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
- 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.
- 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.
- 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.
- 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.
- 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
A Subsidiary book or a Day book is a book of Original entry. Subsidiary books contains the records of similar transactions. An organization maintains six kinds of Subsidiary books. They are Cash book, Purchase book, Purchase Return book, Sales book, Sales return book, and Journal proper.
Organizations that do not maintain the Subsidiary books maintain Journal for all the transactions. A Journal holds records of all entries irrespective of their nature. Thus, Journal does not bifurcate the entries on the basis of their nature.
Purchase Book
Purchase book is a Subsidiary book. The Purchase book or Purchase day book contains the record of all credit-purchase. Cash book accommodates the records of all goods-purchase.
A Purchase book does not hold the record of purchases of assets. The Journal proper contains those records. The entries are recorded in the Purchase book from source documents. Invoices or bills received from the suppliers of goods serve as the source documents.
We make the entries in the Purchase book with the net amount of the invoice. Which is why a Purchase book does not contain trade discount and other details which are there on the invoice.
Every month the total of the Purchase book is posted on the Debit side of the Purchases A/c. Purchases A/c is a ledger A/c. However, the individual accounts of the suppliers may be posted daily. Also, where the volume of transactions is too large, the entries in the ledger can be posted weekly or fortnightly. Given below is the performa of the Purchase book:
Purchase Book
Date | Invoice No. | Name of the Supplier | L.F. | Amount (₹) |
Purchase Return Book/ Return Outward Book
When the goods purchased on credit are returned to the supplier, these are recorded in the Purchase return book. Sometimes, goods purchased can be defective or of low quality, etc. and hence, need to be returned. A separate book is maintained for the purchase return and these are not deducted from the purchases in the Purchase book. Also, Purchase return is recorded at the net amount on the invoice.
Debit note is prepared for every return of goods. It is prepared in duplicate. The original one is sent to the supplier while the duplicate copy is kept for our own records. The Debit note contains the name of the supplier, details of goods returned and the reason thereof. Each debit note is dated and serially numbered.
The supplier may also prepare a Credit note. It is prepared when goods are received from a customer and is therefore sent to him. Given below is the performa of the Purchase return book
Purchase Return Book
Date | Debit Note No. | Name of the Supplier | L.F. | Amount (₹) |
Solved Example For You
Q: Record the following transactions in the books of M/s. Mac and Co. and also show the ledger accounts.
Date | Details |
1 Aug | Purchased from ABC Ltd. (Invoice No. 524): 2000 balls @ ₹ 5 per piece. |
15 Aug | Purchased from XYZ Ltd. (Invoice No. 611): 100 bats @ ₹ 250 per piece. Trade discount 20% |
29 Aug | Purchased from Con Ltd. (Invoice No. 444): 200 skates for ₹100000. Trade discount 10% |
29 Aug | Purchased from ABC Ltd. (Invoice No. 741): 200 Chess for ₹2000. Trade discount 15% |
30 Aug | Purchased from Con Ltd. (Invoice No. 521): 100 skates for ₹40000. Trade discount 8% |
Ans:
In the Books of M/s. Mac and Co.
Purchase Book
Date | Invoice No. | Name of the Supplier | L.F. | Amount (₹) |
1 Aug | 524 | ABC Ltd. | 10000 | |
2000 balls@ ₹ 5 per piece. | ||||
15 Aug | 611 | XYZ Ltd. | 20000 | |
100 bats@ ₹ 250 per piece. = 25000 | ||||
Less: 20% T.D. = 5000 | ||||
29 Aug | 444 | Con Ltd. | 90000 | |
200 skates @ ₹ 500 per piece = 100000 | ||||
Less: 10% T.D. = 10000 | ||||
29 Aug | 741 | ABC Ltd. | 1700 | |
200 Chess @ ₹ 100 per piece = 2000 | ||||
Less: 15% T.D. = 300 | ||||
30 Aug | 521 | Con Ltd. | 36800 | |
100 skates @ ₹ 400 per piece = 40000 | ||||
Less: 8% T.D. = 3200 | ||||
31 Aug | Total | 167500 |
Ledger Accounts
ABC Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
1 Aug | Purchases | 10000 | ||||
1 Aug | Purchases | 1700 |
XYZ Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
15 Aug | Purchases | 20000 |
Con Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
29 Aug | Purchases | 90000 | ||||
30 Aug | Purchases | 36800 |
Purchases A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
31 Aug | Sundries as per Purchase Book | 167500 | ||||
Q: Record the following transactions in the books of M/s. Zen and Co. and also show the ledger accounts
Date2018 | Details |
3 Aug | Returned goods purchased from MNC Ltd. (Debit Note No. 24): 2 T.V. @ ₹ 50000 per piece. |
17 Aug | Goods returned purchased from Daya Ltd. (Debit Note No. 26): 10 DVD Players @ ₹ 2500 per piece. Trade discount 20% |
30 Aug | Returned goods purchased from X Ltd. (Debit Note No. 28): 5 refrigerators for ₹60000. Trade discount 10% |
Ans. In the Books of M/s. Zen and Co.
Purchase Return Book
Date | Debit Note No. | Name of the Supplier | L.F. | Amount (₹) |
3 Aug | 24 | MNC Ltd. | 100000 | |
2 T.V. @ ₹ 50000 per piece | ||||
17 Aug | 26 | Daya Ltd. | 20000 | |
10 DVD Players @ ₹ 2500 per piece. = 25000 | ||||
Less: 20% T.D. = 5000 | ||||
30 Aug | 28 | X Ltd. | 54000 | |
5 refrigerators @ ₹ 12000 per piece = 60000 | ||||
Less: 10% T.D. = 6000 | ||||
Total | 174000 |
Ledger Accounts
MNC Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
3 Aug | Purchases Return | 100000 | ||||
Daya Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
17 Aug | Purchases Return | 20000 | ||||
X Ltd. A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
30 Aug | Purchases Return | 54000 | ||||
Purchases Return A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
31 Aug | Sundries as per Purchase Return Book | 154000 | ||||
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 |