Subsidiary Books

n the past, traders use to keep record of the transaction in the journal. But it was
later found not convenient. f all the transaction are recorded in the journal then the
journal book becomes more thick and difficult to handle it. n big business houses, it
becomes impossible to carry on the work of recording business transaction. therefore
now a day's large scale business firms like to keep record of transaction in subsidiary
books instead of journal. Subsidiary books are the book of original entry and it is also
called primary records because the first entry of transaction is made in subsidiary
books. On the basis of subsidiary books postings are made into concerned account
afterwards. The subsidiary books allow for the reduction of entries in the
ledger since different types of transactions are entered in different types of
books. The subsidiary books are also known as the books of original entry.

Following types of books are used under subsidiary books.

1. Purchase book
2. Sales book
3. Cash book
4. Purchase return book
5. Sales return book
6. Bills received book

1. Purchase book
This book is used for recording goods purchased on credit. This book is also
known as invoice book, bought book or purchased journal. t must be noted that only
credit purchases are recorded in this book. Things purchased on credit for personal use
are not recorded in this book. t also does not record the fixed assets purchased.
t is not necessary to record the transaction in the journal book where they are enter in
the purchases book, because this book contains the name and address of seller, date of
transaction and amount of goods. After recording in purchases book separate amount is
to be open in the ledger for each supplier of goods. The amount of each purchase will
be credited to its respective personnel account.

Date

Particular

nvoice
no.

L.F

Amount

2. Sales book
Sales book is used for recording goods sold on credit. When the trader sells
goods on credit then he should keep record in sales book to know how much goods
have been sold, when and to whom. Thus a sales goods is prepared to know credit
sales. f all the credit sales passed through journal and post them in concern ledger then
it takes time because for every debit, credit also appears side by side. The record in
sales book is made from the outward invoice book which contain the exact copy of each
invoice sent out to the customers. There are five columns in sales book for date,
particulars, outward invoice no. Ledger folio and amount. Name and address of
customer are written in particular column.

Date Particular Outward invoice

no.
L.F. Amount

3. Purchase return book

The book used for recording goods return for the seller is called "Purchase Return
Book". t is also known as return outwards Books. The buyer returns goods when he
finds them damaged or inferior in quality or against the sample. While retuning goods
buyer prepares debit note. Debit note is a letter sent by the buyer to the seller to inform
about the adjustment of amount of goods return in the buyer account and asking to the
seller to adjust the amount in the account of seller.
Specimen of purchase return book

Date Particular L.F Debit

notes
Amount

4. Sales Return Book

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t is a book used for recording goods returned by the buyer. t is also known as
returns inward book. Goods sold may be return by customer for various reasons such
as goods sent of wrong description or inferior quality or damaged. While keeping
records in sales return books sellers prepares a credit note. t is prepared and sent to
buyer of goods to inform about the adjustment of goods to inform about the adjustment
of the amount of goods.
Specimen of Sales Return Book
Date

Particular

L.F.

Credit Note

Amount

5. Cash Books
n business firms there will be many transactions relating to cash. To record cash
transaction, separate book is kept which is called Cashbook. The function of cashbook
is to keep records of all cash transactions. All cash transactions are directly recorded in
cashbook without passing through other subsidiary books. Cashbook takes the place of
cash account that is it is not necessary to open separate cash account in the ledger
after keeping record in the cashbook.
The cashbook is closed and balanced in the same way as cash account in ledger. Cash
book always-present debit balance because more cash can't be paid than business
have. After closing the cashbook, the balance must again be shown on the debit side for
the next month.
There are three types of cashbooks. They are-
Simple Cash Book
Double Column Cash Book
Triple Column Cash Book

. Simple Cash Book:: Simple cash book is prepared like cash account in ledger. There
are eight columns. First four columns are for debit side and second four columns are for
credit side. All the cash received are entered in amount column on debit side and all
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cash paid appear on credit side in amount column. Cash book is closed and balanced at
the end of the month.

date

Particulars

L.F

Amount

Date

Particular

L.F

Amount

Continue of subsidiary book 3..

. Double Column Cash Book: A cashbook with discount column is called double
column cashbook. Two accounts, cash and discount are combined in this book.
Discount allowed to the customers represent loss. So it is recorded in discount column
on debit side. n the same way discount allowed by creditors represents gain. So it is
recorded on credit side in discount column.
Form of double column cashbook:
Date


Particular
L.F Discount Amount Date
Particular
L.F Discount Amount

. Triple Column Cash Book: A cash book with discount and bank column is triple
column cashbook. Three accounts are combined. n business firm most of the payment
are received and paid by cheque. Transactions are preformed through bank. When
business firm makes payment its creditor by cheque then such payment are entered on
credit side in bank column. n the same way when amounts are deposited into bank and
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received cheque from debtors amounts are posted on debit side in bank column. The
advantage of this cashbook is that every time business firm can know amount
discharged from the bank.
Form of triple column cashbook
Date

Particular

L.F

Discount

Amount

Bank

Date

Particular

L.F

Discount

Amount

Bank

END

documents give original information and are known as source documents.

They allow information to be communicated freely among stakeholders.
Sales invoice
The sales invoice is a document prepared by the seller and is sent with the
goods to the buyer, it shows full details of the goods, the unit cost and total
price of the goods supplied.
Debit note
The debit note is a document prepared by the purchaser and sent to the
seller to indicate that the purchaser expects the seller to accept
responsibility for the charge of the goods he has returned.
Credit note
The credit note is sent by the creditor (seller) to the debtor (buyer) when
goods are returned or the order was sent short or the goods were faulty, to
indicate the amount of money owed to the buyer/customer by the seller.
1. It is used to make entries in the sales returns and purchases returns
books.
. When the creditor sends the credit note to the debtor, the creditor enters
the information in his sales returns (returns inwards) book.
3. When the debtor receives the credit note, he enters the information in his
purchases returns (returns outwards) book.
Cheque
The cheque is a representative of money that can be made payable to the
person who needs to receive a payment. The payee takes the cheque to the
bank and it is honoured if there is enough cash in the account to clear it.
There are several types of cheques. A cheque counterfoil is written up to
keep record of who got a particular cheque and for how much and when it
was paid.
Receipt
A receipt is a written document issued by the person receiving money
(payment) to the person making the payment. A counterfoil is completed
and kept as reference.
Petty cash
Petty cash facilities allow for small payments to be made without many
formalities. There is a form called petty cash voucher which is filled out by
the person requesting the payment. When presented to the petty cashier,
the amount will be paid on behalf of the business.
Subsidiary books
The subsidiary books allow for the reduction of entries in the ledger since
different types of transactions are entered in different types of books. The
subsidiary books are also known as the books of original entry.
Types of Books of original entry:
The books of original entry are:
a. The books in which transactions are recorded first of all (origin).
b. Where there is a separate book for each different kind of transactions.
c. The nature of the transactions affects which book it is entered into.
For example:
O Sales in one book to record goods sold
O Purchases in one book to record goods purchases
O Cash in another book to record cash paid and/or received
The transactions are entered in these books giving the following details
- date in chronological order
- details (identity)
- folio column (for cross reference)
- money column (record amount paid or collected)
Source Documents Entered in book of Original Entry
Sales invoice Sales day book or sales journal
Debit Note This document is sent by the creditor
to the debtor whenever there is an
undercharge on an invoice.
Credit Note Sent to customer Returns Inwards day book or sales
return day book
Petty Cash Payment Petty Cash Book(ledger account for
each day)
Purchase Invoice Purchases day book or purchases
journal
Credit note received from supplier Return outwards day book or
purchases returns day book.
Cheque and cash received and paid
out
Cash Book(also ledger)
Receipts Documents issued to the person or
company making payment by the firm
or person who received the money.
Miscellaneous correspondence The Journal.
TYPES OF BOOKS OF ORIGINAL ENTRY
Subsidary book Use Examples and entries
Purchases Day Book OR
Purchases Journal
-Record all credit
purchaes.
-invoices received
from creditors are
entered.
-totalled at end end
of month and
posted to the
ledger.







ample:Bought goods on credit
ntries:Dr.Purchases
Cr. The Creditor

The rule of posting the purchases
day book to the ledger is:
Dr.Purchases a/c(with total of
purchases day book)
Cr. Creditors a/c(with value of
invoice received.)




Subsidary book Use Examples and entries
Sales day Book OR Sales Journal
-Record all
credit sales.
-invoices sent to
debtors entered.
-totalled end of
month and
posted to the
ledger.
ample:Sold goods on
credit
ntries:Dr.debtor
Cr.Sales



Subsidary book Use
Purchases Return Book OR Return Outwards Book
OR
Returns Out Journal
-Record goods returned to
creditors/suppliers.
-Record all allowances
received for creditors
-totalled at end of month
and posted to the ledger.

Subsidary book Use
Sales Return Book OR Return Inwards OR
Sales Journal



-Record goods returned by
customers(the credit will be
issued to the customer).



Subsidary book Use Examples and entries
Cash Book



-Record cash
payments and
receipts

amples of receipt:
A. debtor paid the
company by cash.
ntries:
Dr.Cash a/c
Cr. Debtor a/c
ample of
payments:The
company pays a
creditor by cash
ntries:
Dr. Creditors' a/c


Cr. Cash a/c



Subsidary book Use
Journal -to record other items
#oanne Wright teaches at Immaculate Academy.