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Note on Subsidiary Books

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When a business becomes large and performs a large number of transactions daily, it finds the single journal book insufficient to keep a primary record of all the transaction. The task of journalizing all the transaction is troublesome and expensive. It does not provide classified information immediately. It fails to report the total amount of credit purchases and credit sales. The practical system of primary record of the transaction is subsidiary books.

Meaning and Definition:

Instead of maintaining a single journal book, a large sized business maintains some journal books. The collective form of all these journal books is known as subsidiary books. They are a subdivision of Journal. They are the set of a primary book in which the transactions of the business are recorded at the first time in a classified way.

"Subsidiary books of accounts are also called books of original entry because all the transactions are recorded originally or in the first instance in this subsidiary book." -Dr. A. N. Agrawala

"Subsidiary records are also known as the book of original entry, as transactions are entered there in the first instance so that they may be subsequently transferred to their respective accounts in the ledger." -J.R. Batliboi

Types of Subsidiary Book

  1. Purchase Book: Purchase Book is the first entry of all goods purchased on credit. It is the primary record of all the credit purchases, which are either for reselling or further processing. It does not record cash purchase.
    Example:
    Ashoj 6 = Purchased from Khusboo, Kathmandu 25 pieces of register@ Rs. 60 10 dozens of pencil @Rs.15
    Ashoj 9 = Sangam, Balaju 20 pieces of board marker@Rs. 35 15 pieces of duster @Rs. 10

Date

Particulars

In. no

L.F

Details

Total

Ashoj 6

Khusboo, Kathmandu

25 pieces of register@ Rs. 60

10 dozens of pencil@ Rs. 15

Less: Trade Discount@ 10%

1500

150

165

1485

Ashoj 9

Sangam, Balaju

20 pieces of board marker@ Rs. 35

15 pieces of duster@ Rs. 10

700

150

850

Total

2335

  1. Purchase Return Book: Purchase return book is the first entry of all goods returned to suppliers. It is the primary records of all the purchase returns. When the good purchased is found defective, damaged, in an excess quantity and not as per the order placed, they can be returned to the supplier. It is prepared on the basis of a debit note.
    Example:
    Jan 4 = Goods of Rs 1700 returned to Burning store, Baneshwor
    Jan 16 = Returned to Shinning Store, Banepa 2 quintals Basmati rice@ Rs. 2800 25 kg Mansuli rice@ Rs. 22

Date

Particulars

In. no

L.F

Details

Total

Jan 4

Burning Store, Baneshwor

1700

Jan 16

Shining Store, Banepa

2 quintals Basmati rice@ Rs. 2800

25 kgs Mansuli rice @Rs. 22

5600

550

6150

Total

7850

  1. Cash Book: A cash book is the primary records of all the receipts and payments made in cash and through a bank. It has the features of the subsidiary book as well as the principal book. Mainly, it is a subsidiary book as it is the first entry of all the cash and banking transaction. It is a part of the principal book or ledger as it serves the purposes of cash and bank accounts in the ledger.


  2. Sales Book: Sales book is the first entry of all the goods sold on credit. It is also known as sales journal. It is the primary record of all the credit sales. It does not record cash sales. It is prepared on the basis of the outward invoice sent out to the customer.

Example:

Kartik 29= Sold to Kritika, Basundhara 2 sets 20"LG TV@Rs. 17500 3 sets 21"Sony TV@ Rs. 27500

Kartik 30 = Sold to Anshu, Kathmandu

5 pieces of calculator @Rs. 650 3 sets of Telephone @ Rs. 1050

Date

Particulars

In. no

L. F

Details

Total

Kartik29

Kritika, Basundhara

2 sets 20"LG TV@ Rs. 17500

3 sets 21"Sony TV@ Rs. 27500

Less: Trade Discount @12%

35000

82500

14100

103400

Kartik 30

Anshu, Kathmandu

5 pieces of calculator@ Rs. 650

3 sets of telephone @Rs. 1050

3250

3150

6400

109800

  1. Sales Return Book: Sales return book is the first entry of all the goods returned by customers. It is the primary records of all the sales returns. The sales return book is prepared on the basis on the basis of credit note sent to the customer.
    Example:
    a. Returned by Comfort Furniture Center: 3 chairs@ Rs. 1300
    b. Returned by Luxury Furniture Center: 2 sofa sets@ Rs. 6500 3 Tables @ Rs. 1500

Date

Particulars

In. no

L. F

Details

Total

a.

Comfort Furniture Center3 Chairs @ Rs. 1300

3900

b.

Luxury Furniture Center2 sofa sets @ Rs. 65003 tables @ Rs. 1500

13000

4500

17500

Total

21, 400

  1. Journal Proper: Journal proper is a subsidiary book that records only non- recurring transactions in chronological order. It records those transactions for which no separate subsidiary book has been provided. Credit purchase and sale of assets, bad debts, depreciation and goods withdrawn by the proprietor are some of the examples of transactions, which are recorded in the journal proper.

Importance and Advantages of Subsidiary Book

Subsidiary books are important and advantages to a large- scale trading house due to the following reason:

  1. They avoid the need of passing journal entry for repeated type of transactions.
  2. They keep classified records of the business transactions in a systematic manner.
  3. They help in making the job of audit easier and economical.
  4. They help in minimizing errors and frauds and controlling the transactions effectively.
  5. They make the books of accounts clearer, clean and informative.
  6. They help in saving time and money for recording transactions.

Invoice:

An invoice is received from the supplier while buying goods and it is sent to the customer while selling goods. It is a statement, which is prepared and sent out by the seller along with the goods to buyer mentioning the details of the goods. It states the items of goods, quantity, unit price, total amount, and discount allowed, expenses incurred on behalf of the buyer and net payable amount. It represents the sale transaction. It serves as the basis for maintaining records in the purchases and sales book.

  • "Subsidiary books of accounts are also called books of original entry because all the transactions are recorded originally or in the first instance in these subsidiary books." -Dr. A. N. Agrawala
  • "Subsidiary records are also known as book of original entry, as transactions are entered there in the first instance so that they may be subsequently transferred to their respective accounts in the ledger," - J.R. Batliboi
  • Purchase Book is the first entry of all goods purchased on credit. It is the primary record of all the credit purchases, which are either for reselling or further processing. It does not record cash purchase. 
  •  A cash book is the primary records of all the receipts and payments made in cash and through a bank. It has the features of the subsidiary book as well as the principal book.
.

Very Short Questions

Subsidiary books are important and advantages to a large- scale trading house due to the following reason:

  1. They avoid the need of passing journal entry for repeated type of transactions.
  2. They keep classified records of the business transactions in a systematic manner.
  3. They help in making the job of audit easier and economical.
  4. They help in minimizing errors and frauds and controlling the transactions effectively.
  5. They make the books of accounts clearer, clean and informative.
  6. They help in saving time and money for recording transactions.

Instead of maintaining single journal book, a large sized business maintains some journal books. The collective form of all these journal books is known as subsidiary books. They are the subdivision of Journal. They are the set of a primary book in which the transactions of the business are recorded at the first time in a classified way.

According to Dr. A. N. Agrawala, "Subsidiary books of accounts are also called books of original entry because all the transactions are recorded originally or in the first instance in this subsidiary book."

According to J.R. Batliboi, "Subsidiary records are also known as book of original entry, as transactions are entered there in the first instance so that they may be subsequently transferred to their respective accounts in the ledger."

From the above definition, it is clear that subsidiary books are the classes of journal in which a set of primary books are maintained to make first entry of all the transactions in a classified way and to help for immediate posting in the ledger.

Purchase Book

Date

Particulars

Inward Invoice No.

LF

Amount

Details

Total

Srawan 05

Pujan

11,000

Srawan 22

Suman:

10 bottles of Complan @Rs.275

2,750

15 bottles Horlicks @Rs.300

4,500

7,250

Total

18,250

Sales Book

Date

Particulars

OutwardInvoice No.

LF

Amount

Details

Total

Bhadra 05

Saru:

1,000 kgs of mansuli rice @Rs.28

28,000

75 bottles of drinking water @Rs.14

1,050

29,050

Bhadra 29

Saju:

7 tins of soyabean oil @Rs.1,400

9,800

Total

38,850

Purchase Return Book

Date

Particulars

Debit Note No.

LF

Amount

Details

Total

January 13

Samrat Store, Suryabinayak:

2pcs of Tosai calculator @Rs.550

1,100

3ps of Casio calculator @Rs.850

2,550

3,650

January 21

Prince Trading House

2,500

Total

6,150

Sales Return Book

Date

Particulars

Credit Note No.

LF

Amount

Details

Total

March 10

Jogi Ram:

3 dozens ruler @Rs.48

144

2 dozens daybook @Rs.180

360

504

Less: 15% Trade Discount

75.6

428.4

March 25

Rishi Ram:

3 grosses of exercise book @Rs.1,800

5,400

4 grosses of diary @Rs.3,400

13,600

19,000

Total

19,428.40

Receipts

Simple Cash Book

Payments

Date

Particulars

JF

Cash Amt

Date

Particulars

JF

Cash Amt

Kartik 1

To Capital a/c

80,000

Kartik 2

By Purchase a/c

15,000

Kartik 5

To Sales a/c

4,000

Kartik 17

By Anisha’s a/c

6,000

Kartik 10

To Asha’s a/c

3,000

Kartik 26

By Bank a/c

50,000

Kartik 31

By balance c/d

16,000

87,000

87,000

Mangsir 1

To balance b/d

16,000

Receipts

Cash Book with Cash and Discount Columns

Payments

Date

Particulars

JF

Cash Amt

Discount

Date

Particulars

JF

Cash Amt

Discount

01-05

To Bank a/c

50,000

01-12

By Pujan’s a/c

3,300

200

01-18

To Gunjan’s a/c

5,200

300

01-29

By Bank a/c

2,500

01-31

To Interest a/c

500

01-31

By Balance c/d

49,900

55,700

300

55,700

200

02-01

To Balance b/d

49,900

Triple Column Cash Book

Date

Particulars

JF

Cash

Bank

Dis

Date

Particulars

JF

Cash

Bank

Dis

10-01

To Capital a/c

2,50,000

10-05

By Bank a/c

‘c’

2,00,000

10-05

To Cash a/c

‘c’

2,00,000

10-09

By Purchase a/c

50,000

10-15

To Sales a/c

10,000

10-26

By Pramila’s a/c

19,000

1,000

10-31

By Balance c/d

60,000

1,31,000

2,60,000

-

2,60,000

1,000

11-01

To Balance b/d

60,000

1,31,000

Receipts

Simple Bank Book

Payments

Date

Particulars

JF

Cash Amt

Date

Particulars

JF

Cash Amt

July 1

To Balance b/d

2,50,000

July 13

By Ubin’s a/c

60,000

July 5

To Subin’s a/c

40,000

July 20

By Purchase a/c

25,000

July 28

By Cash a/c

15,000

July 30

By Salary a/c

50,000

July 30

By balance c/d

1,40,000

2,90,000

2,90,000

August 1

To balance b/d

1,40,000

0%
  • The collective form of all these journal books is known as ______.

    trial balance


    subsidiary books


    ledger Books


    journal voucher book


  • Subsidiary books are sub-division of ______.

    final account


    journal


    ledger


    balance sheet


  • How many types of subsidiary books are used in Nepal?

    3


    2


    5


    6


  • Which of the following is a book of prime entry?

    Journal Voucher


    Ledger


    Budget Sheet


    Journal


  • The source documents for entries made in the Return Outwards Journal are ______.

    copies of sales invoices


    credit notes issued by suppliers


    copies of credit notes issued to customers


    purchase invoices


  • The correct way of accounting an amount received from a credit customer is ______.

    debit cash account and credit the individual customer's account


    debit cash account and credit the individual customer's account


    debit cash account and credit capital account


    debit cash account and credit sales account


  • Which of the following statement is incorrect?

    The petty cash book could be either a subsidiary book or a main book of accounts.


    In emergency, the petty cashier may give staff loans of small amounts.


    Regularly petty cashier is reimbursed to make up his cash balance to the imprest.


    Every payment made by the petty cashier should be supported by evidence.


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