Subsidiary Books and Bank Reconciliation Statement
What the domain tests
Subsidiary Books and Bank Reconciliation Statement tests special journals used when transactions are repetitive and the technique of reconciling the cash book with the bank statement.
Core rules
- Subsidiary books include cash book, purchase book, sales book, purchase return book, sales return book, bills receivable book, bills payable book and journal proper.
- The cash book is both a journal and a ledger account. A contra entry affects cash and bank together and is marked 'C' in both columns.
- Credit purchases of goods go to the purchase book; credit sales of goods to the sales book; assets and other credit transactions go to the journal proper.
- A BRS explains differences between the bank column of the cash book and the pass book: cheques deposited not credited, cheques issued not presented, bank charges and interest, direct collections, standing orders, dishonoured cheques and errors.
Worked example
Cash book shows a debit balance of ₹12,000. A cheque of ₹3,000 deposited is not yet credited; bank charges are ₹200; a cheque of ₹1,000 issued is not presented. Start with the cash book’s favourable ₹12,000, deduct deposits not credited ₹3,000, deduct charges ₹200, and add unpresented cheques ₹1,000. Pass book balance = ₹12,000 − ₹3,000 − ₹200 + ₹1,000 = ₹9,800 credit.
Traps
Do not add a cheque deposited but not credited; it is already in the cash book but absent from the pass book. Do not treat a contra entry as a fresh transaction. Check whether the starting balance is debit or favourable, or credit or overdraft, before adjusting; reversing the sign is the most common BRS error.