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Subsidary Books Of Accounts

Published in: Accountancy | B.Com Tuition
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    Sukhbinder S

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Subsidiary Books of Accounts With Examples.

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    1. Purchase Book or Purchase Journal: Purchase book is a book of original entry in which only credit purchases of goods are recorded. Cash purchases of goods are recorded in the cash book. Credit purchases of other assets are also not recorded in the purchase book; they are recorded in the journal proper. Goods here mean the items or articles in which business enterprise is dealing with or we can say that goods are the items which are used by the business enterprise for regular sale. For example, purchase of computer by a business enterprise which is dealing in cloth shall not be treated as its goods and items related to computers shall be regarded as its assets. Similarly, purchase of cloth by a business enterprise which is dealing in computers shall not be treated as its goods since items relating to only computers are its goods. Instead of recording transactions in the journal, the transactions relating to credit purchases of goods are directly recorded in the purchases book. However, the total of the purchases book shall be recorded on the debit side of the 'Purchases Account' The main intention for preparing the purchases book is to know the credit purchases at any particular period of time. The format of purchases book is as under: PURCHASE BOOK Date Invoice Name of the Supplier (Account to be credited) Purchase A/c LE Details Amount Dr. (a) Date: In this column, the date of the transaction, on which goods were purchased on credit, shall be recorded. (b) Invoice Number: The number of invoice (i.e., source document) showing the purchase of goods shall be recorded in this column.
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    (c) Name of the Suppliers: In this column, name of the person/supplier, from whom the goods were purchased, shall be written along with detailed description of goods viz., quantity, quality, rate, gross amount, trade discount and sales tax etc. (d) Ledger Folio (L.F.): Page number of the ledger of the supplier on which the transaction is recorded shall be recorded in this column. (e) Details: The individual total amount of various items, if purchased from the same supplier, shall be recorded in this column. Total trade discount by the supplier and sales tax paid (if any) shall also be adjusted in this column. (f) Total Amount: In this, the net amount payable to the supplier shall be recorded. The total of this column shall be transferred to the debit side of purchases account.
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    ILLUSTRATION (Purchase Book) Enter the transactions in the Purchases Book of MS Khanna Gaments 2011 Sept S Sept. 19 sept 20 sept. 22 Purchased from Gupta Bros. as per Invoice No. 171 120 Shtrts @ 95 each 60 School @ 40 each Purchased a Computer for omce use from M/S Hari. Tech. for 30.000 as per Invoice No. 207. Purchased from Jain Bros. as per Invoice No. 180 70 pairs Socks @ 18 each 90 Skirts @ 130 each Less Trade Discount 100/. Purchases from Vema & Co. as per Invoice No. 261 65 T-Shirts @ 115 each 80 Trousers @ 180 each Less : Trade Discount 200.4 Books of M/S Khanna Garments sot.trnoN Date Invoke PURCHASE BOOK Name of the Supplier (Account to be credited) Gupta Bros. 120 White [email protected] each 60 School [email protected]?40 each Jain Bros. 70 pairs [email protected] 18 90 Less : Trade Discount 10% Verma & Co. 65 80 [email protected]? 180 Less : Trade Discount 20% Purchases A/c LF 2011 Sept. 5 sept. 20 Sept. 22 sep. 30 Ncv 171 261 Details 11.400 2400 11700 1.296 7.475 14.400 2187 Dr. Arnount 13,800 17.500 42,964 2. Sales Book or Sales Journal: Sales book is a book of original entry in which only credit sales of goods are recorded. Cash sales of goods are recorded in the cash book. Credit sales of other assets are also not recorded in the sales book; they are recorded in the journal proper. Goods here mean the items or articles in which business enterprise is dealing or we can say that goods are the items which are used by the business enterprise for regular sale. For example, sale of furniture by a business enterprise which is dealing in stationery shall not be treated as its goods and items related to stationery alone shall be regarded as its goods.
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    Instead of recording transactions in the journal, the transactions relating to credit sales of goods are directly recorded in the sales book. However, the total of the sales book shall be recorded on the credit side of the ' Sales Account' The main intention for preparing the sales book is to know the credit sales at any particular period of time. The format of sales book is as under: SALES BOOK Date Invoice Name of the Customers (Account to be debited) Sales A/c Details Total Amount Cr. Explanations to Various Columns of Sales Book: (a) Date: In this column, the date of the transaction, on which goods were sold on credit, shall be recorded. (b) Invoice Number: The number of invoice (i.e., the source document) showing the sales of goods shall be recorded in this column. (c) Name of the Customers: In this column, name of the person/customers, to whom the goods were sold on credit, is written along with all details and description of goods viz., quantity, quality, rate, gross amount and trade discount etc. (d) Ledger Folio (L.F.): Page number of the ledger of the customer, on which the transaction is recorded, shall be recorded in this column. (e) Details: The individual total amount of various items, if sold to the same customer, shall be recorded in this column. Total trade discount allowed to the customer (if any) shall also be adjusted in this column.
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    (f) Amount: In this the net amount receivable from the customer shall be recorded. The total of this column shall be transferred to the credit side of sales account. ILLUSTRATION 2. (Sales Book) As per the Rough Book, following transactions of M/S Jain Fashion Wears are given. You are required to make out the Sales Book. 2011 Feb. I Feb. S Feb. 18 Feb. 20 sot.UT10N Sold to M/S 0m & Sons on credit as per Invoice No. 182 72 Kurtas @ 175 each. 45 Trousers @ 225 each. Less: Trade Discount @ 5%. Sold to Deepti & Co. as per Invoice NO, 282 50 Long Shirts @ 185 each. 65 [email protected] 233 each. Sold to M/S Gupta & Sons for Cash as per Invoice No. 173 20 Ladies suits @ I IS each. 30 T-Shirts @ 405 each. Less: Trade Discount @ 5%. Sold $ Chairs @ 50 each to Mis Kapil & Co. as per Invoice No. 381 Books of M/S Jain Fashion Wears SALES BOOK Date 2011 Feb. I Feb. S Feb 28 Invoice 182 20 Particulars M/S 0m & Sons. 72 [email protected]? 175 each. 45 [email protected]?225 each. Less: Trade [email protected]% M/S Dcepti & Co. 50 Long [email protected]? 185 each. 65 [email protected] each. Sales A 'c LF Details 12€.)0 10125 2725 1.136 9250 15275 Cr. Total Amount 21589 24,525 46.114 3. Purchases Return Book or Purchases Return Journal: Purchases return book is a book of original entry in which transactions related to the return of purchases of goods are recorded. There may be several reasons for returning the goods to the supplier; some of them are as under: (a) On finding some defects in the goods.
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    (b) When goods sent are not as per the samples or specifications. (c) If the quantity of goods supplied is more than the requirements. (d) When there is a breach of agreement between the seller and the purchaser. When the business enterprise returns the goods to the supplier, a debit note is sent to the party to whom this document is sent. Business enterprise may make a debit note against the supplier for an amount which is to be recovered from him when the business enterprise returns some goods which are defective in nature or not as per specifications. In this document, all details about the date and amount of transaction, the name of the party whose account is debited along with reason for debiting his account shall be mentioned.lt should be noted that the trade discount availed at the time of purchase shall also be adjusted at the time of returning the goods. The format of purchases return book is as under: PURCHASES RETURN BOOK Date Debit Note Particulars Purchases Retum Ale Details Total Amount cr. ILLUSTRATION 5. (Purchase Return Book) Enter the following transactions in the Purchases retum Book of Sh. Subash Chandra, a saree dealer 2011 July 10 Singhal Mitts. accepted the returns of goods (Which were purchased for cash). 10 silk sarees @ 100 July 15 Retumed to Aggarwal Mills— 100 silk sarees @ 110. Less: Trade discount @ 100/0
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    SOLUTION: July 18 Returned one typewriter (being defective) @ 3,500 to Garg & Co. July 25 Retumed to Grover & Sons — 50 Kota sarees @ 60 Less : Trade Discount Q Books or Shri Subash Chandra PURCHASE RETUR.N BOOK. Date July IS July 25 July 31 Debit Note Particulars Aggamal Mills 100 Silk [email protected] Rs Less: Trade Discount Grover & Sons 50 Kota sarees @ cOO Less: Trade Discount @ Purchase Return A'c Details 1 1.000 1.100 3.000 300 Cr. Amount 9.900 12.Ø0 4. Sales Return Book Or Sales Return Journal: Sales return book is a book of original entry in which transactions related to the return of sales of goods are recorded. The sales return book does not record return of goods sold on cash basis. There may be several reasons for returning the goods by the customers. Some of them are as under: (a) On finding some defects in the goods. (b) When there is delay in supply of goods to the customers. (c) When goods sent are not as per the samples or specifications. (d) If there is an oversupply of goods. (e) When there is a breach of agreement between the seller and the purchaser. When a business enterprise receives back the goods sold earlier, it makes a credit note in favour of the purchaser showing that his account has been credited in the books of business enterprise. In this document, all details about the date and amount of transaction, the name of the party whose account is credited along with reason for crediting his account shall be mentioned.lt should be noted that the trade discount allowed at the time of credit sale shall also be adjusted at the time of receiving goods. The format of sales return book is as under:
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    Date Credit Note SALES RETURN BOOK Particulars Sales Retum A/c LF. Details Total Amount ILLUSTRATION 6. (Sales Return Book) Prepare Sales Retum Book of Ram Lal Electricals from the following transactions . 2011 Oct. l. Oct. 15. Oct. 18 SOLUTION Goods returned by Sharma & Sons. 10 Table Fans @ IOO Less: Trade Discount @ Kapil Brothers returned 20 Table Fans @ e 110 Less: Trade Discount @ 1090 Saxena Ltd. retumed a typewriter worth 10.000 Books of Ram Lal Electricals SALES RETURN BOOK Date 2011 Oct. I Oct. 15 Oct.31 Credit Note No. Particulars Sharma & Sons 10 Table Fans 100 Less : Trade [email protected] 10% Kapil Brothers 20 110 Less : Trade [email protected] 10% Sales Return A/c L.F. Details 1,000 IOO 220 Dr. Amount 1.980 2.880 ILLUSTRATION 7. (Preparation of Subsidiary Books) From the following information. prepare necessary subsidiary books of M/S ABC Computers 2011 Mar. 3 Man 7 Bought 12 printers from Rajeev & co. at market price 10,000 each less 15% Trade Discount. Bought office fumiture from Hemant & Co. for 12,500.
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    Mar, 9 Mar 12 Mar. 17 Mar. 21 Mar. 23 Mar. 27 Mar. 30 SOLUTION Sold 280 CDs to J. V..M. Graphics for 4.000. Sold 5 Computers to Vig & Sons @ 25.000 cach Less Trade Discount, Retumed 2 Printer's to Rajeev & Co.. Market price 6.500 each. Less trade discount. Sent 5 CD Writers to Intes Software @ 4.500 each. Less : 5% Trade Discount. Sold old Fumiture for 1,200. I Computer returned by Vig & Sons for 18,000. Sold I Printer to Gupta & Co. @ 8.500 for Cash. Books of M/S ABC Computers PURCHASE BOOK Date 2011 Mar. 3 31 Date 2011 Mar 9 Mar. 12 Mar.21 Mar 31 Date 2011 Mar 17 Man 31 Invoice Invoice Debit Note No. Particulars Rajeev & Co. 12 [email protected]? 10.000 Less : Trade [email protected] I SOS Purchase A/c SALES BOOK Particulars J.V.M. Graphics 280 CD's Vig & Sons 5 [email protected]?25.000 each. Less: 10% Trade Discount Intex Software 5 CD [email protected] each. lass : 5% Trade discount Sales A/c LE Cr. PURCHASE RETURN BOOK Particulars Rajeev & Co. 2 [email protected] each Less: trade discount Purchases Retums A/c Details 12000 18.000 Details 125,000 12.500 22.500 1.125 Details 13,000 1.950 Amount 1.02000 1.02.OOO Amount 4.000 1.12500 21.375 1 37.875 Amount 11.050 Cr.
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    Date 2011 Star 31 Credit Particulars Vig & Sons. I Computer Sales Returns SALES RETURN BOOK AVC LF Details Amount 18,000 18.000 5. Bills Receivable Book: In the case of credit sales, sometimes the business enterprise draws a bill on the purchaser (debtor) and after its acceptance from the debtor it becomes a bill of exchange. In practical life, there are large number of sellers and purchasers and there are numerous numbers of transactions among them for drawing, accepting and making the payment in respect of bills of exchange. The bill is due for payment after adding 3 days to the period of the bill. Hence, it is very important to keep a close watch on all the bills due for payment. For this purpose, a separate book is to be kept in record which is known as Bills Receivable Book. All particulars of the bills viz. date of receipt, name of the party, period of the bill, due date of the bill, Ledger Folio (L.F.), amount of the bill etc. are to be recorded in this book. The format of the bills receivable book is as under: I.edget EOItO of Bill Date of Rccc•vcd Oatc of Bill From whom Recc•sed BILLS RECEIVABLE BOOK t)tawet Acceptor Term Due Date Payable Amount Cash Remarks Book Foll
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    ILLUSTRATION 8. (Bills Receivable Book) Prepare a Bills Receivable Book from the following transactions related to M/S Ajit & Company 2011 Received from H. Singh bill duly accepted for 10,000 dated Jan 8 3.12011, payable at three months. Jan 14 Drew on Vijay at one month for 12,000 and he accpeted the SOLUTION t)atv• Date Recopt Bill next day. Books of M/sAjit & Company BILLS RECEIVABLE BOOK l)raucr Acceptor Whcrc Vcrm Dug Pay abl Date From uhom eccjved Singh Vuay I.edget F0110 Self Self H Singh Vijay 3 V,onth Month Total Amount Cash Remarks BOOK 10.000 12.000 22.000 6. Bills Payable Book: In the case of credit purchases, sometimes the business enterprise accepts a bill which is drawn by the seller (creditor) which is known as bills of exchange and for the business enterprise it is known as bills payable. The bill is due for payment after adding 3 days to the period of the bill. Thus, it is very important to keep a close watch on all the bills due for payment. For this purpose, a separate book is to be kept in record which is known as Bills Payable Book. All particulars of the bills viz. date of acceptance, name of the party to whom bill is given, period of the bill, due date of the bill, Ledger Folio (L.F.), amount of the bill etc. are to be recorded in this book. The format of the bills payable book is as under:
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    Bill-S PAYABLE BOOK term Due Pay cc here Amount Date Patd •a hom (inen Payable Date Cash Remarks Book Folto ILLUSTRATION 9. (Bills Payable Book) Prepare a Bills Payable Book from the following transactions related to M/S Sheetal Prasad & Company 2011 Jan 14 Accepted A's draft for 25,000 at two months. Jan 17 Gave acceptance at two months for 1,00.000 to C. SOLUTION : Books of M/S Sheetal Prasad & Company BILLS PAYABLE BOOK Term Due i. V Amount i)atv Drawer Payee Where No of Bill 2 Date of Bill To whom Gwen Payable Date 2 Oonths Months Paid t .00 000 t 25000 Cash Remarks Book Folio 1 '111 c 7. Journal Proper or General Journal: So far we have discussed that in the case of sub divisions of journal, transactions relating to the cash are recorded directly in the cash book and transactions relating to non-cash specialised items, are directly recorded in subsidiary books viz. sales book, purchase book, sales return, purchase return, bills receivable and bills payable book. Now the question arises what will happen to those transactions which neither relate to cash nor relate to the other subsidiary books, like sale/purchase of an asset on credit? It cannot be recorded in the cash book as no cash flow is there and asset being not included in the terminology of goods; it cannot be recorded in the purchase book either. These are the residual
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    transactions which cannot find place in any of the sub divisions of journal and are recorded in the journal known as journal proper or general journal. Usually, the following types of transactions are recorded in the journal proper: (i) Opening Entries: Through opening entries, the balances in respect of various assets, liabilities and capital appearing at the end of previous accounting year are brought forward at the beginning of current accounting year. (ii) Closing Entries: Closing entries are the entries which are passed to transfer nominal accounts to respective income statements so that financial statements of the business enterprise can be prepared. (iii) Transfer Entries: Transfer entries are those entries which are passed to transfer an amount of an account or the balance of an account to another account. For example, transferring the balance of current account to capital account. (iv) Adjusting Entries: At the end of an accounting year, some adjustments are to be carried out which were revealed later on. For example, recording closing stock, depreciation and various outstanding expenses or incomes. These items are recorded through passing adjusting entries. (v) Entries for rectification of errors: To rectify any accounting errors, these entries are to be passed. (vi) Other Entries: The entries related to credit sale or purchase of assets etc. are recorded in the journal proper.

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