At the end of chapter seven, you have to open a safe, the Necronomicon is inside.
The clues to the combination are found when listening to the three recorded cylinders. If you found them all you can play them on the bookstore phonograph to get the following clues.
Cylinder 1 refers to the red rubies on the chalice of knowledge (in the same room as the phonograph)
Cylinder 2 refers to the number of white chess pieces left defending the queen (found in the same room as the phonograph)
Cylinder 3 refers to a specific volume of a book.
The combination is