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Key Terms and Chapter Summary-11

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Key Terms and Chapter Summary-11

Uploaded by

om patel
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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MEANING OF KEY TERMS USED IN THE CHAPTER

1. Purchases Book It is a subsidiary book in which goods purchased on credit are recorded.
2. Purchases Return It is a subsidiary book in which returns outward, i.e., returns of goods
Book purchased on credit is recorded.
3. Sales Book It is a subsidiary book in which goods sold on credit are recorded.
4. Sales Return Book It is a subsidiary book in which returns inward, i.e., returns of goods sold on
credit are recorded.
5. Journal Proper It is a book in which transactions that are not recorded in any of the other
Subsidiary Books, are recorded.
6. Debit Note It is the document prepared to debit the account of the person.
For example, purchaser of goods prepares a Debit Note when goods are
returned to the seller.
7. Credit Note It is the document prepared to credit the account of the person.
For example, seller of goods prepares a Credit Note when goods are returned
by the purchaser.
8. Trade Discount Trade discount is the discount allowed by the seller to the buyer on
purchase of goods in large quantity. It is recorded in the Purchases Book
and Sales Book. But, in the ledger, purchases and sales are accounted at
net amount.

CHAPTER SUMMARY

Table showing the Nature of Transactions Recorded in Subsidiary Books and their
Effect on Ledger Accounts
Name of the Book Nature of Transaction Entered Effect on Ledger Accounts
Debit (Dr.) Credit (Cr.)

1. Cash Book All cash and bank transactions. Cash and Bank A/c for receipts of Cash and Bank A/c for Payments
Cash and Cheques. of Cash and Cheque.
2. Purchases All credit purchases of goods. Purchases A/c Suppliers’ A/cs
Book
3. Sales Book All credit sale of goods. Customers’ A/cs Sales A/c
4. Purchases All returns of goods purchased Suppliers’ A/cs Purchases Return/Returns
Return Book by us from suppliers. Outward A/c
5. Sales Return All returns of goods sold by us Sales Return/Returns Inward A/c Customers’ A/cs
Book to customers.
6. Journal Proper All such transactions that can not Account affected by transactions. Account affected by transactions.
be entered in the above five
books.

1
• Purchases Book is a book of primary entry, used for recording credit purchases of goods,
i.e., goods in which the firm deals or uses for manufacturing goods. Cash purchases are not
recorded in the Purchases Book. They are recorded in the Cash Book.
• Sales Book is used for the purposes of recording the sale of merchandise on credit.
• Purchases Return Book (also known as Returns Outward Book) is used for recording
all return of goods purchased.
• Sales Return Book (also known as Returns Inward Book) is used for the purposes of
recording the return of goods sold.
• Journal Proper is used for making the original record of those transactions which do not
find a place in any other subsidiary book. Entries recorded in the Journal Proper are:
(i) Opening Entry; (ii) Closing Entry; (iii) Transfer Entries; (vi) Credit Purchase of Assets;
(v) Rectifying Entries; (iv) Adjustment Entries; (vii) Credit Sale of Worn-out or Obsolete Assets.

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