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Subsidiary Book (Class 11) Meaning, Format and Types

Subsidiary Book:- Meaning, Format, Types (purchased book, purchased returned book, sales book, sales returned book, cash book), Advantages, and Disadvantages, Cash and trade discount.

Solution of account class 11

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Subsidiary Book Solution (Purchase book, Purchase return book, Sales book and Sales return book)

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Meaning of Subsidiary Book

A subsidiary book is a special journal and book of original entry in which transactions are recorded in a classified manner according to their nature. In a subsidiary book, transactions are classified based on their nature, and those of similar or repetitive nature are recorded separately. No other entries are required if the transactions are recorded in the Subsidiary book. After recording transactions into the subsidiary books, they are posted into ledger accounts. Hence, subsidiary books are the alternative solutions for the accountants to record the transactions in the general journal. 

Businesses have cash transactions and credit transactions. Cash transactions are those transactions in which payments are made immediately, whereas credit transactions are those in which the amount is promised to be made in the future. In a business, cash transactions are more frequently recurring; hence, all cash transactions are recorded in a separate book, called a cash book. The systematic nature of credit transactions is recorded in other subsidiary books.  

Importance of Subsidiary Books

The advantages or importance of Subsidiary books are listed as follows: 

  • Facilitate smooth recording of growing transactions: Recording all transactions in the book of journal entries makes very bulky and massive through time. This thing causes problems with managing the journal. In contrast, Subsidiary books facilitate the smooth recording of growing financial transitions over time in business entities. As different texts are used for recording different nature of the transactions, subsidiary books cannot be as large and massive as a general journal. 
  • Division of work is possible: A business can employ several book-keepers for separate books when transactions are recorded separately according to their nature.
  • Easy to obtain required information: Subsidiary books used separate books for recurring transactions. One can quickly get the necessary information at any time on such vital business transactions. 
  • No disturbance in other accounting processes: All other accounting words will have to be postponed when journals are taken for posting or auditing. In contrast to this, a particular accounting process, such as recording in the cashbook, or purchase book, or any other specific book, should be postponed for the duration of posting or auditing. 

 

Limitations of Subsidiary Books

Subsidiary books are not also free from limitations. The limitation of subsidiary books can be pointed out as follows: 

  • Recording the transaction in subsidiary books requires several registers or books and several book-keepers. Hence, keeping recording in the subsidiary books is expensive.
  • The system of subsidiary books lacks chronological order and lacks complete information. 
  • Recording in the subsidiary books is the practical system of recording. However, it is not suitable for a small business with a small volume of transactions. 

 

Types of Subsidiary books 

Subsidiary books are maintained based on the characteristics of financial transactions of the business concern. A business enterprise can buy goods on cash and credit and sell merchandise goods on cash and credit. According to the sample, it can make various payments by cash and by cheque, receipt cash, and cheques, and returned goods as defective or not. Receipt cash and cheques returned goods as defective or not according to sample, and received goods returned by the debtors for the same case. A separate book is maintained for each class of similar nature of transactions. The following table will show the different subsidiary books and the exceptional circumstances for maintaining these.


Types of subsidiary books

Transaction to be recorded

Purchase Book

It records the transaction only related to the credit purchase of merchandise goods.

Purchased Return Book

It records the transaction relating to returning goods purchased on credit to the suppliers or creditors.

Sales Book

The transactions related to returning goods sold on credit to the debtor or customer are recorded in Sale Returned Book.

Sales Return Book

The transactions related to returning goods sold on credit to the debtor or customer are recorded in Sale Returned Book.

Cash Book

It records the receipt and payment of cash, including deposits and withdrawals from the bank.

Bills Receivable Book

It records the transactions concerning the bills to be received or collected.

Bills Payable Book

It records the transactions concerning the bills to be paid or accepted by the traders.

Purchase Book

Purchase Book records the transaction relating to the credit purchase of merchandise goods purchased for resale purposes; it may be raw material, semi-finished goods, or finished goods. The purchase book is also called Purchase Day Book or Purchase Journal. The purchase book does not record the purchase of goods for cash. The goods purchased for cash are recorded in the cash book. Similarly, it does not record the transactions made for goods even if purchased on credit to facilitate business operation. For example, a motorcycle dealer, motorcycles are merchandise goods. In addition, if it purchased ten motorcycles on credit and utilized one of them for traveling for business purposes, then this motorcycle is not merchandise goods for the dealer. Instead, these operation assets are not included in the purchased book. It is journalized and then posted in the motorcycle or vehicle account. 

Format of Purchased Books

format-of-purchase-book

 

The details on the above format are as follows: 

  1. Date Column: In this column date of purchase is mentioned.
  2. Particulars: In this column, the name of the supplier, address, description of goods such as type, quantity, rate, and trade discount are recorded 
  3. Invoice number: It shows the number of invoices sent by the supplier. 
  4. L.F: This column is for entering the account number where the transactions are posted after recording in the purchase book. 
  5. Amount: Here, the total amount of purchased transactions are mentioned. 

 Example of Purchase Book

Purchased Return Book

Purchased return book records the transaction relating to returning goods purchased on credit to the suppliers or creditors. It is also known as Return Outward Book. The purchase returns of goods are recorded in the Purchase Return Book based on the debit note information. A Debit Note is a note prepared by buyers and sent to the supplier to inform that their account is debited with the number of goods being returned. 

Format of Purchased Return Book

format-of-purchase-return-book

 

The detail on the above format is as follows: 

  1. Date Column: In this column date of goods returned is mentioned.
  2. Particulars: In this column, the name of the supplier, address, description of goods such as type, quantity, rate, and trade discount are recorded 
  3. Debit Note No: It shows the number of a debit note sent to the supplier. 
  4. L.F.: This column is for entering the account number where the transactions are posted after recording in the purchase book. 
  5. Amount: Here, the total amount of purchased records transaction are mentioned. 

Example of Purchase Return Book


Sales Book

In the sales Book, the goods sold on credit to the customers or debtors are recorded. If any trade discount is given to the customer or debtor, such discount is then deduced from the list price of the goods to determine the balance being debt from the customers or buyers or debtors. The format of the Sale Book is similar to that of the Purchase Book. 

Format of Sales Book

format-of-sales-book 

The details on the above format are as follows

  1. Date Column: The date of goods sold on credit is entered in this column. 
  2. Particulars: In this column, the name of the buyers, address, description of goods such as type, quantity, rate, and trade discount are recorded 
  3. Invoice number: It shows the number of invoices sent by the supplier. 
  4. L.F.: This column is for entering the account number where the transactions are posted after recording in the sales book. 
  5. Amount: Here, the total amount of sales transaction are mentioned. 

 Example of  Sales Book


Sales Return Book

The transactions related to returning goods sold on credit to the debtor or customer are recorded in Sale Returned Book. It is also called Returned Inward Book. The sales returns transactions are recorded based on credit note information in Sale Returned Book. The supplier prepares a credit note after accepting the goods returned by the buyer. The supplier sends the credit note to the buyers stating that goods returned by buyers are accepted, and their account is credited to the extent of goods returned for some specific reason. The specimen of the Sales Return Book are as follows: 

Format of Sales Return Book 

format-of-sales-return-book

The details on the above format are as follows: 

  1. Date Column: In this column date of goods returned is mentioned.
  2. Particulars: In this column, the customer's name, address, description of goods such as type, quantity, rate, and trade discount are recorded. 
  3. Credit Note No: It shows the number of credit notes sent by the supplier to the customer. 
  4. L.F.: This column is for entering the account number where the customers' accounts are located. 
  5. Amount: Here, the total amount of purchased return transaction are mentioned. 

Example of  Sales Return Book


Trade and Cash Discount

Trade Discount 

The discount, which reduces the list price of goods, is a trade discount. The seller offers it to the buyer to induce him to make a bulk purchase. Such discount is deducted from the list price of goods. Therefore, no record is maintained for such a discount. The trade discount appears in the purchase or sales invoice and debit or credit note and is deducted from the list price of goods. Later, the same treatment is done for recording in the respective subsidiary books (Purchased book, sales book, purchase return book, or Sales Returned Book)

Cash Discount

The discount which reduces the amount of debt being paid is known as cash discount. As a debtor receives a discount, he or she records it as a gain, and a creditor records a cash discount as a loss since they sacrifice the benefit for no cost.

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