Subsidiary Books in Accounting: Complete Guide with Examples, Ledger Posting & FAQs (Beginner-Friendly)
Introduction to Subsidiary Books
If you’re learning accounting from scratch, one of the first challenges you’ll face is handling multiple transactions efficiently. Recording everything in one journal quickly becomes messy. That’s where subsidiary books in accounting come in.
Subsidiary books help organize transactions into different categories, making accounting faster, clearer, and more accurate.
What Are Subsidiary Books? (Sub-division of Journal)
Subsidiary books are specialized journals used to record similar types of transactions separately instead of using a single general journal.
Example:
* Credit sales → Sales Book
* Credit purchases → Purchase Book
* Cash transactions → Cash Book
This system is also known as the sub-division of a journal.
Using subsidiary books improves the overall accounting system by:
* Saving time in recording transactions
* Reducing errors
* Making tracking easier
* Allowing division of work among employees
* Simplifying ledger posting
* Faster recording of transactions
* Better accuracy and control
* Easy reference and tracking
* Division of work among staff
* Only totals are posted to the ledger (time-saving)
* Not suitable for small businesses with few transactions
* Requires proper classification skills
* Errors may occur if recorded in wrong book
* Needs trained accounting staff
A discount is a reduction in the price of goods or services offered to customers.
1. Sales Book
2. Purchase Book
3. Sales Return Book
4. Purchse Return Book
5. Bills Receivable Book
6. Bills Payable Book
7. Cash Book
* Credit sales → Sales Book
* Credit purchases → Purchase Book
* Cash transactions → Cash Book
This system is also known as the sub-division of a journal.
Why Subsidiary Books Are Important in Accounting
Using subsidiary books improves the overall accounting system by:
* Saving time in recording transactions
* Reducing errors
* Making tracking easier
* Allowing division of work among employees
* Simplifying ledger posting
Advantages of Subsidiary Books
* Faster recording of transactions
* Better accuracy and control
* Easy reference and tracking
* Division of work among staff
* Only totals are posted to the ledger (time-saving)
Limitations of Subsidiary Books
* Not suitable for small businesses with few transactions
* Requires proper classification skills
* Errors may occur if recorded in wrong book
* Needs trained accounting staff
Meaning of Discount in Accounting
A discount is a reduction in the price of goods or services offered to customers.
Difference Between Cash Discount and Trade Discount
Types of Subsidiary Books in Accounting
1. Sales Book
2. Purchase Book
3. Sales Return Book
4. Purchse Return Book
5. Bills Receivable Book
6. Bills Payable Book
7. Cash Book
1. Sales Book (Sales Day Book)
Why Sales Book Is Used?
The Sales Book records all credit sales of goods.
The Sales Book records all credit sales of goods.
Key Points to Remember
* Only credit sales are recorded
* Only goods (not assets)
* Trade discount is deducted before recording
* Only credit sales are recorded
* Only goods (not assets)
* Trade discount is deducted before recording
Format of Sales Book
Explanation:
1. Date : The date on which the sales was made.
2. Particulars : The name of the customer (debtor) to whom goods are sold.
3. Invoice No : The unique number assigned to the sales invoice.
4. PR : Refers to the page number in the ledger where the transaction is posted.
5. Details : Detail amount of each items sold.
🧾 Practice Question 1
Transactions of AP Traders for March 2026:
Record the following in the Sales Book and post to Ledger:
1. March 1: Sold goods to Ram Traders – List price Rs. 10,000, Trade Discount 10%, Invoice No. 101
2. March 3: Sold goods to Sita Stores – List price Rs. 5,000, Trade Discount 5%, Freight Rs. 200, Invoice No. 102
3. March 5: Sold goods to Hari Suppliers – List price Rs. 8,000, Trade Discount 20%, Freight Rs. 300, Invoice No. 103
✅ Solution
🎯 Key Concepts to Remember
✔ Trade Discount:
* Deduct before recording
* Never shown in books
✔ Freight/Delivery Charge:
* Never shown in books
✔ Freight/Delivery Charge:
* Added to sales amount
* Included in Sales Book
✔ Sales Book Rule:
* Included in Sales Book
✔ Sales Book Rule:
* Only credit sales are recorded
* Cash sales → Cash Book
✔ Posting Rule:
* Cash sales → Cash Book
✔ Posting Rule:
* Debtors → Debited individually
* Sales Account → Credited with total
* Sales Account → Credited with total
2. Purchase Book ( Purchase Day Book)
Why is the Purchase Book used?
Records credit purchases of goods.
Key Points to Remember
* Only credit purchases
* Only goods (not assets)
* Trade discount deducted
* Only credit purchases
* Only goods (not assets)
* Trade discount deducted
Format of Purchase Book
Explanation:
1. Date : The date on which the purchase was made.
2. Particulars : The name of the supplier (creditor) from whom goods are purchased.
3. Invoice No : The unique number assigned to the purchase invoice received from the supplier.
4. PR : Refers to the page number in the ledger where the transaction is posted.
5. Details : Detailed amount of each item purchased.
🧾 Practice Question 2
Transactions of AP Traders for March 2026:
Record in the Purchase Book and post to Ledger:
1. March 2: Purchased goods from Shyam Suppliers – List price Rs. 10,000, Trade Discount 10%, Invoice No. P101
2. March 4: Purchased goods from Gita Traders – List price Rs. 6,000, Trade Discount 5%, Freight Rs. 300, Invoice No. P102
3. March 6: Purchased goods from Om Enterprises – List price Rs. 8,000, Trade Discount 20%, Freight Rs. 400, Invoice No. P103
✅ Solution
🎯 Key Concepts to Remember
✔ Purchase Book
* Records only credit purchases of goods
* Cash purchases → Cash Book
✔ Trade Discount
* Deduct before entry
* Not recorded
✔ Freight (Carriage Inward)
* Added to the purchase cost
* Included in Purchase Book
✔ Posting Rule
* Supplier (Creditor) → Credited individually
* Purchases Account → Debited with total
3. Sales Return Book (Return Inward Book)
Why It Is Used?
Records goods returned by customers.
Records goods returned by customers.
Key Points
* Based on credit note
* Only credit returns
* Based on credit note
* Only credit returns
What is a Credit Note?
A Credit Note is a document issued by a seller to a buyer to reduce the amount the buyer owes.
When is a Credit Note issued?
* A Credit Note is issued when:Goods are returned by the buyer
* Goods are damaged or defective
* There is an overcharge in the invoice
* A discount is given after the sale
* A Credit Note is issued when:Goods are returned by the buyer
* Goods are damaged or defective
* There is an overcharge in the invoice
* A discount is given after the sale
Format of Credit Note:
📘 Practice Question: Sales Return Book
A business sold goods on credit to the following customers:
March 5: Sold goods to Ram for Rs. 5,000
March 8: Sold goods to Sita for Rs. 3,000
Later, the following goods were returned:
March 8: Sold goods to Sita for Rs. 3,000
Later, the following goods were returned:
March 10: Ram returned goods worth Rs. 1,000
March 12: Sita returned goods worth Rs. 500
👉 Prepare: Sales Return Book
March 12: Sita returned goods worth Rs. 500
👉 Prepare: Sales Return Book
Show the effect on: Sales Return Account
Customer’s Account (Ram & Sita)
✅ Solution
🤔 Why is Sales Return Debited?
Sales return is debited because It reduces your revenue
Sales originally had a credit balance
To decrease a credit balance, you debit it
👉 So, Sales Return works like a contra-revenue account (it cancels part of sales)
👤 Why is the Customer’s Account Credited?
Customer account is credited because: Earlier, the customer was debited (they owed you money)
Now, since they returned the goods, their liability decreases
To reduce what they owe, you credit their account
👉 In simple terms:
You are saying, “You don’t owe me this amount anymore.”
Customer account is credited because: Earlier, the customer was debited (they owed you money)
Now, since they returned the goods, their liability decreases
To reduce what they owe, you credit their account
👉 In simple terms:
You are saying, “You don’t owe me this amount anymore.”
4. Purchase Return Book (Return Outward Book)
Why It Is Used?
Records goods returned to suppliers.
Key Points
* Based on the debit note
* Only credit returns
* Based on the debit note
* Only credit returns
What is a Debit Note?
A Debit Note is a document issued by a buyer to a seller to inform that the amount payable has increased or to request a correction in the invoice.
When is a Debit Note issued?
* A Debit Note is issued when:
* Goods are returned to the seller
* Goods received are damaged or defective
* There is an undercharge in the invoice
* Additional charges need to be added (like transport, packaging, etc.)
* Goods are returned to the seller
* Goods received are damaged or defective
* There is an undercharge in the invoice
* Additional charges need to be added (like transport, packaging, etc.)
Format of Debit Note:
📘 Practice Question: Purchase Return Book
A business purchased goods on credit from the following suppliers:
* March 3: Purchased goods from Shyam for Rs. 6,000
* March 7: Purchased goods from Gita for Rs. 4,000
Later, the following goods were returned:
* March 11: Returned goods to Shyam worth Rs. 1,500
* March 13: Returned goods to Gita worth Rs. 1,000
👉 Prepare: Purchase Return Book
👉 Show the effect on:
* Purchase Return Account
* Supplier’s Account (Shyam & Gita)
✅ Solution
🤔 Why is Purchase Return Credited?
Purchase return is credited because ;
* It reduces your expenses (purchases)
* Purchases originally had a debit balance
* To decrease a debit balance, you credit it
👉 So, Purchase Return works like a contra-expense account (it cancels part of the purchases)
👤 Why is the Supplier’s Account Debited?
Supplier account is debited because: Earlier, the supplier was credited (you owed them money)
Now, since you returned the goods, your liability decreases
To reduce what you owe, you debit the supplier’s account
👉 Comprehensively:
You are saying, “I don’t owe you this amount anymore.”
5. Bills Receivable Book
Instead of recording each bill individually in the general journal, all such transactions are systematically entered in the Bills Receivable Book. This helps in better organization, easy tracking of due dates, and efficient management of receivables.
Why It Is Used?
Records bills received from customers.
Records bills received from customers.
Key Points
* Contains due date, amount, and parties
* Used for credit transactions
* Contains due date, amount, and parties
* Used for credit transactions
Parties Involved in a Bill Receivable
A bill receivable involves three main parties:
i) Drawer or Maker
The drawer (in case of a bill of exchange) or maker (in case of a promissory note) is the person who creates the bill. This party is entitled to receive the payment and initiates the transaction.
ii) Drawee or Acceptor
The drawee is the person on whom the bill is drawn. Once the drawee agrees to pay the amount and signs the bill, they become the acceptor. The acceptor is legally responsible for making the payment on the due date.
iii) Payee
The payee is the person who will receive the payment. In many cases, the drawer and the payee are the same, but sometimes the payment may be made to a third party.
Format of Bills Receivable Book:
6. Bills Payable Book
Instead of recording each bill separately in the general journal, all such transactions are systematically entered in the Bills Payable Book. This helps in maintaining proper records, tracking payment due dates easily, and managing liabilities efficiently.
Why It Is Used?
Records bills accepted by the business.
Key Points
* Represents liabilities
* Includes maturity details
* Represents liabilities
* Includes maturity details
Format of Bills Payable Book:
7. Cash Book
Why Cash Book Is Used?
The Cash Book records all cash and bank transactions and works as both a journal and a ledger.
Types of Cash Book
i) Single Column Cash Book
ii) Double Column Cash Book
iii) Triple Column Cash Book
Key Points to Remember
* No separate cash account needed
* Records both receipts and payments
* No separate cash account needed
* Records both receipts and payments
(i). Single Column Cash Book
🔹 MeaningA single-column cash book contains only one amount column on each side (Debit and Credit).
It can be of two types:
* Cash Column Only
* Bank Column Only
🔹 Practice Question
Transactions:
🔹 Meaning
A Double Column Cash Book has two amount columns on each side.
Types:
✍️ Practice Question 1
Prepare a Double Column Cash Book (Cash + Discount) from the following transactions:
2026 Jan
🔍 Important Learning
* Bank Column Only
🔹 Features
* Records only one type of transaction (cash or bank)
* Simple and easy to maintain
* Suitable for small businesses
* Simple and easy to maintain
* Suitable for small businesses
Format:
🔹 Practice Question
Transactions:
Jan 1: Started business with cash Rs. 10,000
Jan 3: Purchased goods for cash Rs. 2,000
Jan 5: Sold goods for cash Rs. 3,000
Jan 3: Purchased goods for cash Rs. 2,000
Jan 5: Sold goods for cash Rs. 3,000
✅ Solution
ii) Double Column Cash Book
🔹 Meaning
A Double Column Cash Book has two amount columns on each side.
Types:
* Cash + Discount Column
* Bank + Discount Column
* Bank + Discount Column
🔹 Features:
* Records cash/bank and discount
* Helps track discounts allowed and received
* More useful than a single column
* Helps track discounts allowed and received
* More useful than a single column
Format:
Prepare a Double Column Cash Book (Cash + Discount) from the following transactions:
2026 Jan
1. Started business with cash Rs. 20,000
2. Received Rs. 4,900 from Ram, discount allowed Rs. 100
3. Paid Rs. 2,950 to Shyam, discount received Rs. 50
4. Purchased goods for cash Rs. 3,000
5. Sold goods for cash Rs. 5,000
6. Paid salary Rs. 2,000
7. Received Rs. 1,980 from Hari, discount allowed Rs. 20
2. Received Rs. 4,900 from Ram, discount allowed Rs. 100
3. Paid Rs. 2,950 to Shyam, discount received Rs. 50
4. Purchased goods for cash Rs. 3,000
5. Sold goods for cash Rs. 5,000
6. Paid salary Rs. 2,000
7. Received Rs. 1,980 from Hari, discount allowed Rs. 20
🚀Solution 1:
🔍 Important Learning
* Discount allowed → Debit side
* Discount received → Credit side
* Cash is always recorded in the cash column
* Discount received → Credit side
* Cash is always recorded in the cash column
✍️ Practice Question 2
Prepare a Double Column Cash Book (Cash + Bank):
* Started business with Rs. 15,000 cash
* Deposited Rs.10,000 into the bank
* Withdrew Rs. 2,000 for office use
* Received a cheque of Rs. 5,000 from Mohan
* Paid rent by cheque Rs. 3,000
* Cash sales Rs. 4,000
* Deposited Rs.10,000 into the bank
* Withdrew Rs. 2,000 for office use
* Received a cheque of Rs. 5,000 from Mohan
* Paid rent by cheque Rs. 3,000
* Cash sales Rs. 4,000
🚀Solution 2:
🔍 Important Learning
* “C” = Contra Entry (Account reducing related account)
* Deposit → Cash ↓ Bank ↑
* Withdrawal → Bank ↓ Cash ↑
* Deposit → Cash ↓ Bank ↑
* Withdrawal → Bank ↓ Cash ↑
iii) Triple Column Cash Book
🔹 Meaning
A Triple Column Cash Book has three columns on each side:
* Cash Column
* Bank Column
* Discount Column
🔹 Features
* Records cash, bank, and discount together
* Includes contra entries (cash ↔ bank transfers)
* Most commonly used in real business
Format:
✍️ Practice Question 3
Prepare a Triple Column Cash Book:
2026 Feb
* Started business with Rs. 25,000 (Rs. 10,000 in bank)
* Received Rs. 4,800 from Ramesh, discount allowed Rs. 200
* Paid Rs. 2,900 to Suresh, discount received Rs. 100
* Deposited Rs. 5,000 into the bank
* Withdrew Rs. 1,000 for personal use
* Received cheque Rs. 6,000 from Amit
* Paid insurance by cheque Rs. 2,000
* Cash sales Rs. 3,500
* Received Rs. 4,800 from Ramesh, discount allowed Rs. 200
* Paid Rs. 2,900 to Suresh, discount received Rs. 100
* Deposited Rs. 5,000 into the bank
* Withdrew Rs. 1,000 for personal use
* Received cheque Rs. 6,000 from Amit
* Paid insurance by cheque Rs. 2,000
* Cash sales Rs. 3,500
🚀Solution 3:
🔥 Must-Know Transactions (Very Important)
Students should master these:
1. Discount Handling
* Allowed → Debit side
* Received → Credit side
* Received → Credit side
2. Contra Entries
* Cash → Bank (Deposit)
* Bank → Cash (Withdrawal)
* Bank → Cash (Withdrawal)
3. Cheque Transactions
* Received cheque → Bank column
* Issued cheque → Bank column
4. Drawings
* Always credit side (cash/bank outflow)
5. Opening Balance
* Cash → Debit
* Bank → Debit
* Bank → Debit
💡 Final Tip
If you understand the Triple Column Cash Book, the other two become very easy—because it includes all features.
FAQs on Subsidiary Books:
1. What are subsidiary books in accounting?Subsidiary books are specialized journals used to record similar types of transactions separately for better organization and efficiency.
2. Why are subsidiary books important?
They save time, reduce errors, and make accounting more systematic.
They save time, reduce errors, and make accounting more systematic.
3. What is the difference between journal and subsidiary books?
A journal records all transactions, while subsidiary books divide them into categories.
A journal records all transactions, while subsidiary books divide them into categories.
4. Is a cash book a subsidiary book?
Yes, the cash book is a subsidiary book and also acts as a ledger.
Yes, the cash book is a subsidiary book and also acts as a ledger.
5. Are trade discounts recorded in subsidiary books?
No, trade discounts are not recorded in accounting books.
No, trade discounts are not recorded in accounting books.
Conclusion
Subsidiary books are a powerful tool that simplifies accounting by organizing transactions into different categories. For beginners, understanding these books is essential to mastering accounting fundamentals.
To truly understand, practice preparing each book and posting it to the ledger. That’s where real learning happens.
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Debit and Credit Explained
Journal Entries & Ledger Examples
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