C o n f i d e n t i a l

MB0041-Financial and Management Accounting

Unit-4 Secondary Books

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Program : MBA (Banking & Finance)

Semester : I

Subject Code : MB0041

Book Id : B1130

Subject Name : Financial and Management Accounting

Unit number : 4

Unit Title : Secondary books

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

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Objectives

Subsidiary books

Purchase book

Sales book

Purchase return book

Sales return book

Trade discount Vs Cash discount

Bill of Exchange

Petty cash book

Lecture Outline

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Objectives

Objectives :

List the various primary books containing the original entries

Difference between trade and cash discount

To know various secondary books

Procedure for balancing a ledger account

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

1. Purchase Book

2. Sales Book

3. Purchase Return Book

4. Sales Return Book

5. Bills Receivables Book

6. Bills Payable Book

7. Cash Book

8. Journal Proper

Subsidiary Books

• The types of subsidiary books include

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Purchase Book

• ONLY CREDIT PURCHASES ARE RECORDED

• CASH PURCHASES ARE RECORDED IN CASH BOOK

• TRADE DISCOUNT ARE GRANTED BY THE SUPPLIER ON THE LIST PRICE

• CASH DISCOUNT IS ALLOWED ON THE INVOICE PRICE

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Sales Book

• CONTAINS DETAILS OF CREDIT SALES

• THE TOTAL OF SALES BOOK IS TRANSFERRED TO LEDGER

• THE PARTIES TO WHOM CREDIT SALES ARE MADE ARE KNOWN AS TRADE DEBTORS

• SALES ACCOUNT SHOWS CREDIT BALANCE

• TRADE DEBTORS ACCOUNT SHOWS DEBIT BALANCE

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Purchase Return Book

• When a firm wants to return the goods purchased due to damages or non adherence to specifications such transactions are recorded in purchase return books.

• A debit note is a document prepared by the purchaser to inform the supplier that his account has been debited with the amount mentioned and for the reason stated therein.

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Sales Return Book

• Sales return books is opened for the purpose of recording the return of goods sold on credit.

• Credit note is prepared to show that the creditor’s account is credited to the value of the goods returned by them to us.

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Trade Discount Vs Cash Discount

• Trade Discount

It is a reduction granted by a supplier from the list price or services

on business consideration.

• Cash Discount It is the reduction granted by the supplier from the invoice price in

consideration of immediate payment or payment within a stipulated period.

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Out of the box thinking

• If I need to promote sales should I allow trade discount or cash discount?

• Trade discount

• Goods sold on cash was returned by the customer. Can we enter this transaction in sales return book?

• No. When goods are returned the journal entry is :

Sales a/c Dr.

To cash account

Being goods sold on cash returned.

Only goods returned on credit sales appear in sales return book.

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Activity

Bill of exchange Promissory Note

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Bangalore 25th Feb 2010 On demand (or three months after date) I promise to pay Mr. Sanjeev or order the sum of rupees one thousand only with interest of 5 per cent per annum for the value received.

Rs.3000 Bangalore

25th Feb 2010 Three months after date, pay me or my or my order, the sum of rupees Three thousand only for the value Received. To B. Rajesh K. Ramesh 10, Gokulam Park Road Mysore

What is the difference between a bill of exchange and a promissory note?

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Petty Cash Book

• In Imprest system of accounting, at the beginning of a month, a definite sum of money is given by chief cashier to petty cashier for petty expenses.

• At the commencement of the next period, the petty cashier is reimbursed equal to what he had spent during the earlier period.

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MB0041-Financial and Management Accounting

Unit-4 Secondary Books

Reference

• http://www.authorstream.com/Presentation/tkjainbkn-146830-bill-exchange-law-cat-gmat-mba-management-business-research-cfp-cfa-frm-cpa-ca-cs-icwa-india-rajasthan-entertainment-ppt-powerpoint/

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