Fundamentals of Accounting · Accounting Process

Subsidiary Books and Cash Book in Accounting

Updated 11 October 2026 · Fact-checked

Subsidiary books are separate books where you first record similar transactions, such as credit purchases, credit sales and returns. The cash book records all cash and bank receipts and payments and acts as both a journal and a ledger. To solve questions, sort each transaction into its correct book, then total and post.

Understand Subsidiary Books and Cash Book

In a real business, hundreds of transactions happen daily. Writing each one in a single journal is slow and messy. So accountants split the journal into subsidiary books, also called special journals. Each book holds only one kind of transaction.

The main subsidiary books are the purchase book (credit purchases of goods meant for resale), the sales book (credit sales of goods), the purchase returns book (goods returned to suppliers) and the sales returns book (goods returned by customers). Cash purchases, cash sales and purchases of assets on credit do not go in the purchase or sales book. Only credit transactions in the goods the business trades in go there. Entries are made from invoices and debit or credit notes, at the net amount after trade discount.

The cash book records every receipt and payment of cash. It is both a book of original entry and a ledger account, so you do not need to post it again to a separate cash account. A single column cash book has one money column for cash. A double column cash book has two columns on each side, usually cash and bank. A triple column cash book adds a discount column: discount allowed on the debit side, discount received on the credit side.

A contra entry is a transaction that affects both cash and bank, such as depositing cash in the bank or withdrawing cash from it. Both sides are in the same cash book, so the entry appears on the debit side in one column and the credit side in the other. It is marked with the letter C in the ledger folio column.

A petty cash book records small, routine expenses such as postage, stationery and travel. Under the imprest system, the head cashier gives the petty cashier a fixed amount. At the end of the period, the petty cashier spends from it and gets back exactly the amount spent. The imprest is then restored to its original figure.

Key rules to remember

Amount recorded in purchase or sales book: Invoice value = List price − Trade discount; Trade discount is never shown as a separate entry. Cash discount is not recorded in these books.
Cash book balance: Closing balance = Total of debit side − Total of credit side; Cash column should never show a credit balance. Bank column can show an overdraft (credit balance).
Contra entry: Dr Bank column, Cr Cash column (cash deposited) or Dr Cash column, Cr Bank column (cash withdrawn); Both sides are in the same book. Do not post to any ledger account. Mark with C.
Discount column in triple column cash book: Discount allowed (debit side) → Dr Discount Allowed A/c; Discount received (credit side) → Cr Discount Received A/c; The discount columns are only totalled, not balanced. Total is posted to the ledger.
Imprest system: Amount to be reimbursed = Total petty expenses of the period; Opening imprest = Total expenses + Closing petty cash balance (when no extra amount is drawn).

How to solve Subsidiary Books and Cash Book questions

Use this method for any question that gives a list of transactions and asks for a subsidiary book or a cash book.

1Read each transaction and decide if it is cash or credit, and whether it is goods for resale or something else (asset, expense).
2Pick the right book: credit purchase to purchase book, credit sale to sales book, goods returned to the supplier to purchase returns book, goods returned by a customer to sales returns book.
3Enter the date, party name and the net amount after trade discount. Total the amount column at the end.
4For a cash book, write the opening cash and bank balances on the debit side first (a bank overdraft goes on the credit side).
5Enter each receipt on the debit side and each payment on the credit side. Put cheque items in the bank column and cash items in the cash column. Enter discount in the discount column.
6Mark contra entries on both sides and tick the C column.
7Total each column, find the balance and carry it down on the opposite side. For the petty cash book, total each expense column and compute the amount to be restored.
8Write the ledger posting totals (for example, Dr Discount Allowed A/c) if the question asks for them.

Quickest way: Two-column check for cash book questions

When to use it: Use it when a long list of transactions is given and time is short.

Underline each cheque or bank word in the question. Those items go in the bank column.
Write all debit side items in one pass, then all credit side items in a second pass.
Put each contra entry on both sides in the same pass so you do not forget one side.
Check your balance: Opening balance + receipts − payments must equal the closing balance you carry down.
For petty cash, add the expense columns and the answer is the amount restored. Closing balance = imprest − expenses.

Common mistakes in Subsidiary Books and Cash Book

Recording cash purchases or purchase of furniture in the purchase book.
Students see the word purchase and stop reading.
Fix: Purchase book is only for credit purchases of goods meant for resale. Cash purchases go to the cash book and assets go to the journal proper.
Recording the invoice at list price instead of net of trade discount.
The discount is mentioned in the question and looks like it needs its own entry.
Fix: Deduct trade discount first and record the net amount. Show no separate entry for trade discount.
Treating a contra entry on only one side of the cash book.
Students think of it as a single deposit or withdrawal.
Fix: A contra entry affects two columns. Cash deposited in the bank: debit bank column, credit cash column.
Putting discount allowed on the credit side or discount received on the debit side.
Students think discount is an expense or gain on the side where they feel it, not where the account sits.
Fix: Discount allowed to customers is a loss and goes on the debit side. Discount received from suppliers is a gain and goes on the credit side.
Balancing the discount columns like cash and bank.
The columns look the same as the others.
Fix: Only total the discount columns. Do not carry down a balance.
Reimbursing the petty cashier with the full imprest instead of the amount spent.
The word imprest sounds like the fixed amount.
Fix: Under the imprest system, the amount received equals the amount spent. The imprest is the fixed starting amount.

Worked examples

Example 1

Prepare a double column cash book (cash and bank) with discount from these transactions of Anand Traders. Jan 1: cash in hand ₹10,000, bank balance ₹40,000. Jan 3: received cash from Ravi ₹4,900, discount allowed ₹100. Jan 5: deposited cash into bank ₹6,000. Jan 8: paid Meena by cheque ₹7,800, discount received ₹200. Jan 12: cash sales ₹9,000. Jan 15: paid rent in cash ₹2,000. Jan 20: withdrew from bank for office use ₹3,000. Jan 25: received a cheque from Sunil ₹12,000 and deposited it in the bank.

Show the solution

Debit side opening: Cash ₹10,000 and Bank ₹40,000. Write them first.
Jan 3: Dr cash ₹4,900. Discount allowed ₹100 goes in the discount column on the debit side.
Jan 5: contra. Debit bank ₹6,000 and credit cash ₹6,000.
Jan 8: Cr bank ₹7,800. Discount received ₹200 goes in the discount column on the credit side.
Jan 12: Dr cash ₹9,000. Jan 15: Cr cash ₹2,000.
Jan 20: contra. Debit cash ₹3,000 and credit bank ₹3,000.
Jan 25: Dr bank ₹12,000.
Cash debit total = 10,000 + 4,900 + 9,000 + 3,000 = ₹26,900. Cash credit total = 6,000 + 2,000 = ₹8,000. Cash balance = ₹18,900.
Bank debit total = 40,000 + 6,000 + 12,000 = ₹58,000. Bank credit total = 7,800 + 3,000 = ₹10,800. Bank balance = ₹47,200.
Discount totals: allowed ₹100 (debit side), received ₹200 (credit side). They are posted to Discount Allowed A/c (debit) and Discount Received A/c (credit).

Answer: Closing cash balance ₹18,900 and closing bank balance ₹47,200. Discount allowed ₹100 and discount received ₹200.

Example 2

Mehta Stores keeps a petty cash book on the imprest system. The imprest is ₹5,000. During the week, the petty cashier spent: stationery ₹800, postage ₹450, travelling ₹1,200, refreshments ₹650 and sundry expenses ₹300. Find the total expense, the closing petty cash balance and the amount the head cashier must give to restore the imprest.

Show the solution

Rule the petty cash book with columns for amount received, voucher number, total payment and analysis columns for each expense head.
Opening imprest received: ₹5,000 on the debit side.
Total expenses = 800 + 450 + 1,200 + 650 + 300 = ₹3,400.
Check that the analysis columns add up to the same ₹3,400 total payments column.
Closing balance = 5,000 − 3,400 = ₹1,600, carried down.
Amount received to restore the imprest = ₹3,400. After receipt, the cash in hand is 1,600 + 3,400 = ₹5,000 again.

Answer: Total expense ₹3,400, closing petty cash balance ₹1,600, and the head cashier gives ₹3,400 to restore the imprest to ₹5,000.

Exam tips

In written papers, rule the format neatly. Marks are often given for correct columns, headings and the C mark on contra entries.
Read each transaction for the words credit, cash, cheque and returned. They decide the book.
Show the closing balance with the words By Balance c/d on the credit side and To Balance b/d on the next debit side.
If a question asks for the difference between purchase book and sales book, say purchase book records credit purchases of goods and sales book records credit sales of goods. The first is built from invoices received and the second from invoices sent.
Always show your totals and the working for the petty cash reimbursement. A small slip then costs only one mark.

Practice questions from Accounting Process

Subsidiary Books and Cash Book in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Subsidiary Books and Cash Book: frequently asked questions

What are subsidiary books in accounting?

They are special journals where you record similar transactions separately. The main ones are the purchase book, sales book, purchase returns book, sales returns book and cash book. They save time and make posting to the ledger easier.

What is the difference between purchase book and sales book?

The purchase book records credit purchases of goods meant for resale, based on invoices received from suppliers. The sales book records credit sales of goods, based on invoices issued to customers. Cash transactions do not go in either.

How do I prepare a double column cash book?

Draw a debit side for receipts and a credit side for payments, each with a cash column and a bank column. Enter opening balances, then all transactions, with cheques in the bank column. Mark contra entries on both sides, total each column and carry down the balances.

What is the imprest system in a petty cash book?

The head cashier gives the petty cashier a fixed sum, called the imprest. At the end of the period, the petty cashier is given only the amount spent. This restores the original sum and makes control easy.

Can the cash column of a cash book show a credit balance?

No. You cannot pay out more cash than you have, so the cash column always has a debit balance or is nil. The bank column can show a credit balance when there is an overdraft.