SUBSIDIARY BOOKS

SUBSIDIARY BOOKS

1. CURRENT LIABILITIES

   • Like current assets, current liabilities are immediate liabilities of the firm that are to be paid within one year from the date of balance sheet. Current liabilities primarily include sundry creditors, expenses payable, bills payable, short-term loans, advance from customers, etc.

2. CURRENT ASSETS

   • Assets that are convertible into cash within the next accounting year are called current assets. Cash in hand, cash in bank, fixed deposit receipts (FDRs), inventory, debtors, receivable bills, short-term investments, staff loan and advances; all these come under current assets. In addition, prepaid expenses are also a part of current assets.

3. OWNER'S EQUITY

   • The equation of equity is as follows: Owner Equity = Assets – liability The owner or the sole proprietor of a business makes investments, earns some profit on it, and withdraws some money out of it for his personal use called drawings. We may write this transaction as follows: Investment (capital) +- Profit or Loss – drawings = Owner’s Equity

4. FINANCIAL STATEMENTS

   • Financial statements are prepared to ascertain the profit or loss of the business, and to know the financial position of the company. Trading, profit & Loss accounts ascertain the net profit for an accounting period and balance sheet reflects the position of the business.

5. DEPRECIATION

   • Depreciation reduces the value of assets on a residual basis. It also reduces the profits of the current year. Depreciation indicates reduction in value of any fixed assets. Reduction in value of assets depends on the life of assets. Life of assets depends upon the usage of assets.
     • METHOD OF DEPRECIATION
       •  Straight Line Method  Written Down Value Method  Annuity Method  Insurance Policy Method Machine Hour Rate Method  Depletion Method  Revaluation Method Depreciation Fund Method

6. TRIPLE COLUMN CASH BOOK

   • When one more column of Bank is added in both sides of the double column cash book to post all banking transactions, it is called triple column cash book. All banking transactions are routed through this cash book and there is no need to open a separate bank account in ledger.

7. BANK RECONCILIATION

   • On a particular date, reconciliation of our bank balance with the balance of bank passbook is called bank reconciliation. The bank reconciliation is a statement that consists of:
     • Balance as per our cash book/bank book
     • Balance as per pass book
       • This statement may be prepared at any time as per suitability and requirement of the firm, which depends upon the volume and number of transaction of the bank. In these days, where most of the banking transactions are done electronically, the customer gets alerts for every transaction. Time to reconcile the bank is reduced more.
     • Reason for difference in both of above

8. BILLS PAYABLE BOOK

   • Bills payable issues to the supplier of goods or services for payment, and the record is maintained in this book.

9. PURCHASE BOOK

   • Purchase book is prepared to record all the credit purchases of an organization. Purchase book is not a purchase ledger.

10. SALE BOOK

    • The features of a sale book are same as a purchase book, except for the fact that it records all the credit sales.

11. PURCHASE RETURN BOOK

    • Sometimes goods are to be retuned back to the supplier, for various reasons. The most common reason being defective goods or poor quality goods. In this case, a debit note is issued.

12. SALE RETURN BOOK

    • The reason of Sale return is same as for purchase return. Sometimes customers return the goods if they don’t meet the quality standards promised. In such cases, a credit note is issued to the customer.

13. KEY FEATURES OF SUBSIDIARY BOOKS

    • There is a difference between a purchase book and a purchase ledger. A purchase book records only credit purchases and a purchase ledger records all the cash purchases in chronical order.

14. PETTY CASH BOOK

    • In any organization, there may be many petty transactions incurring for which payments have to be done. Therefore, cash is kept with an employee, who deals with it and makes regular payments out of it. To make it simple and secure, mostly a constant balance is kept with that employee.

15. BILLS RECEIVABLES BOOK

    • Bills are raised by creditors to debtors. The debtors accept them and subsequently return them to the creditors. Bills accepted by debtors are called as ‘Bills Receivables’ in the books of creditors, and ‘Bills Payable’ in the books of debtors. We keep them in our record called ‘Bills Receivable Books’ and ‘Bills Payable Book’.

16. TRIAL BALANCE

    • Trial balance is a summary of all the debit and credit balances of ledger accounts. The total of debit side and credit side of trial balance should be matched. Trial balance is prepared on the last day of the accounting cycle.

17. CASH BOOKS

    • Cash book is a record of all the transactions related to cash.In double column cash book, a discount column is included on both debit and credit sides to record the discount allowed to customers and the discount received from creditors respectively. In triple column cash book, one more column of bank is included to record all the transactions relating to bank.
      • Single column cash book
        • Cash book is just like a ledger account. There is no need to open a separate cash account in the ledger. The balance of cash book is directly posted to the trial balance. Since cash account is a real account, ruling is followed, i.e. what comes
      • Double column cash book
        • Here, we have an additional Discount column on each side of the cash book. The debit side column of discount represents the discount to debtors of the company and the credit side of discount column means the discount received from our suppliers or creditors while making payments. The total of discount column of debit side of cash book is posted in the ledger