Subsidiary books are books of original entry. In the normal course of business, majority of transactions are either relate to sales, purchases, or cash. So, we record transactions of the same or similar nature in one place, i.e. the subsidiary book. And we record these transactions in chronological order.
Types of subsidiary books:
The number of subsidiary books may vary according to the requirements of each business. Based on the nature of business and the volume of transactions, the following subsidiary books are maintained:
Cash book is a record of all the transactions related to cash. Examples include expenses paid in cash, revenue collected in cash, payments made to creditors, payments received from debtors, cash deposited in bank, withdrawn of cash for office use, etc.
In double column cash book, a discount column is included on both debit and credit sides to record the discount allowed to customers and the discount received from creditors, respectively.
In triple column cash book, one more column of bank is included to record all the transactions relating to bank.
These transactions have an immediate effect on the cash flow of the business. A credit transaction is a business transaction which although has monetary impact does not involve exchange of cash at the time of occurrence of the transaction but is settled in cash at a subsequent date.
Types of Credit Transactions in Subsidiary Books:
- Purchase Book
- Purchases Returns Book
- Sales Book
- Sales Returns Book
- Bills Receivable Book
- Bills Payable Book
- Journal Proper
Purchase Book is that book in which we have record all the business credit transactions related to the purchase of goods only. It is an original entry book like a Cash Book. Cash purchases of goods are not recorded in it because all these transactions are recorded in the Cash Book. This book is also known as purchase register, purchase daybook, purchase journal, and purchase invoice book.
Purchase Return Book:
When the goods purchased on credit are returned to the supplier, these are recorded in the Purchase return book. Sometimes, goods purchased can be defective or of low quality, etc. and hence, need to be returned. A separate book is maintained for the purchase return, and these are not deducted from the purchases in the Purchase book. Also, Purchase return is recorded at the net amount on the invoice.
Debit note is prepared for every return of goods. It is prepared in duplicate. The original one is sent to the supplier while the duplicate copy is kept for our own records. The Debit note contains the name of the supplier, details of goods returned and the reason thereof. Each debit note is dated and serially numbered.
A Sales book is a record of all credit sales made by a business. It is one of the secondary books of accounts and unlike cash sales which are recorded in cash book, sales book is only to record credit sales. The amount entered in the sales book is on behalf of invoices supplied to purchasers. A Sales book is also called Sales Journal or Sales Day Book.
Sales Return Book:
When a customer returns goods it has bought from a business a credit note is issued by the business and details are recorded in the sales return daybook. The sales return daybook, sometimes referred to as the sales return journal or return inwards journal, is a special journal used to record sales returns.
Bills Receivable Book:
Bills receivable book is used to record the bills received from debtors. When a bill is received, details of it are recorded in the bills receivable book.
In the ledger the account of the person from whom each bill is received is credited with the amount of that bill and the periodical total of the book is posted to the debit of bills receivable account.
the bills receivable book is ruled according to the requirements of a particular account.
Bills Payable Book:
Bills payable book is used to record bill accepted by us. When a bill drawn by our creditor is accepted particulars of the same are recorded in this book.
Journal Proper is original entry books like as all subsidiaries Books. All those transactions which cannot record in the any of other subsidiary's books are recorded in journal proper. In other words, all those transactions placed in journal proper which are left from other subsidiaries books.
In this Post we have seen Detailed note on types of Subsidiary Books. In next post we will go through the Advantages of Subsidiary Books.