BUSINESS ACCOUNTING
SUBSIDIARY BOOKS
BY NADYA NARSIDANI
Meaning of subsidiary books:
A small business may be able to record all transactions in single Journal but as
the business expands the number of transactions becomes so large, that the
Journal is required to be sub-divided into Special Journals which are called
Subsidiary Books.
These books are also called as Books of Original entries or Prime entries because
the transactions are first recorded in Subsidiary Books and then posted in the
Ledger.
Modern book-keeping has subdivided this into separate journal, each for
recording transaction of one particular type or nature, in order to avoid clerical
work.
TYPES OF SUBSIDIARY BOOKS
1. Cash Book: for recording all cash/ bank receipts cash/ bank and payments.
2. Purchase Book: for recording all credit purchases of goods
3. Sales Book: for recording all credit sales of goods
4. Sales return book: for recording goods returned by debtors
5. Purchases return book: for recording purchases returned to creditors
6. Bills receivable book: for recording bills received from customers.
7. Bills payable book: for recording bills payable to creditors.
8. General Journal (Journal Proper) : All transactions that do not fall in the category of any of
the special journals stated above are recorded in General Journal.
Purchase Book :
Goods purchased on credit for manufacturing or for resale are only recorded in
purchase book. Cash purchases are not recorded in purchase book. Similarly, credit
purchases other than goods like purchase of office equipment, furniture, stationery
and building are not recorded in purchase book. For example, a business dealing in
machinery spare parts will record only credit purchase of machinery spare parts in
purchase book. This book is also known as Purchase Journal. Goods purchased on
credit are always recorded at net value.
Illustration
Sales Book:
The book to record sales of goods is called Sales Book. Goods sold on credit are only recorded
in Sales Book. Cash sales are not recorded in Sales Book. Similarly, goods assets news paper
sold on credit are not recorded in Sales Book.
E.g. A businessman dealing in furniture will record only credit sale of Furniture in sales book.
Cash sales of Furniture will not be recorded in sales book. It is also known as Sales Journal
PURCHASE RETURN BOOK
Purchase Return book or Return Outward Book is used to record purchase returns of
business.
SALES RETURN BOOK
Sales return book is a book in accounting that records all those transactions related to the
returns of goods and items by the customer which were earlier sold to them on credit.
Bills Receivable and Bills Payable Books
If the firm receives a number of promissory notes it would be convenient to record
the transactions in a separate book called Bills Receivable book. Similarly if
promissory notes are frequently issued, Bills Payable book would be used.
Cash transactions are recorded in cash book, Credit purchases are recorded in
Purchases book, Credit sales are recorded in Sales book. Returns from the customer
are recorded in Sales Returns book, returns to suppliers is recorded in Purchase
Returns book, bills transactions are recorded in Bills Receivables and Bills Payables
book. Apart from these some entries are required to be recorded, these would be
recorded in Journal Proper. Eg Opening, closing entries, rectification entries,
transfer entries, adjusting entries etc.
Cash Book :
All Cash and Bank transactions are recorded in the Cash Book. The Cash Book has
two sides where the left hand side is Receipt Side (Debit-side) and the right hand
side is Payment Side (Credit side). When amount is received details are recorded on
the Receipt side and when payments are made details are recorded on the Payment
side. Cash Book a Journal since it is a Book of Original entries and it also a ledger
since it constitutes a classified record of all cash transactions in the form of Ledger
and helps in finding out Cash and Bank balance at the end of particular accounting
period. Thus, it can be said that cash book serves dual purpose of journal as well as
ledger.
There are 3 types of cash book:
1. Single column cash book
2. Double Column Cash Book
3. Three column or Triple Column Cash Book
Single Column Cash Book- Each side of the one-column cash book contains a
single amount column. This book is nothing more than a Cash Account; there is no
need to establish a separate cash account in the ledger as all cash receipts and
payments are recorded on the debit side and the payment side, respectively.
Double Column Cash Book- Discounted Cash Book Two amount columns, one for
cash and the other for a discount, are included in the column. All cash payments and
discounts are recorded on the credit side of the ledger, while all cash receipts and
discounts are recorded on the debit side.
Three column or Triple Column Cash Book- Three amount columns, one for cash,
one for the bank, and one for the discount, are included on each side of this cash
book. All cash payments, withdrawals from the bank, and discounts obtained are
documented on the credit side, while all cash receipts, entries into the book, and
discounts permitted are recorded on the debit side. In actuality, a triple-column cash
book fulfils the requirements of both a bank account and a cash account. There is no
need to add these two accounts to the ledger as a result.
Important points:
1. Contra entries: When cash is deposited in bank or withdrawn from the bank, these are
recorded on both sides of 3 column cash book. These are known as contra entries and are
indicated by writing ‘C’ in the LF column.
2. Cheque deposits: When cheques are received and deposited in the bank on the same day,
it is directly debited to bank account. However, when its received but not deposited on the
same day, its shown as cash receipt and later when its deposited in banka contra entry is
passed as debit bank account and credit cash.
3. Cheques dishonoured: When cheque is dishonoured, it is recorded by reversing the entry
that was passed at the time of receipt or issue of cheque.
4. Endorsement of cheque: When cheque is received its entered on the debit side bank
column, when its endorsed, its entered on credit side, bank column.
Illustration 1:
Solution 1:
Illustration 2:
