Subsidiary books, also known as subsidiary ledgers or sub-ledgers, are specialized accounting records that provide detailed information about specific types of transactions within a business. They are used to record and track individual transactions before they are summarized and posted to the general ledger. Subsidiary books help in maintaining accurate and organized accounting records by categorizing transactions based on their nature or source.
| No | Name of Book | Function | Account Debited | Account Credited | Source Document |
|---|---|---|---|---|---|
| 01 | Sales Day Book 💰 | Records credit sales | Debtor/ Buyer/ Customers | Sales | Sales Invoice/ Outgoing Invoice/ Duplicate Invoice |
| 02 | Purchases Day Book 🛒 | Record credit purchases | Purchases | Creditor/ Seller/ Suppliers | Income Invoice/ Original Invoice |
| 03 | Sales Returns Day Book 🔄 | Record goods returned to the business by customers | Sales Returns | Debtors | Duplicate Credit Note |
| 04 | Purchases Returns Day Book 🔙 | Record goods returned to the supplier by the business | Creditor | Purchases Returns | Original Credit Note |
| 05 | Cash Book 💵 | Records all cash transactions | Various | Various | Receipts/ Cheque Counterfoil/ Deposit Slip |
The cash book records all cash receipts and payments made by a business. It tracks the inflow and outflow of cash and provides a detailed record of all cash transactions.
The single column cash book is the simplest form, consisting of one column for all cash receipts and payments.
This cash book includes two additional columns for recording discounts allowed and discounts received.
This includes an additional column for bank transactions, useful for businesses that have both cash and bank dealings.
The journal proper is used to record non-routine or adjusting entries that cannot be recorded in other subsidiary books. Examples include depreciation, accruals, provisions, and other adjustments.
The general ledger serves as the main accounting record where all summarized transactions from subsidiary books are posted. It provides an overview of all accounts and their balances, allowing for the preparation of financial statements.
The cash book is essential for businesses, as it helps in tracking the cash inflows and outflows. Each type of cash book (single column, double column, and three column) serves different purposes based on the nature of transactions a business deals with. For instance:
Recording cash transactions follows a clear process, ensuring accurate financial tracking. For example:
The journal proper records non-routine transactions, which cannot be directly recorded in the subsidiary books. Such transactions include:
The sales day book is used to record all credit sales made by a business. It plays an important role in keeping track of sales activity and maintaining accurate accounts receivable records. A separate entry is made in the ledger for every credit sale.
This book helps monitor customer payments, track receivables, and generate aging reports to assist businesses in managing their outstanding balances effectively.
The purchases day book records all credit purchases. It is instrumental in maintaining accurate accounts payable records and monitoring outstanding liabilities owed to suppliers.
The book includes key information such as the date of purchase, name of the supplier, invoice details, and the total amount. Businesses also reconcile their purchases day book with supplier invoices to ensure accuracy.
This book records all goods returned to the supplier by the business. It is important for tracking purchases returns and ensuring that the business's inventory records are accurate.
The sales returns day book tracks goods returned by customers to the business. It is crucial for managing customer returns and updating the sales records accurately.
The general ledger serves as the central repository for all financial information. It provides a comprehensive record of all accounts and their balances. The general ledger plays a crucial role in preparing financial statements by summarizing transactions from subsidiary books. Each transaction is posted in double-entry format, ensuring that debits and credits are accurately balanced.
Using a general ledger offers several advantages to businesses, such as:
The general ledger follows a double-entry bookkeeping system, meaning each transaction affects at least two accounts. For example, when a company makes a credit sale, the accounts affected are accounts receivable (debited) and sales (credited). The general ledger ensures accurate tracking and reporting of these transactions.
Recording cash transactions follows a clear process, ensuring accurate financial tracking. For example:
The journal proper records non-routine transactions, which cannot be directly recorded in the subsidiary books. Such transactions include:
The sales day book is used to record all credit sales made by a business. It plays an important role in keeping track of sales activity and maintaining accurate accounts receivable records. A separate entry is made in the ledger for every credit sale.
This book helps monitor customer payments, track receivables, and generate aging reports to assist businesses in managing their outstanding balances effectively.
The purchases day book records all credit purchases. It is instrumental in maintaining accurate accounts payable records and monitoring outstanding liabilities owed to suppliers.
The book includes key information such as the date of purchase, name of the supplier, invoice details, and the total amount. Businesses also reconcile their purchases day book with supplier invoices to ensure accuracy.
This book records all goods returned to the supplier by the business. It is important for tracking purchases returns and ensuring that the business's inventory records are accurate.
The sales returns day book tracks goods returned by customers to the business. It is crucial for managing customer returns and updating the sales records accurately.
The general ledger serves as the central repository for all financial information. It provides a comprehensive record of all accounts and their balances. The general ledger plays a crucial role in preparing financial statements by summarizing transactions from subsidiary books. Each transaction is posted in double-entry format, ensuring that debits and credits are accurately balanced.
Using a general ledger offers several advantages to businesses, such as:
The general ledger follows a double-entry bookkeeping system, meaning each transaction affects at least two accounts. For example, when a company makes a credit sale, the accounts affected are accounts receivable (debited) and sales (credited). The general ledger ensures accurate tracking and reporting of these transactions.