Subsidiary Books MCQ

Similarly, purchase of cloth by a business enterprise which is dealing in computers shall not be treated as its goods since items relating to only computers are its goods. Assets that are convertible into cash within the next accounting year are called current assets. In these days, where most of the banking transactions are done electronically, the customer gets alerts for every transaction. This book records all the day-to-day petty expenses whose payment is made in cash. Entries from Journal, Sales & Purchase book are posted in Ledger.

• This book is maintained mainly to record credit purchases of goods.
• Financial statements are prepared to ascertain the profit or loss of the business, and to know the financial position of the company.
• There are a few more types of subsidiary books that are available to do the accounting but these few would be enough to set an example of what the subsidiary book means and what are its purposes.
• These notes act as a basis for recording the transaction in the sales return book.
• When goods are returned, a debit note is made out and sent to the supplier to whom goods are returned.

Goods may be returned by the customers for a variety of reasons such as wrong quantity and/or quality. All goods returned by the customers are primarily recorded in this. This book is known as sales return book or also knows as return inward book. It only records the transaction of those goods returned by credit customers. In sales book, all transaction related to credit sales are recorded. Generally sale of assets on credits banks are recorded through journal.

Subsidiary Books Format

All opening, closing, transfer, rectification & adjustment entries are recorded in journal proper. When goods are sold on credit, the funds are blocked in the form of debtors and can be materialised in near future. Sometimes the seller wants a written undertaking from the credit customer, to pay after a specific period. Such document, containing an undertaking to pay with the details of payments is termed as bills of exchange. The total of bills receivable book is transferred to B/R account.

On the other hand any discount received will be posted to the debit of the concerned personal account. It should always be remembered that we never do balancing of discount column as we do in cash column. According to Dr. A. N. Agrawala, “Subsidiary books of accounts are also called books of original entry because all the transactions are recorded originally or in the first instance in this subsidiary book.” When a business enterprise receives back the goods sold earlier, it makes a credit note in favour of the purchaser showing that his account has been credited in the books of business enterprise.

Similar to Topic 6 subsidiary books i(

An invoice is received from the supplier while buying goods and it is sent to the customer while selling goods. It is a statement, which is prepared and sent out by the seller along with the goods to newbie using wave for non buyer mentioning the details of the goods. It states the items of goods, quantity, unit price, total amount, and discount allowed, expenses incurred on behalf of the buyer and net payable amount.

It fails to report the total amount of credit purchases and credit sales. The practical system of primary record of the transaction is subsidiary books. Now the question arises what will happen to those transactions which neither relate to cash nor relate to the other subsidiary books, like sale/purchase of an asset on credit? It cannot be recorded in the cash book as no cash flow is there and asset being not included in the terminology of goods; it cannot be recorded in the purchase book either.

Cash Flow Statement

For some customers, when they made bulk purchase, he offered them some discount. But, some of his customers are not prompt in making the payment. Subsidiary books refer to the books of accounts that maintain the record of transaction having similar nature under the one head. Entries in the purchase return book are made on the basis or original Credit Note received from the supplier.

Sales return book is a book of original entry in which transactions related to the return of sales of goods are recorded. The sales return book does not record return of goods sold on cash basis. There may be several reasons for returning the goods by the customers.