Subsidiary Books - Part 1
"Why record every small sale in the main journal when you can use specialized books?"
As businesses grow, recording every transaction in the journal becomes cumbersome. Subsidiary Books (also called Special Journals or Day Books) are specialized registers maintained for specific types of repetitive transactions.
What are Subsidiary Books?
Definition: Subsidiary books are books of original entry where transactions of a similar nature are recorded separately before being posted to the ledger.
Purpose:
- Save time and effort
- Reduce volume in the main Journal
- Enable division of labor (different people handle different books)
- Minimize errors
Types of Subsidiary Books
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1. Purchases Book (Purchases Journal / Day Book)
Purpose: Record credit purchases of goods only (meant for resale).
What to Record:
- ✓ Credit purchases of trading goods
- ✗ Cash purchases (go to Cash Book)
- ✗ Purchase of assets (go to Journal Proper)
Format of Purchases Book
Date | Supplier Name | Invoice No. | L.F. | Amount (₹)
-----|--------------|-------------|------|----------
Jan 2| Ram & Co. | 1001 | | 50,000
Jan 5| Mohan Traders| 1045 | | 75,000
Jan 8| ABC Ltd. | 2341 | | 1,25,000
-----|--------------|-------------|------|----------
| Total | | | 2,50,000
Posting to Ledger
Individual Posting:
- Credit each supplier's account with the respective amount.
Periodic Total Posting:
- At the end of the month, Debit Purchases Account with the total.
Example Ledger Entries:
Ram & Co. (Creditor Account)
Dr. Ram & Co. A/c Cr.
-----|-------|-------|-------
| |Jan 2 | By Purchases | 50,000
Purchases Account
Dr. Purchases A/c Cr.
----------|----------|-------|-------
Jan 31 | To Sundry Creditors | 2,50,000 |
(Total from Purchases Book)
Real-World Example
Reliance Retail - January Purchases
- Jan 5: Purchased groceries from Britannia ₹10 Lakhs (credit)
- Jan 12: Purchased electronics from Samsung ₹50 Lakhs (credit)
- Jan 20: Purchased toys from Mattel ₹5 Lakhs (credit)
Purchases Book:
Date | Supplier | Amount
------|------------|------------
Jan 5 | Britannia | 10,00,000
Jan 12| Samsung | 50,00,000
Jan 20| Mattel | 5,00,000
------|------------|------------
Total | | 65,00,000
Month-End Entry:
Purchases A/c Dr. ₹65,00,000
To Sundry Creditors A/c ₹65,00,000
2. Sales Book (Sales Journal / Day Book)
Purpose: Record credit sales of goods only (trading goods).
What to Record:
- ✓ Credit sales of trading goods
- ✗ Cash sales (go to Cash Book)
- ✗ Sale of assets (go to Journal Proper)
Format of Sales Book
Date | Customer Name | Invoice No. | L.F. | Amount (₹)
-----|------------------|-------------|------|----------
Feb 3| Sharma Stores | S-101 | | 60,000
Feb 7| Gupta Enterprises| S-102 | | 1,20,000
Feb10| City Mall | S-103 | | 80,000
-----|------------------|-------------|------|----------
| Total | | | 2,60,000
Posting to Ledger
Individual Posting:
- Debit each customer's account with the respective amount.
Periodic Total Posting:
- At month-end, Credit Sales Account with the total.
Example:
Sharma Stores (Debtor Account)
Dr. Sharma Stores A/c Cr.
----------|----------|-------|-------
Feb 3 | To Sales | 60,000|
Sales Account
Dr. Sales A/c Cr.
----------|----------|----------|-------
| | Feb 28 | By Sundry Debtors | 2,60,000
(Total from Sales Book)
Important Points to Remember
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Common Mistakes to Avoid
- Recording Cash Transactions: Cash purchase/sale should go to Cash Book.
- Recording Asset Purchases: Buying a computer for office is NOT a purchase (goes to Journal Proper).
- Forgetting Monthly Total: Must post total to Purchases/Sales A/c.
- Wrong Classification: Purchase of stationery for office use ≠ Purchases (it's an expense).
Quiz: Subsidiary Books - Part 1
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