Preparation of Subsidiary Books.


Welcome to class! 

In today’s class, we will be talking about the preparation of subsidiary books. Enjoy the class!

Preparation of Subsidiary Books.

Subsidiary Books

By the end of the lesson, you should be able to;

  • Prepare sales and purchase day books
  • Post transactions in Return Inward and Return Outward Journals
  • Solve problems on subsidiary books of account 
  • Explain the meaning and types of discounts 
  • Calculate the trade discount on the journal

Layout of a Journal or subsidiary book.

Date Particulars Folio Details Totals

Below is an Illustration of how journals are prepared.



  1. Laolu, a trader undertook the following transactions in the month of April 2016.

April 1            Started business with N25, 000 cash

“       2             Put N18, 000 of the cash into a bank account

“        5            Purchased from Co-operative Stores –

15 drums of groundnut oil at N20, 400 each

12 bags of garri at N3, 500 each.

Invoice subject to 10% trade discount

“        8            Sold to T. Okediran –

8 drums of groundnut oil at N24, 000 each.

Less 5% trade discount,

4 bags of garri at N4, 250 each

200 yams at N450 each

“        9            Returned to Co-operative Stores –

3 drums of groundnut oil bought on 5th April 2016.

“        10          Bought from Oyesile & Sons –

650 yams at N380 each,

32 bags of onions at N12, 500 per bag,

60 bags of Dangote 50kg iodized salt at N3, 200 per bag.

“        12          Paid Co-operative Stores N65, 700 cheque on account

“        15          T. Okediran returned 3 drums of groundnut oil bought on the 8th of April, 2016.

“        18          Sold 320 yams at N550 each for cash

“        19          Bought from Ayodele& Co –

45 bags of onions at N12, 000 each,

50 cartons of Gino Tomato Paste at N14, 000 per carton,

20 drums of palm oil at N3, 800 per drum,

Invoice subject to 15% trade discount.

“         21         Returned to Ayodele& Co –

8 cartons of Gino Tomato Paste and 5 drums of palm oil bought on the 19th April 2016.

“         22         Sold to Adjei Balama –

16 drums of palm oil at N4, 500 per drum,

20 bags of onions at N14, 000 each,

120 yams at N600 each,

Invoice subject to 5% trade discount

“         25         Paid sundry expenses N8, 400 by cheque

“         26         Paid rent of shop N15, 000 cash

“         27         Adjei Balama returned 5 drums of palm oil to us because they were damaged

“         29         T. Okediran paid by cheque for all the sales made to him.

“         30         Bought weighing machine from Standard Tools Ltd on credit N62, 000


You are required to record the above transactions in the appropriate books of original entry.



Meaning of Discounts.

Discounts are allowances which could be a deduction in price or in percentage payment made to retailers by suppliers or manufacturers. 

 Types of Discounts. 

  • Trade Discounts: This is an allowance made to retailers by the manufacturers or suppliers in form of deduction from catalogue prices of goods. 

Features of Trade Discounts  

  1. It is deducted before cash discount
  2. It encourages bulk purchase
  3. Allowance is off invoice prices
  • Cash Discounts: This is a percentage allowance for prompt payments of an account within a specified period of time.

Features of Trade Discounts  

  1. It is deducted after trade discount has been deducted
  2. It is recorded in the account 
  3. It is conditional 
  4. It encourages prompt payment 

Reasons for granting discounts. 

  1. It is given to encourage bulk purchases 
  2. To ensure prompt payment
  3. To attract customers
  4. It is granted to avoid the risk of bad debts
  5. It is also granted to provide for the buyer’s or customer’s profit margin.


In our next class, we will be talking about the Ledger. We hope you enjoyed the class.

Should you any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

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