Subsidiary Books

Subsidiary Books are special books used to record similar types of transactions separately.

If a business has many transactions, recording everything in one journal can become crowded and confusing.

So businesses use separate books for common transaction types.

Simple line: Subsidiary Books divide transactions into smaller special books.

Credit purchases go to Purchase Book.

Credit sales go to Sales Book.

Cash and bank transactions go to Cash Book.

Purchase returns go to Purchase Return Book.

Sales returns go to Sales Return Book.

Suppose Riya runs a stationery shop.

Every day she may buy goods from suppliers, sell goods to customers, receive cash, pay rent, return damaged goods to suppliers, and accept goods returned by customers.

If everything is written in one journal, the book becomes too long.

Subsidiary Books keep similar transactions together.

They save time and reduce confusion.

They make records easier to check.

They help different people handle different books.

They make ledger posting easier.

Memory line: one big journal becomes many small special books.

Riya runs a small stationery shop.

Day 1: she buys notebooks from Amit Traders on credit Rs.10,000.

Day 2: she sells pens to Raju on credit Rs.5,000.

Day 3: she pays shop rent in cash Rs.2,000.

Day 4: she returns damaged notebooks to Amit Traders Rs.1,000.

Day 5: Raju returns pens worth Rs.500.

Should all these be recorded in the same place?

They can be recorded in one journal, but it is easier to use special books.

Credit purchase goes to Purchase Book.

Credit sale goes to Sales Book.

Cash rent goes to Cash Book.

Goods returned to supplier goes to Purchase Return Book.

Goods returned by customer goes to Sales Return Book.

This makes accounting more organized.

Cash Book is used for cash and bank transactions, such as cash sales, cash purchases, rent paid, and bank deposit.

Purchase Book is used for credit purchase of goods. Only credit purchase of goods goes here.

Cash purchase goes to Cash Book. Purchase of an asset like furniture does not go to Purchase Book.

Sales Book is used for credit sale of goods. Only credit sale of goods goes here.

Cash sale goes to Cash Book. Sale of old furniture does not go to Sales Book.

Purchase Return Book, also called Return Outward Book, records goods returned to suppliers.

Sales Return Book, also called Return Inward Book, records goods returned by customers.

Bills Receivable Book records bills accepted by customers in favour of the business.

Bills Payable Book records bills accepted by the business in favour of others.

Journal Proper records entries that do not fit into any special book, such as opening entries, closing entries, adjustment entries, depreciation, bad debts, and transfer entries.

Cash sale Rs.5,000 goes to Cash Book because cash is received.

Credit sale to Raju Rs.8,000 goes to Sales Book because it is credit sale of goods.

Cash purchase Rs.3,000 goes to Cash Book because cash is paid.

Credit purchase from Amit Rs.10,000 goes to Purchase Book because it is credit purchase of goods.

Returned goods to supplier Rs.1,000 goes to Purchase Return Book because goods are returned to supplier.

Customer returned goods Rs.500 goes to Sales Return Book because goods are returned by customer.

Depreciation on furniture Rs.2,000 goes to Journal Proper because it is an adjustment entry.

Bought furniture on credit Rs.15,000 goes to Journal Proper because it is asset purchase, not goods for resale.

Purchase Book uses purchase invoice or supplier bill.

Sales Book uses sales invoice.

Purchase Return Book uses debit note.

Sales Return Book uses credit note.

Cash Book uses cash memo, receipt, bank slip, and cheque counterfoil.

Journal Proper uses journal voucher.

Source documents provide proof before recording in subsidiary books.