Subsidiary Books and Cash Book
When transaction volume is large, recording every transaction in the general journal becomes impractical. Subsidiary books (special journals) divide the journal by transaction type, improving efficiency and enabling division of labour in the accounting department.
Types of Subsidiary Books
Purchases Book: records all credit purchases of goods only (not assets). Sales Book: records all credit sales of goods. Purchases Returns Book: records goods returned to suppliers. Sales Returns Book: records goods returned by customers. Bills Receivable Book: records bills received from debtors. Bills Payable Book: records bills issued to creditors. Cash Book: records all cash and bank transactions. Journal Proper: records transactions not fitting in any subsidiary book (opening entries, closing entries, adjusting entries, rectification entries).
Cash Book
The cash book serves as both a journal (records transactions) and a ledger (provides cash/bank account balances). Types: Single column: records cash transactions only. Double column: records cash and bank transactions (two amount columns on each side). Triple column: adds a discount column (cash discount allowed on debit side, discount received on credit side). Petty cash book: records small daily expenses (stationery, postage, tea) using the imprest system — a fixed amount is given to the petty cashier and replenished periodically.
Bank Reconciliation Statement
A Bank Reconciliation Statement (BRS) reconciles the cash book bank balance with the bank statement (passbook) balance. Differences arise from: cheques issued but not yet presented (deducted in cash book but not yet in bank), cheques deposited but not yet cleared (added in cash book but not yet in bank), bank charges and interest (recorded by bank but not yet in cash book), direct deposits by customers (recorded by bank but not in cash book), and errors in either book. BRS format starts with one balance and adjusts to arrive at the other.
Importance of Subsidiary Books
Subsidiary books offer: division of labour, specialisation, time saving, easy reference, and error detection. In Nepal, even small businesses maintain at least a cash book and purchase/sales books.
Summary
Subsidiary books specialise the recording process. The cash book serves as both journal and ledger. Bank reconciliation resolves differences between cash book and bank statement.
Worked Example: Triple Column Cash Book
Record the following transactions of Namaste Enterprises in a triple column cash book for Jestha 2081:
1 Jestha: Cash in hand Rs 50,000, Bank balance Rs 200,000. 3 Jestha: Received Rs 29,000 from Sita in full settlement of Rs 30,000. 5 Jestha: Paid Rs 48,000 to Gopal by cheque, discount received Rs 2,000. 10 Jestha: Cash sales Rs 75,000. 12 Jestha: Deposited Rs 60,000 into bank. 18 Jestha: Paid salary Rs 20,000 by cash. 25 Jestha: Withdrew Rs 30,000 from bank for office use.
| Dr (Receipts) | Cr (Payments) | ||||||
|---|---|---|---|---|---|---|---|
| Date | Disc | Cash | Bank | Date | Disc | Cash | Bank |
| 1 Jestha Bal b/d | 50,000 | 200,000 | 5 Jestha Gopal | 2,000 | 48,000 | ||
| 3 Jestha Sita | 1,000 | 29,000 | 12 Jestha Bank (C) | 60,000 | |||
| 10 Jestha Sales | 75,000 | 18 Jestha Salary | 20,000 | ||||
| 12 Jestha Cash (C) | 60,000 | 25 Jestha Cash (C) | 30,000 | ||||
| 25 Jestha Bank (C) | 30,000 | ||||||
| Total | 1,000 | 184,000 | 260,000 | 2,000 | 80,000 | 78,000 | |
| Bal c/d | 104,000 | 182,000 | |||||
| 1,000 | 184,000 | 260,000 | 2,000 | 184,000 | 260,000 | ||
Key points: (C) marks contra entries (cash to bank or bank to cash) — they appear on both sides and are NOT posted to the ledger (they cancel out within the cash book itself). Discount allowed (Rs 1,000) is debited to Discount Allowed A/c in ledger. Discount received (Rs 2,000) is credited to Discount Received A/c.
Worked Example: Bank Reconciliation
On 30 Jestha 2081, Namaste Enterprises’ cash book shows a bank balance of Rs 182,000 (Dr). The bank statement shows Rs 195,000. Identify causes:
| Item | Effect | Amount |
|---|---|---|
| Cheque issued to supplier not yet presented | Add to cash book balance | +15,000 |
| Bank charges not recorded in cash book | Deduct from cash book balance | −2,000 |
BRS: Cash book balance Rs 182,000 + 15,000 − 2,000 = Rs 195,000 = Bank statement balance ✔️
Exam Tips
Tip 1: In triple column cash book, contra entries are marked (C) and NOT posted to ledger. Tip 2: Discount columns are NOT balanced — their totals are posted to Discount Allowed/Received accounts. Tip 3: For BRS, start with one balance and systematically adjust — don’t try to do it in your head. Tip 4: Cash column can never show a credit balance (you can’t pay out more cash than you have), but bank column can (overdraft).