Question 1: Explain the need for drawing up the special purpose books.
Answer:
It becomes very much difficult for a small business to record all its transactions in one book only, i.e., the journal. But as the business expands and the number of transactions becomes large, it may become cumbersome to journalize each and every transaction.
For quick, efficient and accurate recording of business transactions, journals are required to be sub-divided into special journals. Many of the business transactions are repetitive in nature.
They can be easily recorded in special journals, each meant for recording all the transactions of a similar nature, e.g., all cash transactions may be recorded in one book, all credit sales transactions in another book and all credit purchase transactions in yet another book and so on.
These special journals are also called daybook or subsidiary books. Special journals prove economical and make division of labour possible in accounting work. The above mentioned are the only reasons which emphasis for drawing the special purpose books.
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