Subsidiary Books of Accounts, Features, Components, Example

Subsidiary Books of Accounts are special-purpose books used to record various business transactions of similar nature systematically and separately. Instead of recording all transactions in the Journal, they are divided into different subsidiary books to save time and improve accuracy. Common subsidiary books include the Purchase Book, Sales Book, Purchase Returns Book, Sales Returns Book, Cash Book, Bills Receivable Book, Bills Payable Book, and Journal Proper. These books help in efficient record-keeping, reduce clerical errors, and facilitate easy posting to ledger accounts, making the accounting process more organized and manageable.

Features of Subsidiary Books of Accounts:

• Cash Book

The Cash Book is a unique subsidiary book that serves as both a Journal and a Ledger. It records all cash and bank receipts and payments. Its primary feature is that it replaces the separate journal and ledger for cash and bank accounts. Different types exist, such as Single Column, Double Column (for Cash & Discount or Cash & Bank), and Triple Column (for Cash, Bank, and Discount). It always shows a debit balance, and this balance is verified by the actual cash in hand. The final balance from the Cash Book is directly posted to the Balance Sheet, making it a book of original and final entry.

• Purchases Book

The Purchases Book records only credit purchases of goods dealt in by the business. Its key feature is that it does not record cash purchases (which go in the Cash Book) or purchases of assets like furniture or machinery (which are journalized). It is prepared with columns for date, supplier’s name, invoice details, ledger folio, and amount. The total of the Purchases Book is posted to the debit of the Purchases Account in the ledger periodically. This specialization allows for easy tracking of credit purchases from suppliers and simplifies the process of accounting for inventory and payables.

• Sales Book

The Sales Book is used to record only credit sales of goods in which the business deals. A crucial feature is that cash sales are recorded in the Cash Book, and sales of fixed assets are recorded in the Journal. It contains columns similar to the Purchases Book. The total of the Sales Book is posted to the credit of the Sales Account in the ledger at the end of a specific period. This book helps in efficiently managing receivables and provides a clear summary of credit sales made to various customers during a period.

• Purchases Return Book

Also known as the Return Outward Book, this book records the return of goods previously purchased on credit. Its main feature is that it helps in tracking goods sent back to suppliers, typically due to defects or other reasons. Recording these returns here, instead of the general journal, simplifies the process of adjusting accounts payable. The total of this book is posted to the credit of the Purchases Return Account (which reduces the total purchases). It acts as a key document for verifying debit notes issued to suppliers.

• Sales Return Book

Known as the Return Inward Book, this subsidiary book records the return of goods by customers that were originally sold to them on credit. Its primary feature is to maintain a dedicated record of goods coming back from customers, which is essential for inventory management and customer account adjustments. The total of this book is posted to the debit of the Sales Return Account (which reduces the total sales). It correlates with the credit notes issued to customers. Keeping a separate book for returns ensures clarity and easy calculation of net sales and net purchases.

• Journal Proper

The Journal Proper is the book used for recording all those transactions that cannot be entered in any other subsidiary book. Its key feature is its role as a residual book for unique, non-routine transactions. This includes opening and closing entries, adjustment entries, transfer entries, rectification of errors, and entries for the purchase/sale of assets on credit. It is the default journal that retains the original format of a journal with date, particulars, ledger folio, and debit/credit amounts. It is essential for completing the double-entry system for all types of transactions.

Components of Subsidiary Books of Accounts:

1. Components of a Cash Book:

The Cash Book typically contains the following components:

• Date: The date of the transaction.

• Particulars: Details of the transaction, including the name of the other account involved (e.g., “To Sales” for cash received from sales or “By Rent” for rent paid). It also includes the unique cheque number for bank transactions.

• Voucher Number (V.N.): A reference number for the source document (e.g., receipt or payment voucher).

• Ledger Folio (L.F.): The page number of the ledger where the corresponding account has been posted.

• Amount: Columns for the monetary value. A multi-column Cash Book will have separate amount columns for Cash, Bank, and Discount.

2. Components of a Purchases Book:

The Purchases Book (for credit purchases of goods) includes:

• Date: The date of the purchase invoice.

• Supplier’s Name: The name of the party from whom goods were purchased on credit.

• Invoice Number: The unique number of the supplier’s bill.

• Ledger Folio (L.F.): The page number of the supplier’s account in the Purchases Ledger.

• Details/Amount: A column for the total invoice amount. In detailed formats, this can be split into Trade Discount (if any), and the Net Amount payable. The net amount column is totaled.

3. Components of a Sales Book:

The Sales Book (for credit sales of goods) contains:

• Date: The date of the sales invoice.

• Customer’s Name: The name of the party to whom goods were sold on credit.

• Invoice Number: The unique number of the sales bill issued.

• Ledger Folio (L.F.): The page number of the customer’s account in the Sales Ledger.

• Details/Amount: A column for the total invoice amount. It can also be subdivided to show Trade Discount allowed and the Net Amount receivable. The net amount column is totaled for posting.

4. Components of a Purchases Return Book:

The Purchases Return Book (Return Outwards) consists of:

• Date: The date when the goods were returned to the supplier.

• Supplier’s Name: The name of the party to whom the goods were returned.

• Debit Note Number: The unique number of the debit note issued to the supplier.

• Ledger Folio (L.F.): The page number of the supplier’s account in the ledger.

• Details/Amount: A column recording the value of the returned goods. This amount column is totaled and posted to the credit of the Purchases Return Account.

5. Components of a Sales Return Book:

The Sales Return Book (Return Inwards) includes:

• Date: The date when the goods were received back from the customer.

• Customer’s Name: The name of the party who returned the goods.

• Credit Note Number: The unique number of the credit note issued to the customer.

• Ledger Folio (L.F.): The page number of the customer’s account in the ledger.

• Details/Amount: A column recording the value of the goods returned. This amount column is totaled and posted to the debit of the Sales Return Account.

6. Components of the Journal Proper:

As the residual book, the Journal Proper retains the classic journal format. Its components are:

• Date: The date of the transaction.

• Particulars: The core of the entry, showing the accounts to be debited and credited, with a brief narration explaining the transaction.

• Ledger Folio (L.F.): The page number of the ledger where each account involved is posted.

• Debit Amount (Dr.): The amount to be debited.

• Credit Amount (Cr.): The amount to be credited.

Example of Subsidiary Books of Accounts:

1. Purchase Book (Credit Purchases of Goods Only)

This book records all credit purchases of goods meant for resale. Cash purchases are not recorded here.

Journal Posting:

Purchases A/c Dr. ₹35,000
 To Creditors A/c ₹35,000
(Being goods purchased on credit from various suppliers)

2. Sales Book (Credit Sales of Goods Only)

This book records all credit sales of goods to customers. Cash sales are not included.

Journal Posting:

Debtors A/c Dr. ₹60,000
 To Sales A/c ₹60,000
(Being goods sold on credit to customers)

3. Purchase Returns Book (Goods Returned to Suppliers)

This book records the return of goods that were earlier purchased on credit.

Journal Posting:

Creditors A/c Dr. ₹4,000
 To Purchase Returns A/c ₹4,000
(Being goods returned to supplier due to damage)

4. Sales Returns Book (Goods Returned by Customers)

This book records goods returned by customers that were sold earlier on credit.

Journal Posting:

Sales Returns A/c Dr. ₹2,000
 To Debtors A/c ₹2,000
(Being goods returned by customer)

5. Bills Receivable Book

This book records all bills of exchange or promissory notes received from debtors.

Journal Posting:

Bills Receivable A/c Dr. ₹30,000
 To Krishna Store A/c ₹30,000
(Being bill received from Krishna Store)

6. Bills Payable Book

This book records all bills of exchange accepted by the business (creditors).

Journal Posting:

Sita Furnitures A/c Dr. ₹15,000
 To Bills Payable A/c ₹15,000
(Being bill accepted for goods purchased on credit)

7. Cash Book (Cash and Bank Transactions)

This records all cash receipts and payments, including banking transactions.

8. Journal Proper (Miscellaneous Transactions)

This is used to record transactions that do not fit into any other subsidiary book — such as adjustments, depreciation, or opening entries.