What are Special Purpose Books? Types, Examples & Advantages
Special Purpose Books are subsidiary accounting records designed to capture transactions of a repetitive and specific nature for easier and more accurate bookkeeping. Understanding Special Purpose Books is essential for students preparing for accountancy exams and for anyone developing practical business knowledge. This topic frequently appears in school board assessments and competitive exams, and is a foundation for error-free accounting.
| Special Purpose Book | Main Use | Example Transaction |
|---|---|---|
| Cash Book | Records all cash and bank transactions | Cash sales, payments to suppliers |
| Purchases Book | Records all credit purchases of goods | Buying merchandise on credit |
| Sales Book | Records all credit sales of goods | Selling goods to a customer on credit |
| Purchases Returns Book | Records return of goods purchased | Returning defective merchandise to supplier |
| Sales Returns Book | Records return of goods sold | Customer returns goods due to defect |
| Bills Receivable Book | Records bills received from customers | Receiving a bill from a debtor |
| Bills Payable Book | Records bills accepted by the business | Accepting a bill drawn by a creditor |
| Petty Cash Book | Records small cash expenses | Stationery purchases, staff tea expenses |
| Journal Proper | Records miscellaneous transactions | Adjustment, rectification, or opening entries |
What are Special Purpose Books?
Special Purpose Books, also known as subsidiary books, are dedicated accounting records for specific types of transactions that occur frequently. Instead of recording each entry in the main journal, businesses use these books to organize similar transactions together, improving clarity and efficiency in the accounting process. At Vedantu, we explain these concepts in a student-friendly manner, ensuring strong exam performance and practical understanding.
Types of Special Purpose Books and Their Uses
There are several types of Special Purpose Books, each designed for a particular category of transaction. Using these books streamlines bookkeeping and reduces errors.
Common Types of Special Purpose Books
- Cash Book: For all cash and banking transactions.
- Purchases Book: For credit purchases of goods meant for resale.
- Sales Book: For credit sales of business merchandise.
- Purchases Returns Book: For returns of goods previously purchased on credit.
- Sales Returns Book: For goods returned by customers.
- Bills Receivable Book: For bills drawn on debtors.
- Bills Payable Book: For bills accepted by the firm.
- Petty Cash Book: For minor daily payments.
- Journal Proper: For entries not fitting in any other book.
Formats and Example Entries in Special Purpose Books
Each Special Purpose Book has a structured format designed for clarity. For example, a Purchases Book typically includes columns for the date, supplier name, invoice number, details, and amount. This organization helps students and professionals quickly record and find entries.
| Date | Supplier Name | Invoice No. | Details | Amount (₹) |
|---|---|---|---|---|
| 2024-07-10 | ABC Traders | 12345 | 100 units of product X | 10,000 |
For more on practical formats and examples, refer to Purchases Day Book and Cash Book.
Advantages of Using Special Purpose Books
Using Special Purpose Books offers many benefits in accounting for students and businesses alike:
- Saves time and allows faster recording of entries.
- Reduces chances of errors and omissions.
- Makes division of work and delegation possible.
- Simplifies the posting process to the Ledger.
- Improves accuracy in preparing Trial Balance and financial statements.
Difference Between Journal and Special Purpose Books
| Basis | Main Journal | Special Purpose Books |
|---|---|---|
| Purpose | Records all transactions in order | Records only specific, recurring transactions |
| Frequency of Posting | Entry by entry | Summarized posting (often monthly or weekly) |
| Use in Large Businesses | Inefficient due to volume | Efficient and manageable |
| Examples | All transactions (if only journal used) | Cash Book, Sales Book, Purchases Book, etc. |
Real-World Application of Special Purpose Books
Special Purpose Books are used in every medium-sized or large business for maintaining proper records. For example, a retail store uses a Cash Book and Sales Book daily, while a manufacturing company also maintains Purchases, Returns, and Petty Cash Books. This helps in easy audit, error detection, and reliable reporting for decisions and tax purposes.
Further Study and Internal Links
To master Special Purpose Books, students should also understand:
- Introduction to Subsidiary Books
- Ledger Accounts
- Journal Proper
- Types of Accounts
- Trial Balance
- Sales Book and Sales Return Book
At Vedantu, we ensure Commerce students understand how Special Purpose Books connect with the entire accounting cycle, helping them prepare confidently for board and competitive exams.
In summary, Special Purpose Books help organize frequent transactions in separate records, such as sales, purchases, cash, and returns. Their use promotes accuracy, saves time, and supports clear ledger and financial statement preparation. This knowledge is essential for exams and is widely used in everyday business practice.
FAQs on Special Purpose Books: Meaning, Types, and Examples
1. What is a special purpose book in accounting?
Special purpose books are subsidiary accounting journals used to record specific, recurring transactions like cash receipts, credit sales, or returns. They help organize accounting efficiently.
2. What are some examples of special purpose books?
Key examples of special purpose books include the Cash Book, Purchases Book, Sales Book, Returns Book, Bills Payable Book, and Bills Receivable Book. These books streamline the recording of specific transaction types.
3. How is a special purpose book different from a journal?
Special purpose books record specific, repetitive transactions, while the journal (or journal proper) records all transactions not categorized elsewhere. Special purpose books improve efficiency by separating transaction types.
4. Why are special purpose books important?
Special purpose books are crucial for efficient and accurate bookkeeping. They improve accuracy, reduce errors, and clarify financial records, aiding in the preparation of ledgers and financial statements.
5. What is the format of a Purchases Book?
A Purchases Book typically includes columns for: Date, Supplier Name, Invoice Number, Details, and Amount. This structured format ensures clear recording of purchase transactions.
6. What are the 7 subsidiary books of accounting?
While the exact number may vary depending on the business, seven common subsidiary books include: Cash Book, Purchases Book, Sales Book, Returns Inward Book, Returns Outward Book, Bills Receivable Book, and Bills Payable Book. These books categorize transactions for efficient accounting.
7. What is the special purpose book cash book notes?
The Cash Book is a special purpose book that records all cash transactions. It usually has columns for Date, Details, Receipts, and Payments, allowing for a clear overview of cash inflows and outflows.
8. What is the difference between journal and subsidiary books?
A journal records all transactions chronologically. Subsidiary books (like special purpose books) categorize and record specific transaction types, making it easier to summarize and post to ledgers. The journal often summarizes information from subsidiary books.
9. Can a business skip using special purpose books and only use the main journal?
While possible, especially for smaller businesses with few transactions, larger businesses strongly prefer using special purpose books for enhanced efficiency and accuracy in recording and summarizing financial transactions. The journal proper would become unwieldy otherwise.
10. What kind of errors can be avoided by maintaining special purpose books?
Maintaining special purpose books minimizes errors of omission, repetition, and difficulties in posting due to improved organization and categorization of transactions. This structured approach greatly enhances accuracy.
11. Are there computerized versions of special purpose books?
Yes, modern accounting software offers digital versions of special purpose books. These streamline data entry, retrieval, and reporting, enhancing efficiency and accuracy in modern accounting practices.
12. How do special purpose books assist during audits?
Special purpose books greatly assist audits by providing neatly organized, categorized records. This simplifies and speeds up the process of tracing and verifying transactions, improving the audit efficiency.
13. Are Petty Cash Books also special purpose books?
Yes, a Petty Cash Book is a type of special purpose book designed to record small, daily cash expenses. It's categorized separately for better control and tracking of minor cash transactions.
