Subsidiary Books

Subsidiary books are books of original entry. In the normal course of business, a majority of transactions are either relate to sales, purchases or cash. So we record transactions of the same or similar nature in one place, i.e. the subsidiary book. And we record these transactions in chronological order.

This actually saves a lot of man-hours and tiresome clerical work. Instead of journalizing each entry, they are recorded into various subsidiary books. Think of your subsidiary book as sub-journals that record only one type of transaction.

There is no separate entry for these transactions in the general ledger. The posting to the Ledger Accounts is done from the subsidiary book itself. This method of recording is known as the Practical System of Accounting or sometimes the English System.

One thing to remember is that such a system does not violate the rules of Double Entry System. We have still recorded the transactions according to this system. All transactions are still affecting two accounts. Only instead of a journal, we are using subsidiary books as the books of original entry.

 

Types of Subsidiary Books

The following are the subsidiary books a company will generally maintain while writing their accounts,

• Cash Book- It is a book which records the receipts and payment of cash transaction.
• Purchase Book- It is a book which records all the credit purchases of goods of the company.
• Purchase Return Book- It is a book which records all the return of credit purchases of goods of the company.
• Sales Book- It is a book which records all the credit sales of goods of the company.
• Sales Return Book- It is a book which records all the return of credit sales of goods of the company.
• Bills Receivable Book- It is a book which records all the bills receivable.
• Bills Payable Book- It is a book which records all the bills payable.
• Journal Proper- All the transactions which are not recorded in the above books are recorded here.

 

It’s Advantages

Let us now take a look at some of the advantages these subsidiary books provide in the process of accounting

1. Saving Labour Hours: Recording in a subsidiary book saves a lot of time and clerical hours. Firstly there is no need to journalize and/or give narrations for every transaction. This helps reduce the time it takes to completely record a transaction. Also since we use a number of subsidiary books, various accounting process can be undertaken simultaneously. This will save the time of the clerks/accountants.
2. Division of Work: In place of one general journal, we have several subsidiary books, So the resulting work may be divided among several members of the staff. This will save time, improve efficiency and result in fewer errors as well.
3. Specialization of Work: If one person maintains the same subsidiary book over many years he acquires full knowledge and understanding of the work. We can say he becomes a specialist in one type of transaction (say purchases for example). He becomes very efficient in handling such transactions and hardly any error gets made.
4. Easy for Reference: When transactions of all types are in the same subsidiary book it becomes easy to search for them. Whenever any information is needed we directly refer the subsidiary book to get said information.
5. Easier for Checking: If the Trial Balance does not match, it will be much easier to locate the error thanks to the existence of separate books i.e. a subsidiary book. Same goes if you want to detect fraud.

 

Purchase Book and Purchase Return Book

 

Sales Book

A Sales Book is a Subsidiary Book and is, therefore, also a book of Original Entry. A Sales Book or Sales Day Book contains the records of all-credit sales of goods. While a Cash Book holds the records of all-cash sales of goods.

We don’t keep record sold assets in the Sales Book. One records that in Journal Proper. We record entries from Source Documents in the Sales Book. Source Documents are Invoices or bills received from the suppliers of goods.

The entries in the Sales Book are also made with the net amount of the invoice. Therefore, Sales Book does not contain a Trade Discount and other details are given on the invoice.

Every month the total of the Sales Book is posted on the Credit side of the Sales A/c. Sales A/c is a ledger A/c. However, the individual accounts of the customers can be posted daily. Also, where the volume of transactions is too large, the entries in the Sales A/c can be posted weekly or fortnightly.

The seller prepares the invoice in two or more copies. The invoice contains the details about the sales, the terms of payment, etc.  Given below is the Performa of the Sales Book

Sales Book

Date	Invoice No.	Name of the Customer	L.F.	Amount

Sales Return Book/ Return Inward Book

Sometimes, goods sold can be defective or of low quality, etc. and hence, the customer may return them. Thus, goods sold that are returned by the customer or buyer, are recorded in the Sales Return Book. It is noteworthy that the return of only those goods is entered in these books that were earlier sold on credit.

A Credit Note is prepared for every return of goods. It is prepared in duplicate. The Credit Note contains the name of the customer, details of goods returned and reason thereof. Each Credit Note is dated and serially numbered. The Credit Note serves as the source document for entries in the Sales Return Book.

The customer to whom the goods were sold may also prepare a Debit Note. It is prepared when goods are returned to the seller and is therefore sent to him. Given below is the Performa of the Sales Return Book:

Sales Return Book

Date	Credit Note No.	Name of the Customer	L.F.	Amount

Solved Example For You

Q. Record the following transactions in the books of M/s. M and Co. and also show the ledger account

Date	Details
10 Aug	Sold to A Ltd. (Invoice No. 24): 2000 shirts @ ₹ 500 per piece.
16 Aug	Sold to B Ltd. (Invoice No. 26): 100 ties @ ₹ 200 per piece. Trade discount 20%
18 Aug	Sold to C Ltd. (Invoice No. 28): 50 coats for ₹100000. Trade discount 10%
21 Aug	Sold to D Ltd. (Invoice No. 30): 100 trousers @ ₹ 400 per piece. Trade discount 15%
25 Aug	Sold to E Ltd. (Invoice No. 33): 50 ties @ ₹ 250 per piece. Trade discount 10%

Ans. In the Books of M/s. M and Co.(Below are entries when recorded in the sales book will look like)

Sales book

Date	Invoice No.	Name of the Customer	L.F.	Amount
10 Aug	24	A Ltd.		1000000
		2000 shirts @ ₹ 500 per piece
16 Aug	26	B Ltd.		16000
		100 ties @ ₹ 200 per piece.   = 20,000
		Less: 20% T.D.                       =   4,000
18 Aug	28	C Ltd.		90000
		50 coats @ ₹ 2,000 per piece    = 100000
		Less: 10% T.D.                          =   10000
21 Aug	30	D Ltd.		32000
		100 trousers @ ₹ 400 per piece = 40,000
		Less: 15% T.D.                          = 6,000
25 Aug	33	E Ltd.		11250
		50 ties @ ₹ 250 per piece         = 12,500
		Less: 10% T.D.                         = 1,250
31 Aug		Total		1149250

(Entries, when recorded in the books of individual traders will look like the below entries)

A Ltd. A/c                                                   

Date	Particulars	Amount		Date	Particulars	Amount
10 Aug	To Sales	1000000

B Ltd. A/c                                                                   

Date	Particulars	Amount		Date	Particulars	Amount
16 Aug	To Sales	16000

C Ltd. A/c                                                                                                                           

Date	Particulars	Amount		Date	Particulars	Amount
18 Aug	To Sales	90000

D Ltd. A/c 

Date	Particulars	Amount		Date	Particulars	Amount
21 Aug	To Sales	32000

E Ltd. A/c     

Date	Particulars	Amount		Date	Particulars	Amount
25 Aug	To Sales	11250

Sales A/c     

Date	Particulars	Amount		Date	Particulars	Amount
				31 Aug	Sundries as per Sales Book	1149250

Q. Record the following transactions in the books of M/s. Z and Co. and also show the ledger accounts.

Date	Details
5 Aug	Goods returned by M Ltd. (Credit Note No. 2): 2 bags @ ₹ 500 per piece.
11 Aug	Goods returned by D Ltd. (Credit Note No. 3): 10 suitcases @ ₹ 2500 per piece. Trade discount 20%
28 Aug	Goods returned by X Ltd. (Credit Note No. 5): 5 duffle bags for ₹5000. Trade discount 10%

Ans.In the Books of M/s. Z and Co.(Below are entries when recorded in the sales return book will look like)

 Sales Return Book

Date	Credit Note No.	Name of the Customer	L.F.	Amount
5 Aug	2	M Ltd.		1000
		2 bags @ ₹ 500 per piece.
11 Aug	3	D Ltd.		20000
		10 suitcases @₹ 2500 per piece          = 25000
		Less: 20% T.D.                                    = 5000
28 Aug	5	X Ltd.		4500
		5 duffle bags @ ₹1000 per piece           = 5000
		Less: 10% T.D.                                      = 500
31 Aug		Total		25500

(Entries, when recorded in the books of individual traders will look like the below entries)

MNC Ltd. A/c

Date	Particulars	Amount		Date	Particulars	Amount
				5 Aug	By Sales Return	1000

D Ltd. A/c   

Date	Particulars	Amount		Date	Particulars	Amount
				11 Aug	By Sales Return	20000

 X Ltd. A/c           

Date	Particulars	Amount		Date	Particulars	Amount
				28 Aug	By Sales Return	4500

 Sales Return A/c 

Date	Particulars	Amount		Date	Particulars	Amount
31 Aug	Sundries as per Sales Return Book	25500