Subsidiary books (special journals) are used when transactions are large in number. They divide journal work into separate books like purchases book, sales book and returns books. Cash book records all cash and bank transactions and also acts as a ledger for cash and bank. Bank Reconciliation Statement (BRS) reconciles the bank balance as per cash book with the bank balance as per pass book by adjusting timing differences and bank entries.
Instead of recording all transactions in one journal, similar transactions are recorded in separate subsidiary books to save time and improve control.
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Subsidiary books (special journals) are used when transactions are large in number. They divide journal work into separate books like purchases book, sales book and returns books. Cash book records all cash and bank transactions and also acts as a ledger for cash and bank. Bank Reconciliation Statement (BRS) reconciles the bank balance as per cash book with the bank balance as per pass book by adjusting timing differences and bank entries.
Instead of recording all transactions in one journal, similar transactions are recorded in separate subsidiary books to save time and improve control.
Cash book is a book of original entry for cash and bank transactions. It also serves as ledger for cash/bank.
Contra entries arise when a transaction affects both cash and bank columns.
Examples:
Under imprest system, petty cashier is given a fixed amount (imprest). At the end of the period, the amount spent is reimbursed so that petty cash is restored to the fixed imprest.
BRS is prepared to reconcile bank balance as per cash book with bank balance as per pass book.
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Subsidiary books (special journals) are maintained when transactions are numerous. They offer several advantages: (i) division of work—different clerks can handle different books (purchases, sales, returns, etc.); (ii) time saving—similar transactions are recorded in one place and totals are posted periodically; (iii) better control and accuracy—specialisation reduces mistakes and makes checking easier; (iv) easy posting—totals from subsidiary books are posted to ledger, reducing ledger workload; and (v) quick information—credit sales, credit purchases, returns and bills can be known quickly from respective books.
Cash book is maintained by the business to record cash and bank transactions. Pass book (bank statement) is maintained by the bank to record transactions of the customer’s account from the bank’s viewpoint. In cash book, bank column increases are recorded on the debit side (receipts) and decreases on the credit side (payments). In pass book, deposits are credited and withdrawals are debited because the bank treats customer deposits as its liability. Thus, cash book is a business record; pass book is a bank record.
Subsidiary books are special journals used to record similar transactions separately to save time and improve control. Important subsidiary books are: Purchases Book (credit purchases of goods), Sales Book (credit sales of goods), Purchases Returns Book (returns to suppliers), Sales Returns Book (returns from customers), Bills Receivable Book (bills received), Bills Payable Book (bills accepted), Cash Book (cash and bank transactions), and Journal Proper (adjustments and transactions not recorded elsewhere). Maintaining these books enables division of work, easy posting (periodic totals), and quick reference for specific types of transactions.