Definition
Special Purpose Books are a set of journals that record transactions only of a particular nature. Examples of these books are Cash Book, Purchases Book, Sales Book, Sales Returns Book, Purchase Returns Book, Bills Payable Book, Bills Receivable Book and Journal Proper. These are subsidiary books that help to record entries of a similar nature more accurately and efficiently. The different types of Special Purpose Books are as follows:
- Purchases Book – Purchases Book (Journal) is a book of original entry. It records transactions related to the credit purchases of items that a firm deals with for its business. The cash purchases get recorded in the Cash Book. The credit purchases for items that the firm will not resell don’t get recorded in the Purchases Book. For Example, if a firm deals in spare parts for vehicles, it will only record the credit purchases of items directly related to those spare parts in the Purchases Books. It will not record the credit purchase of unrelated items like furniture in the book. Those items will get recorded in the main journal or ‘Journal Proper’.
- Sales Book – Sales Book (Journal) is a book of original entry. It records transactions related to the credit sales of items that a firm deals with. The cash sales get recorded in the Cash Book. The credit sales for items unrelated to the business don’t get recorded in the Sales Book. For Example, if a firm deals in tyres, it will only record the credit sales of items directly related to those tyres in the Sales Books. It will not record the credit sales of unrelated items like computers in the book. Those items will get recorded in the main journal or ‘Journal Proper’.
- Purchase Returns Book – The Purchase Returns Book (Journal) records transactions related to the return of goods purchased by the firm. Sometimes the goods that the firm purchases from suppliers get sent back to them because they were defective, damaged or not as per the order’s specifications. The firm also prepares a debit note for this transaction and sends it to the supplier.
- Sales Returns Book – The Sales Returns Book (Journal) records transactions related to the return of goods sold by the firm. Sometimes the goods that a firm sells to customers are sent back by them because those items were defective, damaged or not as per the order’s specifications. The firm also prepares a credit note for this transaction in favour of the customer.
- Bills Payable Book – The Bills Payable Book (Journal) records the details of bills payable for the firm. The accountants will debit the individual accounts of the entities with the corresponding amount, which gets recorded in the Bills Payable Book. It is the money that the firm owes its creditors and has to pay back that amount within a stipulated period.
- Bills Receivable Book – The Bills Payable Book (Journal) records the details of bills receivable for the firm. The accountants will credit the individual accounts of the entities with the corresponding amount, which gets recorded in the Bills Receivable Book. It is the money that the firm will receive from its creditors and has to receive that amount within a stipulated period.
- Cash Book – Cash Book (Journal) records the cash and bank transactions of a business. It fulfils the purpose of both a journal and a ledger for cash inflows and outflows related to the firm’s operations.
- Journal Proper – A Journal Proper records all other transactions which do not find a place in these subsidiary books. Some of the transactions recorded in these books are related to opening entries, transfer entries, rectification entries, adjustment entries, and other miscellaneous entries that do not get recorded anywhere else.
Conclusion
These Special Purpose Books or Subsidiary Books are essential for a firm to keep track of the business activities taking place in the organisation. It is also beneficial for preparing Ledger Accounts, Trial Balance and Financial Statements.
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