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What do you understand by the subsidiary book?
Subsidiary book or the day book is an important area of Accountancy. It is a type of journal that maintains the accounts of detail transactions of a similar type. The entries in the subsidiary book are known as the original entries or the primary entries.
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What is the importance of subsidiary books and journals:
For every day or every week or every monthâ€™s transactions, we use the journal. But this is really haphazard for large scale business. So, to make the entries simpler and easy to understand Subsidiary books or the Day books are important.
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7 types of Subsidiary Books:
A subsidiary book records both the cash and non-cash transactions. Under the non-cash transaction, we can divide the subsidiary books into7 categories likeâ€”
This is a book of original entry where goods sold on credit are recorded. But in case of cash sales, it is recorded in the cash book. When other assets are sold for credits they are not recorded in the sales book; they are recorded in the journal proper.
The transaction from the return of purchases of goods is recorded in the Purchase Return Book. This is the book of original entry. Goods may return for several reasons like-
Transactions from the return of sales of the goods are recorded in sales return books. It does not record any return of goods which are sold on cash.
In case of credit sale, the seller draws a bill to the debtor, and when the bill is accepted from the debtor, it becomes the bill of exchange.
In case of credit purchases, the business enterprise accepts the bill of exchange, and it is then known as the bills payable. The bills due for payments should be kept under close watch, and for this purpose, a separate book is kept which is known as Bills payable book.
Cash transactions are recorded in the cash book, and non-cash transactions are recorded in the purchase book; sales return, sales book, bills receivable book and the bills payable books.
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