Subsidiary books are the books of original entry which are maintained under the modern methods of book-keeping for recording the numerous transactions. They are also referred to as primary records as the first entry of transaction is done in subsidiary books. Based on subsidiary books postings are made into concerned account afterwards.
What are the Types of Subsidiary Books in Accounting?
1. Cash Book: It is advisable that the cash transactions should be recorded instantly as far as possible in order to avoid errors, omissions or frauds. This may also help the trader to find out at once the position of cash in time. Accordingly, it is convenient to record the cash transactions in a separate book referred to as cash book prior to passing the entries through the journal. Thus the cash book is a book of original entry as well as a ledger account where all cash transactions are entered when they occur.
2. Purchases Book: The purchases book can be utilized to record the purchases of goods on credit only. If any property other than goods in purchased on credit, it shouldn’t be noted in this book. Similarly, the cash purchases are also not recorded in this book. Thus a business transaction needs to be satisfy the following pair of conditions before it is entered in the purchases book:
a) The credit purchases involving no payment of cash on the spot.
b) The articles, goods or merchandise purchased, are those that are intended for sale and not as a property or asset of the business.
3. Sales Book: The sales book or sales day book is written up just like the purchases book. It is employed to record only the sale of goods on credit. Thus, the following pair of factors must be taken into account before a sale is entered in this book:
a) The transaction involves sale on credit only with no immediate cash payment.
b) The sale is of goods in which the business enterprise deals.
Figure 1: Different Types of Subsidiary Books in Accounting
4. Purchases Return Book: The purchases returns book (also referred to as Bought Returns Book or Returns Outwards Book) records the details of the goods returned by the business to the suppliers. The columns of the purchase returns book match the purchases book namely: date, particulars, debit note number (as against Invoice number in the purchases book), ledger folio and amount.
a) Debit note: This is a statement sent to the person to whom products are returned. This report informs him that his account has been debited to the extent of the amount of the items returned. It has details in respect of the name of the party to whom goods are returned, the debited of the goods returned and the reasons for return of the goods. It is based on the debit note that the entry is made in the purchases returns book or returns outward book.
b) Credit note: When the products are sent back by the customers combined with the debit note, the seller acknowledge the same with a document called the credit note.
5. Sales Return Book: The sales returns book (or Returns Inward Book) can be employed to record the products returned to the business by the customers, as the goods might not be as per the order, or because they were faulty, damaged or otherwise unacceptable. The columns utilized in this book resemble Sales Day Book except that in place of Invoice No., the Credit Note Number is recorded. A credit note is made by the trader in duplicate to indicate that the customer’s account is credited with the amounts noted therein. The entries in sales returns book are created according to these credit notes.
6. Bills Receivable Book: This book can be used to document the details of bills receivable on which the business will get the amounts from other parties in future. The entries to be made in this book are the name if the acceptor (debtor), the terms, due date, the amount and other details.
7. Bills Payable Book: This is also a book of original entry and is utilized to record the particulars of all the ‘bills payable’ accepted by the business for the intention of paying at a future date the amounts due by it (the organization or the trader) to its creditors. The entries to be made in this book relate with the name of the drawer, the name of the payee, the period, the due date and other particulars. Then the acceptance is duly returned to the drawer.
In the above text, we have discussed the various types of subsidiary books of accounts in brief. Post suggestions in the comment section.