How to Use This Page
Solve each Samacheer Kalvi exercise question on your own first, then compare your method and answer. Books of Prime Entry is all about classifying transactions into the correct book and recording them in the proper format. Practise the formats until they become automatic.
Key Concepts (Quick Recap)
What are Books of Prime Entry?
Books of prime entry (subsidiary books) are books where transactions are first recorded before posting to the ledger. They divide the journal into specialised books for efficiency.
Types of Subsidiary Books
| Book | Records | Ruled Like |
|---|
| Cash Book (Single/Double/Three-column) | All cash and bank transactions | Journal (with columns for discount, cash, bank) |
| Purchases Day Book | Credit purchases of goods | Journal (with date, supplier, invoice, amount columns) |
| Sales Day Book | Credit sales of goods | Journal (with date, customer, invoice, amount columns) |
| Purchases Returns Book | Returns of goods purchased on credit | Journal |
| Sales Returns Book | Returns of goods sold on credit | Journal |
| Bills Receivable Book | Bills of exchange received | Journal |
| Bills Payable Book | Bills of exchange issued | Journal |
| Journal Proper | Transactions not fitting any other book | Journal |
Journal Proper Records
1. Opening entries (to open ledger accounts at the beginning of the year) 2. Closing entries (to close revenue accounts at the end of the year) 3. Adjustment entries (outstanding, prepaid, depreciation, etc.) 4. Transfer entries (transferring between accounts) 5. Rectification entries (correcting errors) 6. Credit purchase/sale of assets (not goods) 7. Dishonour of bills of exchange
Cash Book Types
- Single-column cash book: Records only cash transactions (Dr: receipts, Cr: payments)
- Double-column cash book: Records cash + discount columns (Dr: Discount Allowed + Cash Receipts, Cr: Discount Received + Cash Payments)
- Three-column cash book: Records cash + bank + discount columns
- Petty cash book: Records small cash payments (maintained by petty cashier)
Important Rules
- Cash book is both a journal and a ledger — it is a book of original entry AND a ledger account of cash
- Trade discount is NOT recorded in the books; only the net amount after trade discount is recorded
- Cash discount IS recorded in the discount columns of the cash book
- Contra entry: An entry that appears on both the debit and credit side of the three-column cash book (e.g., cash deposited into bank, cash withdrawn from bank) — marked with 'C' in the folio column
I. Choose the Best Answer (MCQs)
Q1. Which of the following is a book of prime entry? (a) Ledger (b) Trial balance (c) Cash book (d) Balance sheet
Answer(c) Cash book — The cash book is both a book of prime entry (journal) and a ledger account for cash. Ledger, trial balance, and balance sheet are not books of prime entry.
Q2. Credit purchases of goods are recorded in (a) Cash book (b) Purchases day book (c) Journal proper (d) Sales day book
Answer(b) Purchases day book — Credit purchases of goods (trading items) are recorded in the purchases day book. Cash purchases go in the cash book. Credit purchase of assets goes in the journal proper.
Q3. Cash discount is recorded in (a) Purchases day book (b) Sales day book (c) Cash book (d) Journal proper
Answer(c) Cash book — Cash discount is recorded in the discount columns of the cash book. Discount allowed is recorded on the debit side and discount received on the credit side.
Q4. An entry that appears on both sides of the three-column cash book is called (a) Compound entry (b) Contra entry (c) Closing entry (d) Transfer entry
Answer(b) Contra entry — A contra entry appears on both the debit and credit sides of the cash book. Examples: cash deposited into bank, cash withdrawn from bank for office use.
Q5. Which of the following is recorded in the journal proper? (a) Cash purchases (b) Credit sales of goods (c) Purchase of machinery on credit (d) Cash received from debtors
Answer(c) Purchase of machinery on credit — Credit purchase of an asset (not goods) is recorded in the journal proper. Cash purchases and cash received go in the cash book. Credit sales of goods go in the sales day book.
II. Fill in the Blanks
1. The book in which transactions are first recorded is called a book of prime entry. 2. Credit purchases of goods are recorded in the purchases day book. 3. Credit sales of goods are recorded in the sales day book. 4. Returns of goods purchased on credit are recorded in the purchases returns book (or returns outward book). 5. Returns of goods sold on credit are recorded in the sales returns book (or returns inward book). 6. The cash book is both a book of prime entry and a ledger account. 7. Trade discount is not recorded in the books of accounts. 8. Cash discount is recorded in the discount columns of the cash book. 9. An entry appearing on both sides of the cash book is called a contra entry. 10. Opening entries, closing entries, and adjustment entries are recorded in the journal proper.
III. True or False (with corrections for false statements)
Q1. Cash book is only a ledger account.
AnswerFalse — Correction: The cash book is both a book of prime entry (journal) and a ledger account for cash.
Q2. Trade discount is recorded in the books of accounts.
AnswerFalse — Correction: Trade discount is NOT recorded in the books. Only the net amount after trade discount is recorded.
Q3. Cash discount is recorded in the cash book.
AnswerTrue — Cash discount is recorded in the discount columns of the cash book. Discount allowed on the debit side, discount received on the credit side.
Q4. Credit purchase of a machine is recorded in the purchases day book.
AnswerFalse — Correction: Credit purchase of an asset (machine) is recorded in the journal proper, NOT in the purchases day book. The purchases day book records only credit purchases of goods (trading items).
Q5. A contra entry does not affect the bank balance.
AnswerTrue — A contra entry affects both cash and bank columns. When cash is deposited into the bank, the bank column increases and the cash column decreases — the overall position is unchanged.
IV. Match the Following
| Column A | Column B | Answer |
|---|
| 1. Cash book | (a) Records credit purchase of assets | (b) Records cash and bank transactions |
| 2. Purchases day book | (b) Records cash and bank transactions | (c) Records credit purchases of goods |
| 3. Sales day book | (c) Records credit purchases of goods | (d) Records credit sales of goods |
| 4. Journal proper | (d) Records credit sales of goods | (a) Records credit purchase of assets |
| 5. Sales returns book | (e) Records goods returned by customers | (e) Records goods returned by customers |
V. Answer Briefly (2-mark questions)
Q1. What are books of prime entry? Why are they maintained?
Answer
Books of prime entry (subsidiary books) are specialised books in which transactions of a similar nature are first recorded before posting to the ledger. They are maintained to: 1. Divide the work of recording among different persons 2. Save time by grouping similar transactions 3. Reduce errors through specialisation 4. Provide internal check 5. Facilitate easy ledger posting
Q2. Distinguish between trade discount and cash discount.
Answer
| Feature | Trade Discount | Cash Discount | |---|---|---| | Purpose | To encourage bulk purchases | To encourage prompt payment | | When allowed | At the time of sale/purchase | At the time of payment | | Recording | Not recorded in books | Recorded in cash book | | Rate | Higher (10-50%) | Lower (1-5%) | | Deducted from | List price (before recording) | Not deducted from invoice amount |
Q3. What is a contra entry? Give two examples.
Answer
A contra entry is an entry that appears on both the debit and credit sides of the three-column cash book. It is marked with 'C' in the folio column. Examples: 1. Cash deposited into bank: Debit bank column, Credit cash column 2. Cash withdrawn from bank for office use: Debit cash column, Credit bank column
Q4. What transactions are recorded in the journal proper?
Answer
1. Opening entries (to open ledger accounts) 2. Closing entries (to close revenue accounts) 3. Adjustment entries (outstanding, prepaid, depreciation) 4. Transfer entries (between accounts) 5. Rectification entries (to correct errors) 6. Credit purchase/sale of assets (not goods) 7. Dishonour of bills of exchange
Q5. What is a three-column cash book?
Answer
A three-column cash book has three columns on each side: - Discount column: Discount allowed (Dr side), Discount received (Cr side) - Cash column: Cash receipts (Dr), Cash payments (Cr) - Bank column: Bank deposits (Dr), Bank payments (Cr) It combines the discount, cash, and bank accounts in one book.
VI. Answer in Detail (5-mark questions)
Q1. From the following transactions, prepare a Purchases Day Book:
Answer
2024 March 1: Purchased from Raj & Co. 100 units @ ₹50 each, Trade discount 10% March 5: Purchased from Kumar 200 units @ ₹20 each March 10: Purchased from Senthil 50 units @ ₹100 each, Trade discount 5% March 15: Purchased furniture for office ₹5,000 on credit from Furniture Mart
Purchases Day Book
Date | Supplier | Invoice No. | L.F. | Amount (₹)
-----------|-------------------|-------------|------|------------
Mar 1 | Raj & Co. | | | 4,500
Mar 5 | Kumar | | | 4,000
Mar 10 | Senthil | | | 4,750
-----------|-------------------|-------------|------|------------
| Total | | | 13,250
Working Notes:
- Raj & Co.: 100 × ₹50 = ₹5,000; Less TD 10% = ₹500; Net = ₹4,500
- Kumar: 200 × ₹20 = ₹4,000 (no discount)
- Senthil: 50 × ₹100 = ₹5,000; Less TD 5% = ₹250; Net = ₹4,750
- Furniture purchase (₹5,000) is an ASSET, not goods. It goes in the Journal Proper, NOT in the Purchases Day Book.
Q2. From the following transactions, prepare a Two-Column Cash Book:
Answer
2024 April 1: Cash in hand ₹10,000 April 3: Paid to Mohan ₹2,900 in full settlement of ₹3,000 April 5: Received from Raj ₹4,850 after deducting 3% cash discount April 7: Purchased goods for cash ₹2,000 April 10: Paid salary ₹1,500
Two-Column Cash Book (Cash + Discount)
Date | Particulars | L.F. | Discount | Cash | Date | Particulars | L.F. | Discount | Cash
| | | Allowed | ₹ | | | | Received | ₹
-------|-------------------|------|----------|--------|--------|-------------------|------|----------|--------
Apr 1 | To Balance b/d | | | 10,000 | Apr 3 | By Mohan | | 100 | 2,900
Apr 5 | To Raj | | 150 | 4,850 | Apr 7 | By Purchases | | | 2,000
| | | | | Apr 10 | By Salary | | | 1,500
| | | | | Apr 30 | By Balance c/d | | | 8,450
-------|-------------------|------|----------|--------|--------|-------------------|------|----------|--------
| | | 150 | 14,850 | | | | 100 | 14,850
-------|-------------------|------|----------|--------|--------|-------------------|------|----------|--------
May 1 | To Balance b/d | | | 8,450 | | | | |
Working Notes:
- Mohan: ₹3,000 − ₹2,900 = ₹100 discount received (credited side — Mohan gave us discount)
- Raj: ₹4,850 received; Let gross amount = x; x − 3% of x = 4,850; 0.97x = 4,850; x = ₹5,000; Discount allowed = ₹150
Q3. From the following transactions, prepare a Sales Day Book:
Answer
2024 Jan 5: Sold to Anand 100 shirts @ ₹200 each, Trade discount 10% Jan 12: Sold to Babu 50 trousers @ ₹400 each Jan 18: Sold to Charu 200 ties @ ₹50 each, Trade discount 5% Jan 25: Sold old machinery ₹3,000 to David on credit
Sales Day Book
Date | Customer | Invoice No. | L.F. | Amount (₹)
-----------|------------|-------------|------|------------
Jan 5 | Anand | | | 18,000
Jan 12 | Babu | | | 20,000
Jan 18 | Charu | | | 9,500
-----------|------------|-------------|------|------------
| Total | | | 47,500
Working Notes:
- Anand: 100 × ₹200 = ₹20,000; Less TD 10% = ₹2,000; Net = ₹18,000
- Babu: 50 × ₹400 = ₹20,000 (no discount)
- Charu: 200 × ₹50 = ₹10,000; Less TD 5% = ₹500; Net = ₹9,500
- Old machinery sale (₹3,000) is sale of an ASSET, not goods. It goes in the Journal Proper, NOT in the Sales Day Book.
Common Mistakes to Avoid
- Recording trade discount in books: Trade discount is NEVER recorded in the books. Calculate the net amount after trade discount and record only the net amount.
- Confusing purchases day book with journal proper: Credit purchase of GOODS → Purchases Day Book. Credit purchase of ASSETS → Journal Proper.
- Forgetting contra entries: When cash is deposited into bank or withdrawn from bank, both sides of the cash book are affected. This is a contra entry, marked with 'C'.
- Placing discount on the wrong side: Discount ALLOWED is on the debit side (we give discount). Discount RECEIVED is on the credit side (we receive discount).
- Recording cash transactions in day books: Cash purchases go in the CASH BOOK, not the purchases day book. Cash sales go in the CASH BOOK, not the sales day book. Day books record only CREDIT transactions of goods.
- Not balancing the cash book: The cash book must be balanced like a ledger account. The difference is carried forward as balance c/d.
Exam Checklist
- [ ] Can you list all eight subsidiary books and state what each records?
- [ ] Can you distinguish between a journal and a cash book?
- [ ] Can you prepare a single-column, double-column, and three-column cash book?
- [ ] Can you correctly handle trade discount (deduct before recording) vs cash discount (record in discount columns)?
- [ ] Can you identify and record contra entries?
- [ ] Can you prepare a purchases day book (excluding cash purchases and asset purchases)?
- [ ] Can you prepare a sales day book (excluding cash sales and asset sales)?
- [ ] Can you prepare purchases returns and sales returns books?
- [ ] Can you list the transactions recorded in the journal proper?
- [ ] Can you post entries from subsidiary books to the ledger?
