Types of Subsidiary Books: Purchases Book, Sales Book (With Tax Rate), Purchase Returns Book, Sales Return Book

Subsidiary books, also known as special journals, are specialized accounting records used to systematically document specific types of transactions before they are posted to the general ledger. These books, such as the cash book, sales book, and purchase book, enhance efficiency in recording financial data, minimize errors, and facilitate better organization. By categorizing transactions, subsidiary books streamline the bookkeeping process, making it easier for businesses to manage their financial activities and maintain accurate financial statements.

Purchases Book

Purchases book, also known as the purchase journal, is a subsidiary book used to record all credit purchases of goods or services made by a business. It captures essential details such as the date of purchase, supplier name, invoice number, and amount. This book helps in organizing purchasing transactions, tracking inventory levels, and managing accounts payable. By summarizing credit purchases, the purchases book simplifies the posting process to the general ledger, enhancing the accuracy of financial records and facilitating effective financial management.

Objectives of Purchases Book

• To maintain a systematic record of credit purchases.
• To reduce the number of entries in the Journal Proper.
• To provide complete information about purchases made during a period.
• To facilitate the preparation of Purchase Account.
• To help determine the amount payable to suppliers.
• To support internal control over purchasing activities.
• To make posting to the ledger easier.
• To provide reliable information for preparing financial statements.

Purchases Book Example

Types of Purchases Book

1. Simple Purchases Book

Simple Purchases Book is a subsidiary book used to record credit purchases of goods in a straightforward manner. It generally contains columns such as date, particulars, invoice number, ledger folio, and amount. This type of Purchases Book is suitable for small businesses where purchase transactions are simple and do not require extensive classification. Only goods purchased for resale or production are recorded, while cash purchases and fixed-asset purchases are excluded. The total of the book is periodically transferred to the Purchases Account, and individual supplier accounts are credited separately. It saves time and reduces repetitive entries in the Journal Proper.

Example: A retailer purchases goods worth ₹25,000 on credit from Ravi Traders. The transaction is recorded in the Simple Purchases Book under Ravi Traders for ₹25,000.

2. Analytical Purchases Book

Analytical Purchases Book provides more detailed information about credit purchases by dividing the amount into different columns. These columns may include gross purchases, trade discount, taxable value, GST, freight, and net amount. It is useful for businesses that make numerous purchases involving different categories of goods and taxes. Detailed classification helps management analyze purchasing costs and facilitates accurate accounting. It also makes the calculation of tax liabilities and purchase totals easier. The format can be modified according to the requirements of the business and the accounting system being followed.

Example: A business purchases goods for ₹50,000, receives a 10% trade discount, and pays 18% GST. The Analytical Purchases Book can separately record the gross amount, discount, taxable amount, and GST.

3. Goods Purchases Book

Goods Purchases Book is maintained specifically to record credit purchases of trading goods. Trading goods are items that a business purchases for resale to customers or materials used in its normal production activities, depending on the nature of the business. Purchases of fixed assets, such as machinery, furniture, computers, or vehicles, are not entered in this book. It helps determine the total amount spent on goods purchased during an accounting period. By maintaining this book, businesses can systematically track suppliers, purchase invoices, and amounts payable. It also provides a useful basis for calculating cost of goods sold and preparing financial statements.

Example: A clothing retailer purchases shirts worth ₹40,000 on credit from a wholesaler. The ₹40,000 transaction is recorded in the Goods Purchases Book.

4. Departmental Purchases Book

Departmental Purchases Book is maintained by businesses that operate through different departments and need separate information about purchases made for each department. Purchases can be classified according to departments, products, or business segments. This allows management to determine how much each department spends on goods and helps in comparing departmental purchasing activities. Separate columns or sections can be created for different departments within the same book. Such classification supports budgeting, cost control, performance evaluation, and decision-making. It is particularly useful for large retail stores, supermarkets, and businesses selling several categories of products.

Example: A departmental store has Clothing, Electronics, and Grocery Departments. Credit purchases of ₹60,000 for Clothing and ₹90,000 for Electronics can be recorded separately under their respective departmental columns.

5. Computerized Purchases Book

Computerized Purchases Book is maintained through accounting software instead of manually recording transactions in a physical book. When a purchase invoice is entered into the system, the software can automatically update the purchases account, supplier account, inventory records, taxes, and outstanding liabilities. It reduces manual work, calculation errors, and duplication of entries. Computerized systems also make it easier to search invoices, prepare purchase reports, monitor suppliers, and analyze purchasing trends. This method is particularly useful for medium and large businesses handling a large volume of transactions.

Example: A company receives an electronic invoice of ₹1,00,000 from a supplier. After entering the invoice into its accounting software, the system automatically records the purchase, updates the supplier’s payable balance, and adjusts the inventory records.

Sales Book (With Tax Rate)

Sales Book, also known as the sales journal, is a subsidiary book used to record all credit sales of goods or services. When including tax rates, entries in the sales book will typically reflect the sales amount, applicable tax, and total amount payable by the customer. Below is an example of a sales book with a 10% tax rate, including entries in table format:

Sales Book Example

Purchase Returns Book

Purchase returns book, also known as the returns outward book, is a subsidiary book used to record all goods returned to suppliers. These returns may occur due to reasons such as defective products, incorrect quantities, or unsatisfactory quality. The purchase returns book captures essential details, including the date of return, supplier name, invoice number, and the value of goods returned. This systematic record helps businesses track returns, adjust their inventory, and manage accounts payable effectively, ensuring accurate financial reporting and compliance with accounting standards.

Purchase Returns Book Example

Objectives of Purchase Returns Book

• To maintain a systematic record of purchase returns.
• To reduce entries in the Journal Proper.
• To provide details of goods returned to suppliers.
• To facilitate accurate ledger posting.
• To determine the total amount of purchase returns.
• To help adjust amounts payable to suppliers.
• To improve purchase control and documentation.
• To provide reliable information for accounting and auditing.

Sales Return Book

Sales Return Book, also known as the returns inward book, is a subsidiary book used to record all goods returned by customers. These returns can occur due to reasons such as defective items, incorrect shipments, or customer dissatisfaction. The sales return book captures crucial details, including the date of return, customer name, invoice number, and the value of goods returned. This systematic record helps businesses track returned sales, adjust inventory levels, and manage accounts receivable effectively, ensuring accurate financial reporting and compliance with accounting standards.

Sales Return Book Example