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In accounting, businesses record numerous transactions daily. Managing all these entries directly in the main books can be overwhelming and prone to errors. To simplify this, accountants use subsidiary books, which are specialized books designed to record specific types of repetitive transactions systematically. These books help organize data, reduce errors, and make the overall accounting process more efficient.
Think of subsidiary books as separate notebooks for different types of transactions - like one notebook for cash dealings, another for credit purchases, and yet another for credit sales. This separation makes it easier to track, summarize, and post transactions to the main ledger accounts.
Subsidiary books are books of original entry that record transactions of a similar nature before they are posted to the ledger accounts. They help in grouping transactions, making bookkeeping more manageable and systematic.
The main types of subsidiary books covered here are:
| Subsidiary Book | Type of Transactions Recorded | Examples |
|---|---|---|
| Cash Book | All cash and bank receipts and payments | Cash sales, cash purchases, payment of expenses in cash |
| Purchase Book | Credit purchases of goods only | Buying inventory on credit from suppliers |
| Sales Book | Credit sales of goods only | Selling goods on credit to customers |
The cash book is a unique subsidiary book because it serves as both a journal and a ledger for cash transactions. It records all cash inflows (receipts) and outflows (payments) in chronological order. Unlike other subsidiary books, the cash book shows the running balance of cash on hand, making it easier to track cash availability.
In addition to cash, many businesses also maintain bank accounts. The cash book often includes separate columns for bank transactions, allowing it to record both cash and bank dealings.
graph TD A[Cash Receipt or Payment Occurs] --> B[Record in Cash Book - Debit for Receipts, Credit for Payments] B --> C[Update Running Cash/Bank Balance] C --> D[Periodic Balancing of Cash Book] D --> E[Post Totals to Ledger Accounts]
The purchase book records all credit purchases of goods made by the business. It does not include cash purchases or purchases of assets or services-only goods bought on credit. This book helps in tracking how much the business owes to suppliers.
The purchase book typically has columns such as:
The sales book records all credit sales of goods made by the business. Like the purchase book, it excludes cash sales and sales of assets or services. This book helps track the amount receivable from customers.
The sales book format is similar to the purchase book, with columns such as:
On 1st June 2024, a business received cash of INR 10,000 from a customer and paid cash expenses of INR 2,500 on the same day. Record these transactions in the cash book.
Step 1: Identify the nature of each transaction.
Step 2: Record the receipt on the debit side.
Date: 01/06/2024 | Particulars: Customer | Receipt: INR 10,000
Step 3: Record the payment on the credit side.
Date: 01/06/2024 | Particulars: Cash Expenses | Payment: INR 2,500
Step 4: Calculate the closing cash balance.
Opening balance assumed zero.
Closing balance = INR 10,000 (receipts) - INR 2,500 (payments) = INR 7,500
Answer: Cash book shows a closing cash balance of INR 7,500 on 1st June 2024.
On 5th June 2024, a business purchased 200 kg of sugar on credit from XYZ Suppliers at INR 50 per kg. Record this transaction in the purchase book.
Step 1: Confirm that this is a credit purchase of goods, so it belongs in the purchase book.
Step 2: Calculate the total amount.
Total = Quantity x Rate = 200 kg x INR 50/kg = INR 10,000
Step 3: Fill in the purchase book columns:
Answer: The purchase book entry records a credit purchase of sugar worth INR 10,000 from XYZ Suppliers on 5th June 2024.
On 10th June 2024, a business sold 150 kg of wheat on credit to ABC Traders at INR 40 per kg. Record this transaction in the sales book.
Step 1: Confirm this is a credit sale of goods, so it belongs in the sales book.
Step 2: Calculate the total amount.
Total = 150 kg x INR 40/kg = INR 6,000
Step 3: Fill in the sales book columns:
Answer: The sales book records a credit sale of wheat worth INR 6,000 to ABC Traders on 10th June 2024.
At the end of June 2024, the purchase book shows total credit purchases of INR 50,000, and the sales book shows total credit sales of INR 75,000. Explain how these totals are posted to the ledger accounts.
Step 1: Understand that subsidiary books record individual transactions, but only totals are posted to ledger accounts to save time.
Step 2: Posting purchase book total:
Step 3: Posting sales book total:
Step 4: This process ensures the double entry system is maintained, and ledger accounts reflect accurate totals.
Answer: Totals from purchase and sales books are posted to respective ledger accounts as summarized debit and credit entries, maintaining the double entry system.
graph TD PB[Purchase Book Total: INR 50,000] -->|Debit| PurchasesAccount[Purchases Account] PB -->|Credit| CreditorsLedger[Creditors' Ledger] SB[Sales Book Total: INR 75,000] -->|Credit| SalesAccount[Sales Account] SB -->|Debit| DebtorsLedger[Debtors' Ledger]
The cash book of a business shows the following transactions for 30th June 2024:
Calculate the closing cash balance and show how to balance the cash book.
Step 1: Calculate total cash receipts.
Opening balance + Cash received = INR 5,000 + INR 12,000 = INR 17,000
Step 2: Calculate total cash payments.
Rent + Payments to suppliers = INR 3,000 + INR 4,000 = INR 7,000
Step 3: Calculate closing cash balance.
Closing balance = Total receipts - Total payments = INR 17,000 - INR 7,000 = INR 10,000
Step 4: Balance the cash book by entering the closing balance on the credit side.
Answer: The cash book shows a closing cash balance of INR 10,000 on 30th June 2024.
When to use: Quickly identify where to record a transaction during exams.
When to use: To avoid posting errors and maintain accuracy.
When to use: To maintain clarity and meet exam expectations.
When to use: To improve speed and accuracy in exam scenarios.
When to use: To avoid confusion about where to post cash transactions.
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