MB0041-Financial and Management Accounting Unit-4 Secondary Books

Program Semester Subject Code Book Id Subject Name

: MBA (Banking & Finance) :I : MB0041 : B1130 : Financial and Management Accounting

Unit number
Unit Title

:4
: Secondary books

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Lecture Outline

Objectives Subsidiary books Purchase book Sales book Purchase return book Sales return book Trade discount Vs Cash discount Bill of Exchange Petty cash book

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Objectives
Objectives : List the various primary books containing the original entries Difference between trade and cash discount To know various secondary books Procedure for balancing a ledger account

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Subsidiary Books
The types of subsidiary books include

1. 2. 3. 4. 5. 6. 7. 8.

Purchase Book Sales Book Purchase Return Book Sales Return Book Bills Receivables Book Bills Payable Book Cash Book Journal Proper

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Purchase Book
ONLY CREDIT PURCHASES ARE RECORDED CASH PURCHASES ARE RECORDED IN CASH BOOK TRADE DISCOUNT ARE GRANTED BY THE SUPPLIER ON THE LIST PRICE CASH DISCOUNT IS ALLOWED ON THE INVOICE PRICE

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Sales Book
CONTAINS DETAILS OF CREDIT SALES THE TOTAL OF SALES BOOK IS TRANSFERRED TO LEDGER THE PARTIES TO WHOM CREDIT SALES ARE MADE ARE KNOWN AS TRADE DEBTORS SALES ACCOUNT SHOWS CREDIT BALANCE TRADE DEBTORS ACCOUNT SHOWS DEBIT BALANCE

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Purchase Return Book

When a firm wants to return the goods purchased due to damages or non adherence to specifications such transactions are recorded in purchase return books. A debit note is a document prepared by the purchaser to inform the supplier that his account has been debited with the amount mentioned and for the reason stated therein.

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Sales Return Book

Sales return books is opened for the purpose of recording the return of goods sold on credit. Credit note is prepared to show that the creditors account is credited to the value of the goods returned by them to us.

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Trade Discount Vs Cash Discount

Trade Discount
It is a reduction granted by a supplier from the list price or services on business consideration.

Cash Discount
It is the reduction granted by the supplier from the invoice price in consideration of immediate payment or payment within a stipulated period.

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Out of the box thinking

If I need to promote sales should I allow trade discount or cash discount? Trade discount Goods sold on cash was returned by the customer. Can we enter this transaction in sales return book? No. When goods are returned the journal entry is : Sales a/c Dr. To cash account Being goods sold on cash returned. Only goods returned on credit sales appear in sales return book.

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Activity

Bill of exchange

Promissory Note

Bangalore 25th Feb 2010 Bangalore 25th Feb 2010 Three months after date, pay me or my or my order, the sum of rupees Three thousand only for the value Received. To B. Rajesh K. Ramesh 10, Gokulam Park Road Mysore Rs.3000 On demand (or three months after date) I promise to pay Mr. Sanjeev or order the sum of rupees one thousand only with interest of 5 per cent per annum for the value received.

What is the difference between a bill of exchange and a promissory note?

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MB0041-Financial and Management Accounting Unit-4 Secondary Books

Petty Cash Book

In Imprest system of accounting, at the beginning of a month, a definite sum of money is given by chief cashier to petty cashier for petty expenses. At the commencement of the next period, the petty cashier is reimbursed equal to what he had spent during the earlier period.

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Reference
http://www.authorstream.com/Presentation/tkjainbkn146830-bill-exchange-law-cat-gmat-mba-managementbusiness-research-cfp-cfa-frm-cpa-ca-cs-icwa-india-rajasthanentertainment-ppt-powerpoint/

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