accounting books

📚 Accounting Books (Books of Accounts)

Accounting books (or books of accounts) are records used to systematically record all financial transactions of a business. They form the basis for preparing financial statements and tracking a company’s financial performance.

✅ Types of Accounting Books

Accounting books are generally classified into two categories:

1. Primary Books (Journals)

Used to record transactions as they happen in chronological order.

Book Purpose
Journal Proper Records non-routine transactions not covered in other specific journals.
Cash Book Records all cash and bank transactions.
Purchase Book Records credit purchases of goods (not cash purchases).
Sales Book Records credit sales of goods.
Purchase Returns Book Records goods returned to suppliers.
Sales Returns Book Records goods returned by customers.
Bills Receivable Book Records all bills received (promissory notes).
Bills Payable Book Records all bills issued to creditors.
2. Secondary Books (Ledgers)

Used to classify and summarize information from the journals.

Ledger Type Purpose
General Ledger Contains all accounts (assets, liabilities, equity, income, expenses).
Debtors Ledger (Sales Ledger) Contains individual accounts of customers.
Creditors Ledger (Purchase Ledger) Contains individual accounts of suppliers.
🔄 Flow of Recording Transactions
Source Documents (Invoices, Receipts)
↓
Journal (Books of Original Entry)
↓
Ledger (Books of Final Entry)
↓
Trial Balance → Financial Statements

🧾 Example Entry in Journal:

Transaction: Bought goods worth ₹5,000 on credit from ABC Traders.
Journal Entry:

Purchases A/C Dr ₹5,000
To ABC Traders A/C ₹5,000
(Being goods purchased on credit)

📌 Why Are Accounting Books Important?

Maintain a legal record of financial activities

Provide the basis for financial statements

Help in audit, tax filing, and compliance

Enable tracking of business performance