The Bad Book is a notebook where Martha writes down who has misbehaved and what they did. In December of each year, she counts up who was bad the most times and that child receives coal instead of candy, in her stocking at Christmastime.
I have put up all of the entries for the Merriman Household Bad Book thus far. (It can also be found on the Merriman page under My Doll Play -> Meet The Dolls -> Merriman).