### Subsidiary Books

Subsidiary books are specialized divisions of the journal designed to record transactions of a similar

nature. This method reduces the load on the general journal and facilitates better organization and

efficiency. These books are crucial for managing transactions like credit sales, credit purchases,

returns, and small payments, which would otherwise clutter the general journal.

#### Significance of Subsidiary Books

1. **Saves Time**: Transactions are recorded directly without requiring lengthy narrations, reducing

clerical work and saving hours.

2. **Division of Work**: Each book focuses on specific types of transactions, allowing tasks to be

split among staff, enhancing efficiency, and minimizing errors.

3. **Specialization**: Dedicated handling of one type of book (e.g., purchases or sales) makes

employees more skilled, reducing the likelihood of mistakes.

4. **Easy Reference**: Organized transaction records make locating specific entries easier.

5. **Simplified Checking**: Errors or fraud in the trial balance can be identified faster by referring to

specific subsidiary books.

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### Types of Subsidiary Books

1. **Purchases Book**

Records credit purchases of goods only (not cash purchases or purchases of assets). Each entry

includes details like the date, supplier name, invoice number, ledger folio, and total amount.

**Illustration**:
 The module gives an example of purchases recorded by M/s. Mac and Co. Transactions include

credit purchases of balls, bats, skates, and chess items with trade discounts applied. The book

calculates the total amount for the month after adjusting for the discounts.

2. **Sales Book**

Logs credit sales of goods and services, excluding cash sales or asset sales. The format includes

columns for the date, customer name, invoice number, ledger folio, and net amount.

**Illustration**:

An example of sales entries in the books of M/s. M and Co. records sales of shirts, ties, coats, and

trousers with trade discounts deducted. A grand total of the credit sales is computed at the end of

the period.

3. **Purchase Returns Book**

Also called the Returns Outward Book, it tracks goods returned to suppliers for credit purchases. It

includes columns for the date, supplier name, debit note number, ledger folio, and amount.

**Illustration**:

M/s. Zen and Co. records returns of televisions, DVD players, and refrigerators with applicable

trade discounts. The total return value for the period is computed.

4. **Sales Returns Book**

Also called the Returns Inward Book, it is used to record goods returned by customers for credit

sales. Similar to the purchase returns book, it includes details like the date, customer name, credit

note number, and amount.

M/s. Z and Co.'s sales return book logs returns of bags, suitcases, and duffle bags with discounts

applied, and calculates the total amount.

5. **Bills Receivable Book**

This book tracks bills received from customers for credit sales. Entries include details such as the

date received, drawer, acceptor, term, due date, amount, and remarks.

6. **Bills Payable Book**

Used to record acceptances given to suppliers for credit purchases. Details like the date of

acceptance, giver, payee, term, due date, and amount are included.

7. **Cash Book**

Records all cash transactions in different formats:

- **Simple Cash Book**: Logs only cash receipts and payments.

- **Two-Column Cash Book**: Adds a discount column alongside cash entries.

- **Three-Column Cash Book**: Includes columns for cash, bank, and discount.

- **Petty Cash Book**: Tracks small recurring expenses separately.

**Illustration (Single-Column Cash Book)**:

Mr. Kumaran's cash book logs entries like capital introduction, goods purchases, salary payments,

and commission receipts.

**Illustration (Three-Column Cash Book)**:

Thiru Durairaj's book includes transactions like goods sold partly in cash and cheque, cheques

deposited, and withdrawals made for personal use.

### Petty Cash Book

The **petty cash book** is used to record minor expenses that occur frequently, such as postage,

transportation costs, and office supplies. This helps prevent overcrowding in the main cash book.

#### Types of Petty Cash Books

1. **Simple Petty Cash Book**:

- Contains only a single column for recording payments.

- Transactions are simple, and advances received from the head cashier are recorded on the debit

side.

2. **Analytical Petty Cash Book**:

- Contains multiple columns for categorizing expenses, such as postage, cartage, and stationery,

along with a total payments column.

- Each transaction is recorded in both the total and specific expense columns.

#### Illustration:

The module provides an analytical petty cash book example under the **imprest system**, where a

fixed amount of Rs.500 is provided at the start of the month. Expenses like transportation, postage,

stationery, and repairs are categorized, with the balance tracked at the end.

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### Bank Reconciliation Statement (BRS)

A BRS reconciles discrepancies between the firm's cash book and bank statement balances.
#### Causes of Differences

1. **Timing Differences**:

- Cheques issued but not presented.

- Cheques deposited but not cleared.

- Bank charges or interest credited directly by the bank.

- Payments made directly by the bank on standing instructions.

2. **Errors**:

- Mistakes in recording transactions by the firm or bank.

#### Techniques of Preparing BRS

1. **Without Adjusting the Cash Book**:

Start with either the cash book or passbook balance and adjust for discrepancies.

2. **After Adjusting the Cash Book**:

Update the cash book first for any missing transactions and prepare the BRS with remaining

differences.

**Illustration**:

The module includes a BRS for Four Star (Pvt.) Ltd., considering factors like unencashed cheques,

dividends collected, and duplicate entries. The reconciliation calculates the final balance as of

August 31, 2016.