.
Example:
Returned goods worth ₹2,000 to Raman Traders:
Raman Traders A/c Dr. ₹2,000
To Purchases Return A/c ₹2,000
Important Points:
Records only returns of goods purchased on credit.
Total is credited to the Purchases Return Account, and individual supplier accounts are debited.
🧾 Sales Book: Recording Credit Sales
The sales book (or sales journal) records all credit sales of goods. Cash sales are recorded in the cash book, while credit sales of non-trading assets (like furniture) are recorded in the journal proper.
Key features:
Customer names are entered in the customer column.
The total is credited to the Sales Account, and individual customer accounts are debited.
Example:
Sold goods worth ₹12,000 on credit to Laxmi Traders:
Laxmi Traders A/c Dr. ₹12,000
To Sales A/c ₹12,000
Tip for EPFO Exam: Sales Book records only credit sales of goods. Cash and asset sales are handled separately.
📉 Sales Return Book: Managing Returns and Credit Notes
When customers return goods sold on credit, the transaction is recorded in the sales return book (or return inwards book).
Credit Note:
The seller issues a credit note to the customer to adjust the amount in their account.
Example:
Customer returns goods worth ₹2,000:
Sales Return A/c Dr. ₹2,000
To Customer A/c ₹2,000
Remember:
Only credit sales returns are recorded here.
The total is debited to the Sales Return Account, and individual customer accounts are credited.
📚 Journal Proper: The Residual Journal
The journal properly records transactions that do not belong to any special journal. It’s often called the residual book.
Common transactions recorded in the journal proper:
1. Purchase or sale of non-trading items on credit
2. Goods withdrawn by the owner for personal use
3. Goods distributed as free samples
4. Loss of goods by fire, theft, or spoilage
5. Discounts given or received during final settlements
Example:
Purchased furniture on credit for ₹8,000:
Furniture A/c Dr. ₹8,000
To Supplier A/c ₹8,000
Pro Tip: Always analyze the nature of the transaction. If it doesn’t fit into cash, sales, or purchase books, it usually goes into the journal proper.
⚖️ Balancing Accounts: Why It Matters
Balancing accounts involves totaling both the debit and credit sides and showing the difference on the shorter side to make them equal. This difference is known as the balance c/d (carried down) and becomes the balance b/d (brought down) in the next period.
If the debit side > credit side, it’s a debit balance (common for assets and expenses).
If the credit side > debit side, it’s a credit balance (common for liabilities and income).
Important Notes:
Real accounts (like assets and liabilities) are balanced.
Nominal accounts (like expenses and income) are closed and transferred to the Profit & Loss account.
🧠 Quick Tips & Common Mistakes for EPFO/APFC Exam
✅ Cash Book: Always remember that cash and bank accounts are not separately maintained if a cash book is used.
✅ Purchases Book: Records only credit purchases of goods, not machinery or furniture.
✅ Sales Book: Records only credit sales of goods.
✅ Return Books: Purchase return → supplier account debited; Sales return → customer account credited.
✅ Journal Proper: Used for exceptional or residual transactions.
❌ Common Mistake: Including cash transactions in purchases or sales books. These always go in the cash book.
🏁 Conclusion: Mastering Transaction Recording for Accounting Success
Recording transactions accurately is one of the most critical skills in accounting. It lays the foundation for preparing financial statements, ensures regulatory compliance, and supports business decision-making. For EPFO/APFC aspirants, mastering the flow — from cash book to journal proper — is vital for both conceptual understanding and scoring high in the accounting section of the exam.
By understanding how and where different transactions are recorded, you can approach accounting questions with confidence and accuracy. Whether it’s handling a debit note, balancing accounts, or distinguishing between purchase and sales books — clarity on these basics will give you a competitive edge.
How to record business transactions
Accounting books explained
Cash book and journal examples
Purchases book vs sales book
Journal proper in accounting
Debit and credit notes explained
Accounting basics for EPFO exam
Special journals in accounting
