UNIT -4 SUBSIDIARY BOOKS

Transcription

1 UNIT -4 SUBSIDIARY BOOKS

2 Understanding the technique of recording transaction in subsidiary books Posting from subsidiary books to ledger Maintaining of subsidiary books doesn t take away the importance of Journal Difference between Subsidiary book and principle books

3 (1) There are numerous transactions which occur so many times in a day. (2) It is inadequate and inconvenient to record the transaction in the book of original entry i.e. journal. (3) Every Transaction recorded makes journal bulky, tedious and consumes more time, labour and money.

4 (4) (5) (6) So the transactions which are of repetitive nature are recorded in a separate book through special journal. Such separate book of original entry, maintained for recording the similar and repetitive types of transactions is known as subsidiary books. Also known as sub-journal or sub- division of journal, this book includes purchase book, sales book, purchase return book, sales return book and cash book.

5 Generally a business transaction consists of Purchase of goods sale of goods Receipt of cash payment of cash

6 For transaction recorded in such book there will be no Journal entry As they are recorded in books which are specially meant for it Later based on those books, ledger account are prepared

7 This system is known as Practical system of book keeping (OR) English system of book keeping In above system, there is no departure from basic rule of the double entry system

8 Subsidiary books are those from which ledger account are prepared From ledger a Trial balance Subsidiary books Ledger Trial balance

9 Journal Cash (receipt/ Payment) Bills receivable / Bills Payable Purchase/ Purchase return Sales/ sales return

10 The various type of subsidiary books can be Understood by following example q Ex:- Mr. Hari started business with capital of Rs.100,000. This would be recorded under receipt side of cash book

11 q He has purchase some Office furniture and other office equipment worth Rs 23400/= and some trading good worth Rs 5000/= for cash Purchase of assets would be recorded on Payment side of Cash book

12 q To start with trading activity he brought goods on credit from Mr. Narayan for Rs 50000/= and also purchase goods on cash for Rs 8000/= Credit purchase All credit purchase will be entered in purchase book Cash purchase Cash purchase will form part of cash book

13 q Some of those good which was purchase on cash and credit basis was returned to supplier due to some defect Credit purchase return All credit purchase return are recorded in purchase return book(return outward) Cash purchase return All cash purchase return are entered in cash book only

14 q He sold goods to Mrs Swetha on credit basis at price of Rs 24500/= and to Mrs Ankita for Rs 8450/= on cash basis Credit sale All credit sale will be entered in sales book Cash sale Cash sale will form part of cash book

15 q Due to some quality difference Mrs. Swetha, to whom good were sold on credit, returned some goods. At same time Mrs. Ankita also returned entire goods which were sold at cash Credit sales return Cash sales return Are always routed to sales return book.(return inward) Are entered in cash book

16 Bills receivable Dealt separately Bills payable Dealt separately

17 Cash book To record all cash transactionswhatever be their nature Purchase book To record all transactions of credit purchase Purchase return book To record all transactions of purchase returns to suppliers

18 Sales book To record all transactions of credit sales Sales return book To record all transactions of sales returns from customers

19 Bills receivable book To record of the bills received from debtors Bills payable book To record of bills accepted by us

20 Memory technique F-ADSS F Facility in checking A Availability of information D Division of work

21 s Specialization and efficiency s Saving of time

22 Expensive in case of small business As transaction are very less, they can maintain business transaction in journal proper Difficult to locate error Fundamental of accountancy should be strong else locating of error will be time consuming

23 .. First transaction are recorded in subsidiary books, later they are posted in Ledger From subsidiary book we can t prepare Trial Balance Because subsidiary books records only specified transaction. For EX:- Fixed assets, Debtor, Creditor etc., doesn t find place in subsidiary book

24 . Therefore primary books are those books from which a trial balance can be prepared Which are {A} Ledger {B} Cash book. Hence subsidiary books assist only in processing

25 Financial books are divide into to category A] Ledger Book s B] Subsidiary Book s It worth noting that Cash book is part of both the books

26 Financial book Primary books Subsidiary books Ledger Cash book Cont

27 Cash book Simple cash book Double column cash book Triple column cash book Petty cash book

28 Credit Purchase Purchase book Purchase return book Subsidiary book Credit Sale Receivable Journal proper Sale book Sales return book Bills receivable Bills payable

29 ... Is used to record those transaction which are not recorded elsewhere If there is no special book meant to record a transaction, it is recorded here Therefore the use of journal proper is restricted to following entries

30 journal journal Opening Entries Adjustment Entries Closing Entries Rectification Entries Transfer Entries Entry on dishonor of bill

31 Opening entries are the entries which are made at the starting of the financial year. Closing entries transferring balances of the trading and profit and loss account at the end of year is called closing the books and entries passed at that time are called closing entries. Transfer entries are the entries which are passed in order to transfer one account to another account. Adjustment entries are passed at the end of an accounting period in order to modify the accounts For example:- outstanding expenses, prepaid income, interest on capital etc.,

32 Rectification entries are passed to rectify the error detected the books through an entry in journal proper Entry of dishonor bill Dealt separately Miscellaneous entry Such as: 1) credit purchase of Fixed assets, (2) Discount after issue of invoice (3) Bad debts,(4) Transfer of profit, etc.,

33 Trade discount Debit note Credit note Sales tax Freight Return outward/ inward

34 Trade discount is an allowance made from the full invoice price to a customer who buys goods in the ordinary course of trade Generally trade discount is adjusted in invoice only And taxes such as Vat or sales tax is charged after allowing discount

35 For ex: Swetha sold goods to Mr Hari worth Rs 6000/- less 10% Trade discount subject to 10% sales tax. Ans gross amount 6000 Less-Trade (600) Net price 5400 Add sales 10% 540 Total amount 5940

36 Debit note A transaction which reduce amount payable Credit note A transaction which reduce amount receivable To a vendor From a customer is a debit memo is a credit memo

37 Debit note Purchase return, quality difference Credit note Sale return, discount Is always issue by BUYER It always issue by SELLER

38 It is levied on Purchase and sale of good Sales tax is part of indirect tax Where seller collect on behalf on Govt. from buyer and remit to Govt. Its neither an income nor expenses A separate ledger account is open for this purpose.

39 Mr X buy goods from Mr Y The balance in sales tax is either payable or refundable From which he will collect tax and credit to sales tax account Sales tax Now, he will sell those good to Mr Z For which Mr.x will pay tax Which he will enter tax amount on Debit side of sales tax account

40 Is nothing but cost of transportation for bringing the goods to present location Generally it is included in the purchase bill Hence it has to be accounted separately

41 Following journal entry is pass Purchase A/C Dr Sales tax A/C Dr Freight A/C Dr To Creditor

42 Return outward Return inward Also termed as sales return Also termed as purchase return As goods are going out it said as return outward(from buyer point of view) As goods are coming in it said as return inward( From seller point of view)

43 Return inwards/ purchase return Creditor A/C.Dr To Purchase Return A/C Return outward /sales return Sales return A/C.Dr To Debtor A/C

44 1) In which book or original entry, will you record the following transaction (i) Debit note issued are used to prepare (a) Sales return book (b)purchase return book (c) Sales book (d) purchase book Ans:- (B) one of the transaction where debit note is issued is purchase return

45 (ii) An allowances of Rs 50 was offered for an early payment of Rs 1050 (a)sales book (b)cash book Journal (d)purchase book Ans:- cash book In double column cash book we have discount column

46 (iii) A second hand motor was purchased on credit for Mr.B for Rs (a) Journal (b) sales book (c) Cash book (d) purhase Ans:- (a) Purchase of fixed assets are recorded in journal proper

47 (iv) Accounting for partial recovery from Mr. c of an amount of Rs 2000 earlier written off as bad debt (a)journal (b) sales book purchase book (d) cash book Ans:- (d) Cash is received, hence posted in cash book. Second effect would be given to P&L account

48 (v) A credit purchase of stationery by a stationery dealer (a) Purchase book (b) sales book (c) Journal (d) cash book Ans:- (a) Purchase of trading goods on credit is recorded in purchase book

49 (vi) A bills receivable of Rs 500, which was received from a debtor in full settlement for a claim of Rs 600, is dishonored (a) Purchase return book (b) purchase book (c) Journal (d) Bills receivable book Ans It is an adjustment entry

50 (vii) Unpaid salary for ` 340 is to be provided for in the accounts. (a) Bills Receivable Book (b) Purchases Book (c) Journal Proper (General Journal) (d) Purchases Return Ans: It is an adjustment entry

51 (viii) A debit note for ` 2,000 issued to Mr. F for goods returned by us is to be accounted for (a) Bills Receivable Book (b) Purchases Book (c) Journal Proper (General Journal) (d) Purchases Return Ans: (d) It is an purchase return

52 (ix) Goods Outward Journal is meant for recording all returns of goods (a) Sold on credit (b) Purchased on credit (c) Purchased on cash (d) None of the above Ans: -(b)

53 (x) Purchases day book records: (a) All cash purchases. (b) All credit purchases (c) Credit purchases of goods in trade. (d) None of the above Ans : (b)

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