II. Very Short Answer Questions
Question 1. Mention four types of subsidiary books.
Answer
1. Purchase Book
2. Sales Book
3. Purchase Return Book
4. Sales Return Book
Question 2. What is purchases book?
Answer. Purchases book is a subsidiary book in which only
credit purchases of goods are recorded. When business wants to know the
information about the credit purchases of goods at a glance, the information
can be made available if purchases of goods on credit are separately recorded.
Question 3. What is purchases returns book?
Answer. Purchases returns book is a subsidiary book in which
transactions relating to return of previously purchased goods to the suppliers,
for which cash is not immediately received are recorded. Since goods are going
out to the suppliers, they are also known as returns outward and the book is
called as 'returns outward book or returns outward journal'.
Question 4. What is sales book?
Answer. Sales book is a subsidiary book maintained to record
credit sale of goods. Goods mean the items in which the business is dealing.
These are meant for regular sale. Cash sale of goods and sale of property and
assets whether for cash or on credit are not recorded in the sales book. This
book is also named as sales day book, sold day book sales journal or sale
register.
Question 5. What is sales returns book?
Answer. Sales returns book is a subsidiary book in which,
details of return of goods sold for which cash is not immediately paid are
recorded. Just as goods may be returned to suppliers, goods may be returned by
customers.
Question 6. What is debit note?
Answer. A 'debit note' is a document, bill or statement sent
to the person to whom goods are returned. This statement informs that the
supplier's account is debited to the extent of the value of goods returned. It
contains the description and details of goods returned, name of the party to
whom goods are returned and net value of the goods so returned with reason for
return.
Question 7. What is credit note?
Answer. A credit note is prepared by the seller and sent to
the buyer when goods are returned indicating that the buyer's account is
credited in respect of goods returned. Credit note is a statement prepared by a
trader who receives back the goods sold from his customer. It contains details
such as the description of goods returned by the buyer, quantity returned and
also their value.
III. Short Answer Questions
Question 1. Give the format of purchases book. Answer.
Format of Purchases book / Purchases Journal
(i) Date In the date column, the date of purchases of goods
on credit is recorded.
(ii) Particulars In this column the name of the supplier
from whom goods have been purchased and details of goods purchased are given.
It contains the name, quantity, quality and rate of goods purchased, trade
discount and any other specification and specialties of the goods are recorded
in this column.
(iii) Invoice number Invoice is the statement prepared by
the seller of goods. It contains details about the goods, its price and other
expenses incurred. The invoice number is entered in this column.
(iv) Ledger Folio (LF.) The page number of the ledger in
which the supplier's account appears is recorded in this column. Purchases of
goods must be posted to the personal accounts of suppliers. Purchases book
contains the page number of supplier's account in the ledger. It helps in
posting and also in checking the records.
(v) Amount column (Details) Amount column is divided into
two parts, i.e., details and total. The details column is used to record the
amount of various individual items purchased from a particular supplier. The
amount of trade discount allowed is deducted. This column is used for
adjustment of additions and subtractions. Total amount column (Total) The net
amount payable to the supplier of goods is recorded in the total amount column.
Question 2. Mention the subsidiary books in which the
following transactions are recorded
1. Sale of goods for cash 2. Sale of goods on credit 3.
Purchases of goods on credit 4. When the proprietor takes goods for personal
use 5. Goods returned to suppliers for which cash is not received immediately
6. Asset purchased as credit.
Answer
1. Cash book
2. Sales book
3. Purchase book
4. Journal proper
5. Purchase return book
6. Journal proper
Question 3. What are the advantages of subsidiary books?
Answer: The advantages of maintaining subsidiary books are:
1. Proper and systematic record of business transactions:
All the business transactions are classified and grouped conveniently as cash
and non-cash transactions, which are further classified as credit purchases,
credit sales, returns, etc. As separate books are used for each type of
transactions, individual transactions are properly and systematically recorded
in the subsidiary books.
2. Convenient posting: All the transactions of a particular
nature are recorded at one place, i.e... In one of the subsidiary books. For
example, all credit purchases of goods are recorded in the purchases book and
all credit sales of goods are recorded in the sales book. It facilitates
posting to purchases account sales account and concerned personal accounts.
3. Division of work: As journal is sub-divided, the work
will be sub — divided and different persons can work on different books at the
same time and the work can be speedily completed.
4. Efficiency: The sub — division of work gives the
advantage of specialisation. When the same work is done by a person repeatedly
the person becomes efficient in handling it. Thus, specialisation leads to efficiency
in accounting work.
5. Helpful in decision making: Subsidiary books provide
complete details about every type of transactions separately. Hence, the
management can use the information as the basis for deciding its future
actions. For example, information regarding sales returns from the sales
returns book will enable the management to analyse the causes for sales returns
and to adopt effective measures to remove deficiencies.
6. Prevents errors and frauds: Internal check becomes more
effective as the work can be divided in such a manner that the work of one
person is automatically checked by another person. With the use of internal
check, the possibility of occurrence of errors or fraud may be avoided or
minimised.
7. Availability of requisite information at a glance: When
all transactions are entered in one journal, it is difficult to locate
information about a particular item. When subsidiary books are maintained,
details about a particular type of transaction can be obtained from subsidiary
books. The maintenance of subsidiary books helps in obtaining the necessary
information at a glance.
8. Detailed information available: As all transactions
relating to a particular item are entered in a subsidiary book it gives
detailed information. It is easy to arrive at monthly or quarterly totals.
9. Saving in time: As there are many subsidiary books, work
of entering can be done simultaneously by many persons. Thus, it saves time and
accounting work can be completed quickly.
10. Labour of posting is reduced: Labour of posting is
reduced as posting is made in periodical totals to the impersonal account for
example. Purchases account.
IV. Exercises
- 1. Invoice.
- 2. Credit note.
- 3. Debit note.