Subsidiary books: purchase book, sales book and returns books
Financial Accounting · Unit II · Topic 6 of 14 · 4 min read
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Cases checked to exist. Read the judgment before quoting a holding.
Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.
1. Why subsidiary books
In a business of any size, recording every transaction in one journal is slow, cannot be shared among clerks, and produces hundreds of separate postings to Sales and Purchases accounts. The journal is therefore divided into subsidiary books (special journals), each for one class of transaction that recurs. The advantages: division of labour, saving of time, fewer postings (only the periodic total goes to the main account), easier location of errors, and ready information (total credit purchases for the month at a glance).
2. Kinds of subsidiary books
| Book | Records |
|---|---|
| Purchases book (purchase day book) | Credit purchases of goods |
| Sales book (sales day book) | Credit sales of goods |
| Purchases returns book (returns outward) | Goods returned to suppliers |
| Sales returns book (returns inward) | Goods returned by customers |
| Bills receivable / bills payable books | Bills received and accepted |
| Cash book | All cash and bank transactions |
| Journal proper | Everything else: opening and closing entries, credit purchase of assets, adjustments, rectification |
3. Purchases book and sales book
Purchases book records only credit purchases of the goods the firm deals in. Cash purchases go to the cash book. A credit purchase of an asset (furniture by a grocer) goes to the journal proper. The ruling is: Date | Particulars (supplier’s name, invoice details) | Inward invoice No. | L.F. | Details | Amount. The sales book has the same ruling for credit sales, with outward invoice numbers.
Posting. Each supplier’s account is credited individually with the amount of his invoice; the periodic total is debited to Purchases A/c. Each customer’s account is debited individually; the total is credited to Sales A/c.
Trade discount and cash discount. Trade discount is a reduction in the list price allowed to traders who buy in quantity. It is deducted in the “Details” column and only the net amount is recorded; it is never posted to a discount account. Cash discount is allowed for prompt payment, appears only when cash is paid or received, and is recorded in the cash book.
4. Worked problem: November 2019 (January 2026, 100-mark paper)
Purchases Book
| Date | Particulars | Details Rs. | Amount Rs. |
|---|---|---|---|
| Nov 1 | Anand, Koppal: 20 bags rice @ Rs. 600 | 12,000 | |
| Nov 1 | Vinod, Bangalore: 10 boxes tea powder @ Rs. 200 | 2,000 | |
| Nov 6 | Dharma: 20 bags wheat flour @ Rs. 200 Less trade discount 5% | 4,000 200 | 3,800 |
| Nov 6 | Anjan: 40 bags sugar | 16,000 | |
| Total (debited to Purchases A/c) | 33,800 |
Sales Book
| Date | Particulars | Details Rs. | Amount Rs. |
|---|---|---|---|
| Nov 2 | Dinesh: 10 bags rice @ Rs. 250 | 2,500 | |
| Nov 2 | Kiran: 6 boxes tea powder @ Rs. 300 | 1,800 | |
| Nov 4 | Vinod: 10 bags sugar @ Rs. 500 10 bags wheat flour @ Rs. 250 Less trade discount 10% | 5,000 2,500 7,500 750 | 6,750 |
| Total (credited to Sales A/c) | 11,050 |
Notes to the solution. (1) The question does not say “on credit” but names a party in each case, which is the signal for a credit transaction. (2) The purchase of 20 dozen biscuits on 7 November (Rs. 2,000) names no supplier, so it is treated as a cash purchase and goes to the cash book, not the purchases book; state this assumption in a line. (3) Vinod is both a supplier (1 Nov) and a customer (4 Nov); he has one personal account, credited Rs. 2,000 and debited Rs. 6,750.
Ledger posting. Purchases A/c Dr Rs. 33,800 “To Sundries as per Purchases Book”; Anand Cr 12,000, Vinod Cr 2,000, Dharma Cr 3,800, Anjan Cr 16,000. Sales A/c Cr Rs. 11,050 “By Sundries as per Sales Book”; Dinesh Dr 2,500, Kiran Dr 1,800, Vinod Dr 6,750.
5. The June 2025 version
Purchases book: Hari & Co. (30 pens @ 10 = 300, 20 pencil boxes @ 20 = 400) Rs. 700; Arun & Co. (30 erasers @ 20 = 600 less 10% = 60) Rs. 540; total Rs. 1,240. Sales book: Kumar & Co. (10 pens @ 20 = 200, 16 pencil boxes @ 30 = 480) Rs. 680; Gopal & Co. (10 ballpoint pens @ 50 = 500 less 10% = 50) Rs. 450; total Rs. 1,130. Purchases returns book: ABC & Co. Rs. 600 (stationery is the stock-in-trade of this business, so its return is a return of goods).
How this is examined
As a 16-mark problem in the 100-mark paper (January 2026) and as a 6-mark problem in the 80-mark paper (June 2025). Draw separate, properly ruled books with a total for each, show the trade discount in the details column, and state any assumption about a transaction with no party named. If time permits, show the ledger postings in two lines below each book; it is the step most answers skip.
Now try the real questions: Financial Accounting past question papers.