Accounting · Accounting Process

Subsidiary Books and Cash Book for CA Foundation Accounting

Updated 1 October 2026

Subsidiary books are special journals that record one type of transaction each, such as credit purchases, credit sales, returns and bills. The cash book records all cash and bank transactions and works as both journal and ledger. To solve questions, identify the book, record in order, total, and post to ledgers.

Understand Subsidiary Books and Cash Book

A single journal for everything becomes slow when a business has hundreds of transactions a day. So the journal is divided into subsidiary books. Each book records only one kind of transaction. This saves time, allows division of work and makes errors easier to trace.

The main subsidiary books are the purchases book (credit purchases of goods meant for resale), the sales book (credit sales of goods), the purchases returns book (goods returned to suppliers, also called returns outward) and the sales returns book (goods returned by customers, also called returns inward). The bills receivable book and bills payable book record bills of exchange received and accepted. Cash purchases, cash sales and purchases of assets on credit do not go in the purchases or sales books.

The cash book records all receipts and payments of cash. It is a book of original entry and also a ledger account, so you do not open a separate cash account in the ledger. A single column cash book has only a cash column. A double column cash book has two amount columns on each side, either cash and discount or cash and bank. A three column cash book has cash, bank and discount columns on each side. Cash discount is shown in the discount columns: discount allowed on the debit side, discount received on the credit side.

A contra entry is when both the debit and credit are in the cash book, such as depositing cash into the bank or withdrawing cash from the bank. It is marked C in the folio column and needs no ledger posting.

The petty cash book records small routine expenses such as postage, stationery and conveyance. Under the imprest system, the petty cashier receives a fixed sum (the imprest) at the start of a period. At the end, the amount spent is reimbursed so the balance returns to the fixed sum. The petty cash book often uses an analytical (columnar) format.

Difference from the journal: the journal records all kinds of transactions in a debit-credit form with narration, while the cash book records only cash and bank transactions and also serves as a ledger.

Key rules to remember

Purchases book entry (via totals): Purchases A/c Dr. To Suppliers (individually, in ledger); Post each supplier's credit individually. Post the periodic total to the debit of Purchases A/c.
Sales book entry (via totals): Customers Dr. (individually) To Sales A/c (total); Only credit sales of goods in the normal course of business.
Returns: Returns outward: Supplier Dr. To Purchases Returns A/c. Returns inward: Sales Returns A/c Dr. To Customer; Record returns at the net invoice value (list price less trade discount), the same value at which the goods were originally recorded.
Trade discount: Invoice value = List price − Trade discount; Trade discount is never recorded in the books. Record the net amount.
Cash book sides: Debit side: receipts, discount allowed. Credit side: payments, discount received; Discount columns are totals only and are posted at period end: Discount Allowed A/c Dr., Discount Received A/c Cr.
Cash book balancing: Closing balance = Total of debit side − Total of credit side (for each of cash and bank); Do not balance the discount columns. Bank may show an overdraft as a credit balance.
Petty cash imprest: Amount reimbursed = Imprest − Closing petty cash balance = Total expenses of the period; Opening balance + amount received = Total expenses + closing balance.

How to solve Subsidiary Books and Cash Book questions

Use this order for any question on subsidiary books or cash books.

1Read the transactions and tick each one by type: credit purchase, credit sale, return, bill, cash or bank item, or none of these.
2Send each transaction to its correct book. Cash and bank items go to the cash book, and other items go to the journal proper.
3Work out the amount to record. Deduct trade discount from the list price. Keep cash discount separate.
4Enter transactions in date order with the party name, invoice or voucher detail and amount.
5For a cash book, put each item on the correct side and in the correct column. Show contra entries on both sides with C in the folio.
6Total each book. Balance the cash and bank columns and carry down the balances. Do not balance the discount columns.
7If asked, post to ledgers: individual accounts for parties, periodic totals for Purchases, Sales, Returns and Discount.
8Check that debit side total equals credit side total after balancing.

Quickest way: Sort first, then record in one pass

When to use it: Use when a question lists 10 to 20 mixed transactions and you have limited time.

Write the code next to each transaction: P for purchases book, S for sales book, PR for purchases return, SR for sales return, C for cash book, J for journal.
Draw the ruled format for each book once, with only the columns you need.
Copy the entries book by book rather than in the order given. This reduces switching and mistakes.
For three column cash books, enter bank items in the bank column only and cash items in the cash column only.
Mark each contra entry in both columns at the same time so you do not forget the second side.
Balance cash and bank before writing discount totals. Then check the totals tally.

Common mistakes in Subsidiary Books and Cash Book

Recording cash purchases or sales in the purchases or sales book
Students see the word purchases or sales and stop reading.
Fix: Only credit transactions in goods go to these books. Cash ones go to the cash book.
Entering a credit purchase of furniture or machinery in the purchases book
The transaction is on credit, so it seems to belong there.
Fix: The purchases book is only for goods meant for resale. Record asset purchases in the journal proper.
Recording trade discount in the books
Students confuse trade discount with cash discount.
Fix: Record the net invoice amount. Only cash discount is shown, in the discount columns.
Putting discount allowed on the credit side
Discount feels like a reduction, so it seems to belong on the credit side.
Fix: Discount allowed is an expense and goes on the debit side. Discount received is a gain and goes on the credit side.
Not showing contra entries on both sides
Students treat it as one transaction and enter it once.
Fix: Enter both sides and mark C. Cash deposited into the bank: Bank column Dr. and Cash column Cr. Cash withdrawn from the bank for office use: Cash column Dr. and Bank column Cr.
Reimbursing petty cash with the wrong amount
Students give the full imprest instead of the amount spent.
Fix: Reimburse only the total expenses of the period. The balance plus the reimbursement equals the imprest.

Worked examples

Example 1

Enter in a three column cash book for January 2025: Jan 1 Cash in hand ₹10,000 and bank balance ₹40,000. Jan 3 Received from Ravi ₹4,900 by cheque after allowing discount of ₹100. Jan 5 Paid to Mohan ₹3,800 in cash, discount received ₹200. Jan 8 Deposited cash into the bank ₹5,000. Jan 10 Withdrew ₹2,000 from the bank for office use.

Show the solution

Debit side: Jan 1 balances: cash ₹10,000, bank ₹40,000.
Jan 3: Ravi, discount ₹100, bank ₹4,900 on the debit side.
Jan 5: Mohan, discount ₹200, cash ₹3,800 on the credit side.
Jan 8: contra. Debit side bank ₹5,000. Credit side cash ₹5,000. Mark C.
Jan 10: contra. Debit side cash ₹2,000. Credit side bank ₹2,000. Mark C.
Debit side before totalling: cash 10,000 + 2,000 = ₹12,000. Bank 40,000 + 4,900 + 5,000 = ₹49,900. Discount ₹100.
Credit side before balancing: cash 3,800 + 5,000 = ₹8,800. Bank ₹2,000. Discount ₹200.
Closing cash = 12,000 − 8,800 = ₹3,200.
Closing bank = 49,900 − 2,000 = ₹47,900.
Carry down the closing balances on the credit side: cash ₹3,200 and bank ₹47,900. Credit side totals then become cash 8,800 + 3,200 = ₹12,000 and bank 2,000 + 47,900 = ₹49,900, which equal the debit side totals.
Bring the balances down on the debit side on Jan 11: cash ₹3,200 and bank ₹47,900.

Answer: Closing cash balance is ₹3,200 and closing bank balance is ₹47,900. Both sides total ₹12,000 in the cash column and ₹49,900 in the bank column. Discount allowed ₹100 (debit total) and discount received ₹200 (credit total) are posted to their accounts at period end.

Example 2

A petty cashier receives an imprest of ₹5,000 on 1 April. During April he spends: postage ₹600, stationery ₹1,150, conveyance ₹850, miscellaneous ₹400. Find the amount reimbursed on 30 April and the closing petty cash balance before reimbursement.

Show the solution

Total expenses = 600 + 1,150 + 850 + 400 = ₹3,000.
Closing petty cash balance before reimbursement = 5,000 − 3,000 = ₹2,000.
Amount to reimburse = Imprest − closing balance = 5,000 − 2,000 = ₹3,000.
After reimbursement, petty cash in hand = 2,000 + 3,000 = ₹5,000, the imprest amount.
Main cashier entry: Petty Cash A/c Dr. ₹3,000 To Cash/Bank A/c ₹3,000, and the expense heads are posted from the analysis columns.

Answer: Closing petty cash balance before reimbursement is ₹2,000. Amount reimbursed is ₹3,000. Opening balance for the next period is ₹5,000.

Exam tips

Always read the question for whether it asks for a book, a ledger posting or a journal entry. Do the exact task, not extra.
In cash book questions, show the folio or particulars clearly and mark contra entries with C. Presentation earns step marks.
Do not forget the opening balances. Many students lose marks by starting from zero.
In petty cash questions, show the totals of each column and tick that opening plus received equals expenses plus closing.
If a transaction does not fit any subsidiary book, move to the journal proper and state that briefly.

Practice questions from Accounting Process

Subsidiary Books and Cash Book: frequently asked questions

What is the difference between a cash book and a journal?

The journal records all types of transactions in debit and credit form with a narration. The cash book records only cash and bank transactions. The cash book also acts as a ledger, so no separate cash account is needed.

Which transactions go in the purchases book?

Only credit purchases of goods meant for resale. Cash purchases go to the cash book. Credit purchases of assets such as furniture go to the journal proper.

What is the imprest system in a petty cash book?

The petty cashier gets a fixed amount for a period. At the end, the main cashier reimburses only what was spent, so the fund returns to the fixed amount. This keeps control over small expenses.

What is a contra entry in the cash book?

A contra entry is a transaction where both the debit and the credit are in the cash book, such as depositing cash in the bank. It is marked C in the folio column and is not posted to the ledger.

Do I balance the discount columns in a three column cash book?

No. The discount columns are only totalled. The totals are posted to the Discount Allowed and Discount Received accounts in the ledger.