Subsidiary Books The process of recording the transactions in the journal and then posting to ledger accounts, requires

each and every transaction to be recorded first and then posted to ledger accounts. If we try to analyze the transactions, we may find that more than 95 per cent of the transactions relate to cash (bank), purchase, sales, purchase returns, sale returns, bills received and bills accepted. Since these few types of transactions constitute bulk of the total transactions, we can save time and efforts by recording them in separate books rather than first recording in the journal and then individually posting to ledger accounts each entry separately. The books maintained to record these transactions separately are called special purpose journal or day books or Subsidiary books. In the following paragraphs, we will discuss these Subsidiary books. Kinds of subsidiary books:

Subsidiary books

Cash book

Day book

Bill book

Single Column Double Column Triple Column

Purchase book

Bills Receivable Book

Purchase Return Book Sales Book Sales Return Book

Bills Payable book

Petty cash Book

Cash Book Cash book is used to record those transactions that involve either receipt or payment of cash. It serves the purpose of journal as well as ledger (cash) account. For all the transactions recorded in cash book, only one posting is required. The amount column in the cash book may be more than one depending upon the needs of the organization. If the

organization has only cash transactions, cash book with single amount column on either side is maintained. This is usually referred to as simple cash book. Simple Cash Book When all receipts and payments are in cash only, the cash book contains only one column on each (debit and credit) side. It is called simple cash book or single column cash book. A format of simple cash book is given

Double Column Cash Book However, this is a remote possibility in todays world, where we can think even of personal transactions purely in cash because of security and legal considerations the transactions have to be routed through banking system. This requires addition of one more amount column on that cash and bank transaction may be recorded separately and simultaneously. We have more transactions through the bank which requires the ascertainment of cash position both, in hand and at bank; this necessitates the addition of one more column on either side in the cash book to facilitate the recording of banking transactions of the business. Format: Double Column Cash Book Dr Date Particulars L.F Cash Bank Date Particulars L. F Cr Cash Bank

Triple Column Cash Book: This cash book has three amount columns (cash, bank and discount) on each side. All cash receipts, deposits into bank and discount allowed are recorded on debit side and all cash payments, withdrawals from bank and discount received are recorded on credit side.

Format:
Date Particulars L.F Cash Bank Discount allowed Date Particular L.F Cash Bank Discount Received

4. Petty Cash Book In every organization, a large number of small payments, such as, for conveyance, cartage, postage, telegrams and other expenses (collectively recorded under miscellaneous expenses) are made. These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may become very bulky. To avoid this, large organizations normally appoint one more cashier (petty cashier) and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book. The petty cashier works on the imprest system. Under this system, a definite sum, say Rs. 5,000, is given to the petty cashier at the beginning of a certain period. This amount is called imprest money. The petty cashier goes on making all small payments out of this imprest amount, and when he has spent the substantial portion of the imprest amount say Rs. 4,780, he gets reimbursement of the amount spent from the main cashier. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments. In certain cases, the petty cash system is operated through the main cash book itself. In such instances, the petty cash book is not maintained independently. The petty cash book generally has a number of columns for the amount on the payment side (credit) besides the first total amount column. Each of the other amount columns is allotted for items of specific payments which are most common. The last amount column is designated as Miscellaneous followed by a Remarks column. In the miscellaneous column those payments are recorded for which a separate column does not exist. In the remarks column the nature of payment is recorded. At the end of the period, all amount columns are totaled. The total amount column will show the total amount spent and to be reimbursed. On the receipt (debit) side, there is only one amount column. Columns for the date, voucher number and particulars are common for both receipts and payments. The format and entries in the petty cash book are illustrated below:

Balancing of Cash Book On the left side, all cash transactions relating to cash receipts (debits) and on the right side, all transactions relating to cash payments (credits) are entered date-wise. When a cash book is maintained, a separate cash account in the ledger is not opened. The cash book is balanced in the same way as an account in the ledger. But it may be noted that cash book will always show debit balance since cash payments can never exceed cash available (opening balance of cash plus receipts during the period). The source document for cash receipts is generally the receipt issued by the cashier. For payment, any document, invoice, bill, receipt, etc. on the basis of which payment has been made will serve as a source document for recording transactions in the cash book. When payment has been made, all these documents, popularly known as vouchers, are given a serial number and filed in a separate file for future reference and verification. Advantages of cash book: 1. Saves time and labour: When cash transactions are recorded in the journal a lot of time and labour will be involved. To avoid this all cash transactions are straight away recorded in the cash book which is in the form of a ledger. 2. To know cash and bank balance: It helps the proprietor to know the cash ban bank balance at any point of time 3. Mistakes and frauds can be prevented: Regular balancing of cash book reveals the balance of cash in hand. In case he cash book is maintained by business concern, it can avoid frauds. Discrepancies, if any can be identified and rectified. 4. Effective cash management: Cash book provides all information regarding total receipts and payments of the business concern at a particular period. So that effective policy of cash management can be formulated. Other Day Books When there are large numbers of transactions of the similar type, the firm can maintain subsidiary books for recording transactions of similar nature in one book only. In that case, transactions of repetitive nature such as purchases, sales, purchases returns, sales returns are recorded in subsidiary books and the remaining transactions are recorded in the journal called the general journal. Subsidiary books are also called day books. Such as Purchases book Sales book Purchase returns book Sales returns book Bills receivables book Bills payables book 1 Purchases Journal (Book)

All credit purchases of merchandise are recorded in the purchases journal, cash purchases are recorded in the cash book. Other purchases such as purchase of office equipment, furniture, building, are recorded in the general journal if purchased on credit or in the cash book if purchased for cash. The source documents for recording entries in the books of accounts are invoices or bills received by the firm from the suppliers of the goods. Entries are made with the net amount of the invoice. Trade discount and other details of the invoice need not be recorded in this book. The format of the purchases journal is the same as that of the general journal except that one more column (credit) for the invoice number is added after the date column, while one amount column is deleted. The monthly total of the purchases book is posted to the debit of Purchases Account in the ledger. Posting to the credit side of individual suppliers account may be made daily. Format: Date Particulars Purchase book Invoice No L.F Amount Details Total Remarks

2 Sales Journal (Book) All credit sales of goods are recorded in the sales journal. The format of the sales journal is similar to that of the purchases journal. The source documents for recording entries in the sales journal are sales invoices or bills issued by the firm. The date of sale, invoice number, name of the customer and amount of the invoice are recorded in the sales journal. Other details about the sales transaction including terms of payment are available in the invoice. In fact, two or more than two copies of a sales invoice are prepared for each sale. The book keeper makes entries in the sales journal from one copy of the sales invoice. Periodically, at the end of each month the amount column is totaled and posted to the credit of sales account in the ledger. Posting to the debit side of individual customers accounts may be made daily. 3 Purchases Returns Journal (Book) In this book, goods returned to supplier and recorded. Sometimes, goods purchased are returned to the supplier for various reasons such as, the goods are not of the required quality, or are defective, etc. For every return, a debit note (in duplicate) is prepared. The original note is sent to the supplier for making necessary entries in his book and the duplicate copy is retained. The supplier may also prepare a note which is called the credit note. The source document for recording entries in the purchases returns journal is generally a debit note. A debit note will contain the name of the seller (to whom the goods have been returned), details of the goods returned and the reason for returning the goods. Each debit note is serially numbered and dated. The format of the purchases returns journal is also similar to that of the purchases journal 4 Sales Returns Journal (Book) This journal is used to record sales returns from customers to whom the goods were sold credit. On receipt of goods from the customer, a credit note is prepared, like the debit note for purchase returns. The difference between the credit note and the debit note is that the former is prepared by the seller and the latter is prepared by the purchaser. Like the

debit note, the credit note is also prepared in duplicate and contains details relating to the name of the customer, details of the merchandise received back and the amount. Each credit note is serially numbered and dated. The source document for recording entries in the sales returns book is generally the credit note. The format of the sales returns journal is similar to that of the purchases return journal. 5 Bills Receivable Book The sales on credit may be made on an open account system or the seller may insist on the buyer to accept the bill for the value of goods purchased. A bill in such a case, is bill receivable for the seller, whereas, bills payable for the purchaser. If the bills are received against credit sales, the seller may record the bills so received in a separate book which helps in getting the full information about the bills. 6. Bills Payable Book When the bills are more commonly accepted to acknowledge debt, it is better to maintain the record of bills accepted in a separate book. Balancing of Accounts Accounts in the ledger are periodically balanced, generally at the end of the accounting period, with the objective of ascertaining the precise position of the business firm with regard to them. Balancing of an account means that the two sides are totaled and the difference between them is inserted on the side which is shorter in order to make their totals equal. The words balance c/d or c/f are written against the amount of the difference between the two sides. The amount of balance is brought down in the next accounting period indicating that it is a continuing account, till finally settled or closed. In case, the debit side exceeds the credit side, the difference is written on the credit side and is called a debit balance. If the credit side exceeds the debit side, the difference between the two appears on the debit side and is called credit balance. The balancing of an account is illustrated below with the help of an illustration explaining the complete process of recording the transaction, posting to ledger and balancing the account. Advantages: 1. Division of Labour: The division of journal, resulting in division of work, ensures more clerks working independently in recording original entries in the subsidiary books. 2. Efficiency: The division of labour also helps the reduction in work load, saving in time and stationery. It also gives advantages of specialization leading to efficiency. 3. Prevents Errors and Frauds: The accounting work can be divided in such a manner that the work of one person is automatically checked by another person. With the use of internal check, the possibility of occurrence of errors and frauds may be avoided. 4. Easy reference:

IT facilitates easy references to any particular item. For instance total credit sales for a month can be easily obtained from the sales book. 5. Easy postings: Posting from the subsidiary books are made at convenient intervals depending upon the nature of the business.