Subsidiary Accounting Books In this web primer we will also discuss:
Subsidiary books or sub-journals or
special journals are the various names used to describe practical system of book
keeping. As the size of business grew the volume of transactions of all the
business houses rose alarmingly and it was realized that journal was inadequate
as the only book of original entry. It was found to be convenient and
advantageous to have different books of original entries for different
activities of the business like purchases, sales, purchases returns and sales
returns etc.
Special journalsThese are the journals in which
special classes of transactions are recorded such as ; Purchases book records
purchases of goods on credit; Sales book records sales of godson credit;
Purchases returns book records the return of goods purchased (returns outwards)
;Sales returns book records the return of goods sold (return inwards) ; Bills
receivable book records the bills accepted by the debtors and Bills payable book
records the bills drawn by the creditors.
General JournalRecords those transactions which do
not fall within the scope of special journals. Such transactions usually relate
to
(1) Opening entries
(2) Closing entries
(3) Transfer entries
(4) Rectification entries
(5) Adjusting entries
(6) Credit purchase of assets
(7) Credit sale of discarded or
obsolete fixed assets etc.
General Journal1. Transactions for which no
special journal exists are recorded.
2. Each transaction is posted to
ledger separately.
3. Ruling of journal is identical.
4. Essential part of accounting
process.
Special Journal1. Specific types of transactions
are recorded in each special journal.
2. Only the periodical totals are
posted in group a. counts like purchases or sales account.
3. Ruling is modified as the
requirements of the business e.g., additional columns for excise duty or sales
tax may be provided.
4. Optional as per the desire of
the business.
Purchases BookPurchases Book is also known as
'Invoice Journal' or 'Bought Journal' or Purchases Journal, issued for recording
credit purchases of goods meant for resale. Cash purchases will not be entered
in Purchases Book (to be entered in cash book) and credit purchases of goods not
meant for resale viz., assets shall be entered in journal proper and not in the
purchases book.
Form of the Purchases BookUsual Purchase book should have
columns for date, invoice number, particulars, ledger folio, details and
amount.
InvoiceWhen we purchase goods on credit we
receive a statement from the supplier giving the particulars of the goods
supplied by him. This statement is called an invoice. The invoice states the
quantity, price and value of goods supplied. It also states the discounts
allowable (trade and cash) and the conditions under which payment is
expected.
Trade DiscountIt is an allowance made by the
supplier to the retailers off the catalogue or invoice or list price. (The
object of allowing 'trade discount' is to enable the retailer to sell the goods
to the consumer at list price and still leaving margin for meeting business
expenses and his profit.) Trade discount is offered without reference to the
time factor within which supplier expects to receive the payment. Entries in the
books of both supplier as well as retailer are made on the basis of net amount
i.e. invoice price less trade discount.
It may be distinguished from cash
discount as follows:
Trade discount1. It is a concession "off the
catalogue price" and allowed on purchases.
2. It is not recorded in ledger
accounts.
3. It is deducted from the
invoice.
Cash discount1. It is a concession allowed on
payment being made "within certain period"
2. Ledger account is maintained for
discount allowed and availed.
3. It is not deducted from the
invoice.
Posting The net amount of invoices
will be posted to the ledger as follows: Credit the personal accounts of the
suppliers with the individual amount, and Debit the purchases account with the
periodical total.
Sales BookIn this book are recorded all goods
sold on credit. The ruling is similar to that of purchases book. If there are
cash sales they are recorded in cash book and sale of assets (distinguish
between goods and assets) are recorded in the journal proper. The entries in the
sales book are made from the copies of the invoices which have been sent to the
customers along with the .goods. Such copies of the invoices may be termed as
'Outward invoice' Each such outward invoice should be numbered consecutively and
the reference be given in the sales book along with the entry. .Posting. The net
amounts of the invoices are posted to the ledger as follows: Debit the personal
accounts of the customers with the value of sales to them. Credit Sales
account with the periodical total.
Purchases Returns BookThis book is also known as "Returns
Outwards Book". It records all returns of goods bought. Goods purchased may have
to be returned to the supplier for various reasons such as not up to sample or
not ordered or damaged during the transit etc. The ruling of the return books is
identical with the ruling of purchases book. Debit Note. While returning the
goods to the suppliers a letter is sent to them for their information and
stating therein that we have debited your account by this amount on account of
goods being returned herewith for the reasons stated. Generally such
"information letters' are printed with counterfoil. Debit notes are sent to the
parties concerned the counterfoils providing the base for writing up the
purchases returns book.
Credit NoteWhen a debit note is received along
with the goods returned from the customer, itis a claim on us. If claim is
accepted then Credit Note, usually printed in red ink, with full details is sent
to the customer signifying our acceptance of the goods and customer's account
being given the required credit. Counterfoils provide the base for writing up
the Sales Returns Book.
Sales Returns BookThis book is also known as "Returns
inwards book" . It records all returns of goods sold. Goods sold may be
returned. by our customers for various reasons such as goods sent being of wrong
description or inferior quality or damaged. Ruling is identical with the ruling
of sales book. Credit Note: When a debit note is received along with the goods
returned from the customer, it is a claim on us. If claim is accepted then
Credit Note, usually printed in red ink, with full details is sent to the
customer signifying our acceptance of the goods and customer's account being
given the required credit. Counterfoils provide the base for writing up the
Sales Returns Book.
Bills Receivable BookAll receipts of bills are entered
in a book called bills receivable book. Whenever a bill of exchange is received
its particulars are entered in the appropriate columns of the Bills Receivable
Book. Posting from bills receivable book-The periodical total of the bills
receivable book is posted to the debit of the bills receivable account in the
ledger. Each entry in the book is posted to the credit of the individual account
from whom the bill is received.
Bills Payable BookThe details of the bills accepted by a trader are recorded
in the book known as Bills Payable Book. Posting of the bills payable book-The
periodical total of the bills payable book is posted to the credit of the bills
payable account in the ledger. Each entry in the book is posted to the debit of
the individual account to whom the bill is
granted. |
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