Book of original Subsidiary Books

Book of original Subsidiary Books: Subsidiary Books are original entry books in which related transactions are recorded in a single location and in chronological sequence. In a large corporation, logging all transactions in a single journal and publishing them to numerous ledger accounts would be very complicated and time-consuming.

Subdividing the journal into multiple subsidiary journals or volumes avoids this. ‘Subsidiary Books’ are partitions of a journal into multiple subsidiary journals for documenting transactions of a similar sort.

The different Book of original Subsidiary Books and their purpose are shown below:

1. Purchases Day Book: for recording credit purchase of goods only. Cash purchase or assets purchased on credit are not entered in this book.
2. Sales Day Book: for recording credit sales of goods only. Assets sold or cash sales are not recorded in this book.
3. Purchases Returns Book: for recording the goods returned to the suppliers when purchased on credit.
4. Sales Returns Books: for recording goods returned by the customers when sold on credit.
5. Bills Receivable Book: for recording the bills received [Bills Receivables] from customers for credit sales.
6. Bills Payables Book: for recording the acceptances [Bills Payables] given to the suppliers for credit purchases.
7. Cash Book: for all receipts and payments of cash.
8. Journal Proper: for recording any transaction which could not be recorded in the above-mentioned subsidiary books. For example, assets purchased or sold on credit and opening entry etc., are entered in this book.

Book of original Subsidiary Books Benefits and Importance:

1. Clerical Labour Savings:

Subsidiary books result in significant clerical labour savings in posts and narration. Transactions of a single class, such as credit purchases, credit sales, cash transactions, and so on, are recorded in separate subsidiary journals, and narration is not required.

For example, entering transactions in the Purchase Day book saves 50% of the time spent on posts. The Purchases a/c will be charged for the periodical total of this book. Only the suppliers’ personal accounts are to be credited.

2. Clerical Work Division:

The distribution of clerical labour among numerous office clerks becomes practicable because separate diaries are utilised to record transactions of each kind. This allows for a quick record of day-to-day transactions.

3. Reduces Frauds:

These books allow for the implementation of an internal check system, as well as the use of a rotating system for writing up books. This aids in the reduction of mistakes and the detection of fraud.

4. Makes it easier to find more information:

Because transactions of a similar sort are placed together in a distinct book, it is much easier to go back to a specific item.

Types of Book of original Subsidiary Books

1. Purchase Journal or Purchase Book:

Book of original Subsidiary Books: A buy book is an original entry book that records solely credit purchases of commodities. Purchases of products made with cash are noted in the cash book. Other asset credit purchases are similarly not documented in the purchase book; instead, they are entered in the journal proper.

Goods are the objects or articles that a business enterprise deals with on a regular basis, or we might say that goods are the items that a business firm sells on a regular basis. For example, a computer purchased by a firm dealing in fabric will not be considered one of its commodities, whereas anything linked to computers would be considered one of its assets. Similarly, the purchase of fabric by a company that sells computers is not considered one of its products since it exclusively sells computer-related things.

The transactions connected to credit purchases of items are immediately entered in the purchasing book, rather than in the journal. The amount of the purchases book, on the other hand, must be entered on the debit side of the ‘Purchases Account.’ The primary goal of keeping a buy book is to keep track of credit purchases over a certain period of time.

2. Sales Journal or Sales Book:

Book of original Subsidiary Books: Only credit sales of items are documented in a sales book, which is an original entry book. The cash book keeps track of all cash transactions of products. Other asset credit sales are similarly not documented in the sales book; instead, they are entered in the journal itself.

The term “goods” refers to the products or articles with which a business enterprise deals, or the items that the business firm sells on a regular basis. For example, the sale of furniture by a company that sells stationery will not be considered its products, but anything linked to stationery will be considered its goods.

3. Purchases Return Journal or Book of Purchases Returns:

A buy return book is an original entry book that records transactions relating to the return of purchases of goods.

There might be a variety of reasons for returning the items to the provider, including the following:

(a) When the items are found to have certain flaws.

(b) When items are delivered that do not match the samples or specifications.

(c) If the amount of items delivered exceeds the standards.

(d) When the seller and the purchaser have broken their agreement.

A debit note is delivered to the person to whom this document is sent when the business firm returns the products to the supplier. The business enterprise may issue a debit note to the supplier for an amount that will be recovered from him if the business enterprise returns items that are faulty or do not meet the standards.

All facts concerning the date and amount of the transaction, as well as the name of the person whose account is debited and the reason for debiting his account, must be included in this document. It should be noted that any trade discounts received at the time of purchase will be adjusted when the products are returned.

4. Returns Journal or Sales Return Book

A sales return book is an original entry book that records transactions relating to the return of items sold. Returns of items sold on a cash basis are not recorded in the sales return book. The clients may return the items for a variety of reasons.

Here are a few of them:

(a) When the items are found to have certain flaws.

(b) When items are not delivered on time to clients.

(c) When items are delivered that do not match the samples or specifications.

(b) If there is an excess of items on the market.

(e) When there is a breach of contract between the buyer and the seller.

When a company gets products it previously sold, it issues a credit note in the purchaser’s name, indicating that his account has been credited in the company’s records. All facts concerning the date and amount of the transaction, as well as the name of the person whose account is credited and the reason for crediting his account, must be included in this document. It’s worth noting that the trade discount authorised at the time of credit sale will be modified when the products are received.

5. Bills Receivable

Book of original Subsidiary Books: In the event of credit sales, the commercial firm may issue a bill to the buyer (debtor), which becomes a bill of exchange if the debtor accepts it. In everyday life, there are a great number of vendors and buyers, and there are a significant number of transactions between them for drawing, accepting, and paying bills of exchange.

After adding 3 days to the bill’s duration, the bill is due for payment. As a result, it’s critical to keep a tight eye on all invoices that need to be paid. A separate book called the Bills Receivable Book should be maintained in record for this purpose. This book must include all information about the bills, such as the date of receipt, the name of the party, the period of the bill, the due date of the bill, the Ledger Folio (L.F.), the amount of the bill, and so on.

6. Bills Payable

Book of original Subsidiary Books: In the event of credit purchases, the business enterprise may accept a bill issued by the seller (creditor), referred to as bills of exchange, and referred to as bills payable by the business firm. After adding 3 days to the bill’s duration, the bill is due for payment. As a result, it’s critical to keep a tight eye on all invoices that need to be paid. A separate book called Bills Payable Book should be maintained in record for this purpose. This book must include all information about the bills, such as the date of acceptance, the name of the party to whom the bill is sent, the period of the bill, the due date of the bill, the Ledger Folio (L.F.), the amount of the bill, and so on.

7. Journal proper

So far, we’ve seen that transactions involving cash are recorded directly in the cash book, while transactions involving non-cash specialised items are recorded directly in subsidiary books such as the sales book, purchase book, sales return, purchase return, bills receivable, and bills payable book.

The concern now is what will happen to transactions that do not involve cash or other subsidiary books, such as the sale or purchase of an item on credit. It cannot be recorded in the cash book since there is no cash flow and the asset is not classified as a good; it also cannot be recorded in the purchase book. These are the transactions that do not fit into any of the journal’s sub divisions and are recorded in the journal itself, often known as the general journal.

Book of original Subsidiary Books

The following sorts of transactions are often documented in the journal itself:

• Opening entries:

The balances in respect of different assets, liabilities, and capital showing at the conclusion of the previous accounting year are carried forward at the start of the current accounting year by opening entries.

• Closing entries:

Closing entries are those that are passed to move nominal accounts to appropriate income statements in order to generate financial statements for a firm.

• Transfer Entries:

Transfer entries are those that are used to transfer an account’s balance or an account’s sum to another account. For instance, shifting the current account balance to the capital account.

• Adjusting entries:

Some modifications must be made at the conclusion of an accounting year that will be disclosed later. For instance, closing stock, depreciation, and different ongoing costs or earnings should all be recorded. Passing adjusting entries are used to record these things.

• Rectification errors:

These inputs must be passed in order to correct any accounting problems.

•  Additional Entries:

In the journal proper, entries connected to credit sales, asset purchases, and so on are documented.