Subsidiary book and Principal book

A cash book is a type of subsidiary book that is treated as a principal book of accounts. Let's understand what these terms mean and why the correct answer is option 'A'.

Subsidiary book:
- A subsidiary book is a book of original entry used to record specific types of transactions in a systematic manner.
- It is a subsidiary to the main or principal book of accounts, which is the ledger.
- Subsidiary books help in maintaining a detailed record of transactions before they are posted to the ledger.

Principal book:
- The principal book of accounts is the ledger, which is a collection of all accounts maintained by a business.
- It serves as the central repository for recording and summarizing all financial transactions.
- The ledger provides a detailed record of each account, including its opening and closing balances, as well as all transactions affecting the account.

Cash book:
- A cash book is a type of subsidiary book used to record cash and bank transactions.
- It acts as a record of all cash receipts and payments, as well as bank receipts and payments.
- The cash book helps in maintaining an accurate record of cash and bank balances, and it is updated on a regular basis.

Cash book as a subsidiary book:
- The cash book is considered a subsidiary book because it records specific types of transactions (cash and bank).
- These transactions are later posted to the respective accounts in the ledger.
- The cash book serves as a subsidiary to the ledger, providing a detailed record of cash and bank transactions before they are summarized in the ledger.

Cash book as a principal book:
- While the cash book is a subsidiary book, it is also treated as a principal book of accounts.
- This is because the cash book contains important financial information that is used for various purposes, such as preparing financial statements, analyzing cash flows, and monitoring cash and bank balances.
- The cash book is often referred to as the "bank account" of a business, as it provides a detailed record of all cash and bank transactions.

Conclusion:
In conclusion, a cash book is a type of subsidiary book that is treated as a principal book of accounts. It serves as a detailed record of cash and bank transactions, acting as a subsidiary to the ledger while also providing important financial information as a principal book.

A