What is Subsidiary Books?
In order to save time, efforts and avoid inconvenience of classifying transactions for posting purposes, similar types of transactions are recorded in special journals called subsidiary books.
Table of Content
The various types of subsidiary books are
- Cash Book
- Sales Book
- Purchase Book
- Sales Return Book
- Purchase Return Book
- Bills Receivable Book
- Bills Payable Book
- Journal Proper
Cash book is a book of original entry. It records transactions involving receipts or payment of cash. Since the number of cash transactions is usually large, it is a difficult task to classify and post them to their respective ledger accounts.
Though cashbook is a book of primary entry yet it serves as a ledger account. Cashbook is called as journalised ledger since cash transactions are primarily entered in cashbook and it shows the closing cash balance at the end of the particular period.
Features of Cash Book
- Only cash transactions find its place in cash book
- Each and every cash receipts are posted on the debit side whereas every cash payments are posted on the credit side of the cash book.
- Only one aspect of a transaction is recorded in the cash book, i.e. cash.
- All cash transactions are recorded chronologically in the cashbook.
- It performs functions of both journal and ledger at the same time.
- In case of cashbook at the end of accounting period either both the sides will have same total hence no balance will be there or total of debit side will be higher than credit side and difference will be shown as closing balance.
Types of Cash Book
Cash book can be of following four types:
Single Column Cash Book
It records only cash receipts and payments. It has only one amount column on each of the debit and credit sides of the cashbook and all the cash receipts and cash payments are entered on the debit side and the credit side respectively.
Cash book, serves purpose of cash account and cash is a real account so rule of debit what comes in and credit what goes out shall be applicable.
Points to be kept in mind while writing single column cash book:
- The pages of the cashbook are vertically divided into two equal parts. The left hand side is for recording receipts and the right hand side is for recording payments.
- The cashbook with the balance brought forward from the preceding period or with what we start. It appears at the top of the left sideas ‘To Balance’ or ‘To Capital’ in case of a new business.
- The transactions should be recorded in order of the date.
- If any cash is received on an account, the name of that particular account is entered in the recepits column by the word ‘To’ on the left hand side of the cashbook.
- If any amount has been paid on an account, the name of the account is written in a payments column as ‘By’ on the right hand side of the cashbook.
- It should be balanced at the end of said period.
The opening balance of the period is not posted but the other entries which appear on the debit side of the cashbook are posted on the credit of the respective accounts in the ledger and the entries appearing on the credit side of the cashbook are posted on the debit of the proper accounts in the ledger.
Double Column Cash Book
The double column cash book are two types are :
Double column cash book with discount and cash columns
Double column cash book which is also known as the two column cash book consists of two separate columns on the debit side and credit side for recording cash and discount. In many organisation trader allow or to receive small allowance off or against the dues. These allowances are provided for prompt settlement of accounts.
The process of posting entries in the cash columns is in the same way as single column cash book. But as far as discount column is concerned, each item of discount allowed (Dr. side of the cash book) will be posted on the credit side of the concerned personal accounts.
On the other hand any discount received will be posted to the debit of the concerned personal account. The total of the discount column on the debit side of the cash book will be posted to the debit side of the discount account in the ledger and the total of discount column on the credit side of the cash book on the credit side of the discount account. It should always be remembered that we never do balancing of discount column as we do in cash column.
Double Column Cashbook With Bank and Cash column
In this type of cash book, an additional column (bank) is inserted on both the sides of simple cash book. This column is kept to record the transactions with the bank. Bank account is treated as ‘personal account’ hence ‘debit the receiver’ and ‘credit the giver’ rule of personal account shall be applicable.
Such cash book has bank account and cash book. In this case, cash account is treated as an asset and so the rule of ‘real account’ shall be applied. When
- Cash is deposited
- Cheque is deposited
- Draft is deposited
- Amount deposited by debtors directly in bank account
- Any amount like
Three Column Cash Book
A three column cashbook or triple column cashbook is one in which there are three columns on each side of the cash book i.e.on both the debit and credit side. First one is used to record cash transactions; the second is used to record bank transactions and third is used to record discount received and paid.
Process of writing a Three Column cashbook
The first step is write the opening balance of cash in hand and cash at bank on the debit side in the cashbook and bank columns. If the opening balance is credit balance (overdraft) then it will be put in the credit side of the cashbook in the bank column. i.e. opening bank balance would appear at debit side of cashbook as a opening balance in bank column and and bank over draft at credit side.
- Cheque/ Chequeor Cash Received
- Payment by Cheque/Chequeor Cash
- Contra entries
- Contra entries are passed
Petty Cash Book
The petty cashier will record all the petty transactions in an separate multi column book called petty cashbook. Amount received from the head cashier is debited in the petty cashbook. All payments are entered on the credit side.The petty cashbook is treated as book of original entry.
There are two systems of petty cash:
Simple System Of Petty Cash
Under this method, petty cashier is given any specific amount to be spent on petty expenses. After spending the whole amount, he submits the petty cashbook to the head cashier for necessary verification. He also asks for more money to carry out further transactions.
Imprest System Of Petty Cash
A fixed amount of money for a fixed period which may be a week or a month and it is allocated towards meeting the petty small daily expenses. At the end of the period the accounts are checked, verified and again cash equivalent to expenses incurred is reimbursed to the petty cashier.
In sales book, all transaction related to credit sales are recorded. Generally sale of assets on credits banks are recorded through journal. Only the credits sale of goods in which you are dealing for trading purpose are recorded in sales book. This book is also known as sales journal or sales day book.
It should be remembered that sales day book, records only those goods which are sold on credit and the goods in which the business enterprise deals in. It should be also noted that the goods any forward sale the delivery of which is to be made in future will not find place in the day book.
|Date||Name of the customer||Invoice No.||L F No.||Amount (R)|
It is to be noted that the sales book is a book of original entry and hence perodic posting must be completed to ledger accounts concerned.
All transactions related to credit purchases of goods are primarily recorded in this book. It is also known as purchase day book bought day book or purchase journal.On receiving the goods and the invoice, the receiving department compare both with the copy of the order placed by purchase department.
|Date||Name of the supplier||Invoice No.||L F No.||Amount|
If everything is found in order, the goods are sent to the stores. Based on the invoice received from the supplier, necessary entry is passed in the Purchase Book.
Sales Return Book
Goods may be returned by the customers for a variety of reasons such as wrong quantity and/or quality. All goods returned by the customers are primarily recorded in this. This book is known as sales return book or also knows as return inward book. It only records the transaction of those goods returned by credit customers.
When goods are returned by the customer following procedure is followed:
Preparation Of Credit Note
When credit customers return goods, the company prepares a credit note in the customers name. This note mentions that the account of the customers has been credited with the amount stated there in. The original being sent to the customer and the duplicate is preserved in the file, which provides basis for recording entries in the sales return book.
Posting From The Sales Return Book
The total values of the goods returned by customers are posted to various ledger accounts concerned periodically.
|Datе||Namе of thе Customеr||Credit note No.||L F||Amount|
Purchase Return Book
Goods may be returned by the company to the sellers for a variety of reasons such as wrong quantity and or quality. All goods returned by the company are primarily recorded in this. This book is also known as Return Outwards Book.
It only records the transaction of those goods returned to the debit sellers. When goods are returned to the sellers following procedure followed:
Preparation Of Debit Note
When the goods are returned to the suppliers, intimation is sent to them through what is known as a debit note. These debit notes serve as vouchers for these entries. A debit note is a statement sent by a businessman to another person, showing the amount debited to the account of the later. Debit notes are usually serially numbered and are prepared in the same form as that of the invoice.
Posting from the Sales Return Book
The total of the purchases returns or returns outwards book is credited to returns outward account or purchases return account (being the goods sent out). Individual suppliers to whom goods are returned are debited (because they receive the goods).
|Dat||Namе of thе suppliеr||Debit Note No||L F No.||Amount|
Entries in the purchase return book are made on the basis or original Credit Note received from the supplier.
Bills Receivable Book
When goods are sold on credit, the funds are blocked in the form of debtors and can be materialised in near future. Sometimes the seller wants a written undertaking from the credit customer, to pay after a specific period. Such document, containing an undertaking to pay with the details of payments is termed as bills of exchange.
When the bill is drawn by the seller and accepted by the buyer it is termed as bills receivable from selleres point of view. All such bills receivables are recorded in the books of accounts through a subsidiary book called as bills receivable book.
|No of bill||Datе of rеcеipt||Datе of bill||From whom|
|Namе of thе accеptor||LF||Duе datе of bill||Amount||Rеmark|
The total of the bills receivable book indicates the total value of bills receivable drawn during the period. Information about bill discounting, dishonour, encashment etc is noted in the remark column.
Entries of endorsement, dishonour of bills are recorded through journal proper. Bill encasement and discounting is passed through cashbook.
Bills Payable Book
When the business unit purchases goods on credit, the creditor may want an undertaking from the unit, for the payment in future on or before a specific date, such written promise to pay the specific amount on specific date, is termed as bills of exchange.
For the person or the organisation that promises, the bill is bills payable and for the one whom it is promised, it is bills receivable Bills payable book is maintained for the bills accepted by the drawe.
|No of bill||Date of receipt||Date of bill||Namе of the drawеr||LF||Duе datе|
Journal proper is used for making the original record of those transactions, which do not find a place in any of the previously mentioned books of original entry. The journal proper is used to record the following types of entries:
Opening entries are used at the beginning of the financial year to open the books by recording the assets, liabilities and capital, appearing in the Balance Sheet of the previous year. The rule to be applied is.
Assets Account Dr
To Liabilities Account
To Capital Account
Closing entries are passed at the end of each year whereby the revenue items (expenses and incomes losses and profits) are transferred to revenue account (i.e. trading and profit and loss account). Balances in capital items (as assets, liabilities, and proprietary balances etc) do not change and then these are transferred to balance sheet.
The closing entries are often avoided now and instead, in the ledger itself the destination of the balances is indicated as: transfer to trading account, transfer to profit and loss account etc.
Adjustment entries are passed at the time of finalisation These entries are needed to bring into books outstanding expenses, accrued incomes, depreciation, provision for bad and doubtful debt, provision for discounts etc.
Rectification entries are required to rectify different types of errors located, as errors of omission, commission, principle etc.
These are needed for transfer of any amount from one account to another account.
Share issue entries are needed for issue of share and making calls etc in case of companies.