📑 Topics on this page (Jump to Topic):
📌 1. Subsidiary Books: What & Why
In a large business it is hard to record everything in one journal, so the journal is split into special books — the subsidiary books or books of original entry. This brings division of work, saves time and controls errors.
| Book | What is recorded | Posting to ledger |
|---|---|---|
| Cash book | All cash/bank receipts and payments | It itself serves as Cash and Bank A/c |
| Purchases book | Only credit purchases of goods | Monthly total to debit of Purchases A/c; suppliers credited |
| Sales book | Only credit sales of goods | Total credited to Sales A/c; customers debited |
| Purchases returns book | Goods returned to suppliers; debit note | Suppliers debited; total credited to Purchases Returns A/c |
| Sales returns book | Goods returned by customers; credit note | Total debited to Sales Returns A/c; customers credited |
| Bills receivable book | Bills of exchange received | Bills Receivable A/c debited; customers credited |
| Bills payable book | Bills of exchange accepted | Suppliers debited; Bills Payable A/c credited |
| Journal proper | Remaining items — opening, closing, adjustment, rectification, credit purchase of assets, loss by fire | Each entry posted individually |
⚠️ Exam Traps:
- Credit purchase of machinery/furniture is not entered in the purchases book — it goes to the journal proper.
- Cash purchases/sales go to the cash book, not the purchases/sales book.
- Trade discount is not recorded in the books; the net invoice amount is entered. Cash discount is recorded.
📌 2. Types of Cash Book
| Type | Columns (each side) | Feature |
|---|---|---|
| Simple (single column) | Cash | Only cash transactions |
| Double column | Cash + Discount or Cash + Bank | Discount column totals go to Discount A/c |
| Triple column | Cash + Bank + Discount | Contra entries possible |
| Petty cash book | Analytical columns (postage, stationery, travel…) | Small expenses; imprest system |
- The cash book is both a book of original entry and a ledger.
- The cash column always shows a debit balance (or nil); the bank column may show debit or credit (overdraft).
- Contra entry: depositing cash into the bank or withdrawing cash from it — both sides are in the cash book; "C" is written in the L.F. column.
- The discount column on the debit side = discount allowed; on the credit side = discount received.
📌 3. Petty Cash Book & Imprest System
- Imprest system: the petty cashier gets a fixed amount (imprest) at the start; at the end the main cashier reimburses exactly the amount spent.
- Example: imprest ₹5,000, spent ₹4,320 → reimbursement ₹4,320, opening balance again ₹5,000.
📌 4. Quick Revision
| Transaction | Book |
|---|---|
| Goods sold on credit to Mohan | Sales book |
| Goods ₹2,000 returned to Sohan | Purchases returns book |
| Furniture bought on credit | Journal proper |
| Withdrew ₹10,000 cash from bank | Cash book (contra entry) |
| Postage stamps ₹150 | Petty cash book |
| Customer accepted a bill and returned it | Bills receivable book |
💡 Memory Tip: "Purchases book = goods + credit" — both conditions must hold.
📌 5. Worked Examples
Example: double-column cash book (cash and bank) and imprest
Opening balances: cash ₹10,000, bank ₹20,000. (1) Cash sales ₹6,000; (2) deposited ₹8,000 into bank (contra entry C); (3) paid a creditor ₹5,000 by cheque; (4) withdrew ₹3,000 from bank for office use (contra entry C).
| Item | Cash (₹) | Bank (₹) |
|---|---|---|
| Opening balance | 10,000 | 20,000 |
| (1) Cash sales | +6,000 | — |
| (2) Deposited into bank (C) | −8,000 | +8,000 |
| (3) Cheque to creditor | — | −5,000 |
| (4) Withdrawn for office (C) | +3,000 | −3,000 |
| Closing balance | 11,000 | 20,000 |
Imprest system: the petty cashier holds an imprest of ₹5,000 and spends ₹4,200 in the month. At month-end the main cashier pays ₹4,200, restoring the balance to ₹5,000.
📌 6. Practice MCQs
📝 Practice MCQs (prepared by SF Prep — not PYQs)
Q1. The purchases book records: Practice
Correct answer: (D)
Cash purchases go to the cash book; credit purchase of assets to the journal proper.
Cash purchases go to the cash book; credit purchase of assets to the journal proper.
Q2. Credit purchase of machinery is recorded in the: Practice
Correct answer: (A)
Machinery is not goods, so not in the purchases book.
Machinery is not goods, so not in the purchases book.
Q3. The cash book is: Practice
Correct answer: (B)
Entries are made in it and it also serves as the Cash A/c.
Entries are made in it and it also serves as the Cash A/c.
Q4. The cash column of a cash book can show: Practice
Correct answer: (C)
Payments cannot exceed the cash in hand.
Payments cannot exceed the cash in hand.
Q5. The entry for depositing cash into the bank is a: Practice
Correct answer: (C)
Both sides fall in the cash book; "C" in L.F.
Both sides fall in the cash book; "C" in L.F.
Q6. Trade discount is: Practice
Correct answer: (D)
Only the net invoice amount is recorded.
Only the net invoice amount is recorded.
Q7. The total of the discount column on the debit side of the cash book shows: Practice
Correct answer: (A)
Receipts are on the debit side; discount allowed to customers is written there.
Receipts are on the debit side; discount allowed to customers is written there.
Q8. The imprest system relates to the: Practice
Correct answer: (B)
A fixed imprest is given to the petty cashier.
A fixed imprest is given to the petty cashier.
Q9. The imprest is ₹5,000 and ₹4,320 was spent. The reimbursement is: Practice
Correct answer: (A)
Exactly the amount spent is reimbursed.
Exactly the amount spent is reimbursed.
Q10. Goods returned by a customer are recorded in the: Practice
Correct answer: (C)
It is also called returns inward.
It is also called returns inward.
Q11. The document sent to a supplier when returning goods is a: Practice
Correct answer: (D)
We debit the supplier's account, hence a debit note.
We debit the supplier's account, hence a debit note.
Q12. The monthly total of the sales book is posted to the: Practice
Correct answer: (B)
Customers are debited individually; total sales credited.
Customers are debited individually; total sales credited.
Q13. Discount columns are not accounts, so their totals are posted to: Practice
Correct answer: (B)
Cash and bank columns are accounts; discount columns are memoranda.
Cash and bank columns are accounts; discount columns are memoranda.
Q14. The columns of a triple-column cash book are: Practice
Correct answer: (C)
These three columns on each side.
These three columns on each side.
Q15. A credit balance in the bank column shows: Practice
Correct answer: (D)
More was drawn than was deposited.
More was drawn than was deposited.
Q16. Closing and adjustment entries are made in the: Practice
Correct answer: (A)
Items with no special book go to the journal proper.
Items with no special book go to the journal proper.
Q17. One advantage of keeping subsidiary books is: Practice
Correct answer: (D)
Different staff can keep different books.
Different staff can keep different books.
Q18. Small expenses like postage and stationery are recorded in the: Practice
Correct answer: (A)
The analytical petty cash book.
The analytical petty cash book.
Q19. We accepted a bill and returned it to the supplier. It is recorded in the: Practice
Correct answer: (B)
For us it is a bill payable.
For us it is a bill payable.
Q20. A credit note is issued by: Practice
Correct answer: (C)
The seller credits the customer's account.
The seller credits the customer's account.