ASSIGNMENT

Unit IV: Subsidiary Book

1. Prepare a simple cash book of Mr. Shriram from the following details:
2011
 
Feb.
1. Balance of cash Rs 65,500.
2. Brought additional capital Rs 12,000.
4. Received from Nilesh on account Rs 3,800.
Purchased goods from United Ltd. Rs 16,000 and paid half the amount
7.
immediately.
9. Received commission from Aarti Traders Rs 2,650.
10. Paid to Prithviraj Traders on account Rs 17,800.
13. Purchased stationery for office use Rs 2,460.
17. Received rent Rs 4,900.
20. Paid Rs 1,750 for insurance premium.
22. Sold goods for cash Rs 13,800.
25. Purchased 10% debentures Rs 20,000.
27. Paid telephone bill Rs 3,000 and electricity bill Rs 2,340.
28. Deposited into bank all cash in excess of Rs 11,000
2. What is Subsidiary Book? Explain types of Subsidiary book?

Subsidiary book may be defined as a book of prime entry in which transactions of a

particular category are recorded. In other words, in order to save time and energy,
the transactions which are of similar character are recorded in separate books,
these are called subsidiary books or subdivision of journal. A number of subsidiary
books are opened to record all business transactions. In practical system of book-
keeping, subsidiary books are: Cash Book: Purchase Book: Sales Book:
Purchase Return Book: Sales Return Book:

Types of Subsidiary Books

1. Cash Book : This book records all cash transactions whenever cash is received or
paid.
2. Purchases Book : This book records allcredit purchases of goods.
3. Purchases Return Book : This book recordstransactions, inwhich goods
purchased on credit are returned.
4. Sales Book : This book records credit sale of goods.
5. Sales Return Book : This book recordstransactions inwhichgoodssold on credit
are returned.

CASH BOOK
Transactions held in cash or by cheque are recorded in this book. There are two
sides in cash book. In the left-hand side all cash receipts are recorded and in the
right hand side all cash payments are recorded.
Cash book serves the purpose of cash account and thus, there is no need to open
cash account separately in ledger. In cash book all cash receipts and cash payments
are recorded. We can also record bank deposits, bank withdrawals, receipts and
payments through cheques in cash book. Some business organizations also record
cash discount allowed to customers and cash discount received from suppliers in
cash book.
Cash Book is of four types: Single column cash book, Double column cash book,
Triple column cash book, Petty cash book. In the single column cash book only
receipt of cash and payment of cash are recorded.
A simple or single column cash book contains only the 'cash' column. The simple
cash book has two sides (i) debit side (left-hand side) and (ii) Credit side (right –
hand side. All receipts are recorded in the debit side and all the payments are
recorded in the credit side of a simple column cash book.
PURCHASE BOOK
Purchases Book is a subsidiary book in which only credit purchases of goods are
recorded. When we purchase goods on credit the seller gives us a statement of
sales called the ‘invoice’. The invoice contains particulars of goods, such as
quantity, quality, rate, discount and total net amount payable etc. For the purchaser
it is an inward invoice because it comes in. The purchaser gives a separate number
to each inward invoice and files them in the order of their receipt for future
reference. So there is no need to write detail description or purchases, in the
purchases book.
In the purchases book, we only write the date of the purchases, inward invoice
number, the name of the seller, ledger folio and the total amount payable to him.
The postings from the purchases book are made to the debit of purchases account
and to the credit of the different sellers accounts. In the purchases account, instead
of individual, total, periodical debit is given, while the sellers are individually
credited.

PURCHASE RETURN BOOK

Purchases Return book is also a subsidiary book. In this book we record the return
of goods, purchased by us on credit. The goods can be returned on various grounds.
For example it may not be according to the sample, it may be spoiled, or it may be
in excess of the quantity demanded. When goods are returned a statement of the
goods returned is sent to the seller. This statement is called “Debit Note”. Debit
note contains the description of the goods returned, the reasons for its return and
in this connection amount debited to the seller’s account. Just like the inward
invoice, each debit note is given a number and filed for future reference. So in
purchases return book, there is no need to write full description of the goods
returned. In purchases Return book, we only enter the date of the goods returned,
debit note number, seller name, his ledger folio, and the total value of the goods
returned. Posting from the purchases Return book are made to the debit of the
persons to whom the goods are returned and to the credit of purchases Return
account. In the purchases Return account periodical totals are credited, while the
sellers account are individually debited

SALES BOOK
Sales book is also a subsidiary book. Only goods sold on credit are entered into it.
When we sell goods we give its invoice to the purchaser. For us it is an “outward
invoice”. We make out copies of each of the outward invoices and file them, for
future reference. So in sales book there is no need to write full particulars of the
goods sold. In sales book we only write, the date of the sale, outward invoice
number, purchaser’s name, his ledger folio, and the total, amount receivable from
him. The ledger postings from the sales book are made to the debit side of the
individual purchasers account and to the credit of the sales account. In sales
account periodical total is credited.

SALES RETURN BOOK

Sales return is also a subsidiary book. We record in it goods returned by the
customers purchased by them on credit. When we accept the returned goods from
the customer we send him a credit note. Credit note contains the particulars of the
goods accepted by us, and the amount in this connection credited in the customer’s
account. We make out copies of each of the credit notes we send. They are
numbered and filed for future reference. In sales Return Book we only enter the
date of the goods returned, credit note number, name of the person, who returned
the goods, his ledger folio and the amount of the goods returned. The postings from
the sales return book are made to the debit of the sales return account and to the
credit of the individual customers accounts. In sales Return account periodical total
is debited.