Subsidiary Books 📚

Introduction 🌟

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.

Cash Book 💳

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.

Single Column Cash Book 📝

The single column cash book is the simplest form, consisting of one column for all cash receipts and payments.

Double Column Cash Book 📊

This cash book includes two additional columns for recording discounts allowed and discounts received.

Three Column Cash Book 📈

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.

Subsidiary Books

Cash Book - Detailed Explanation 💵

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:

• Single Column Cash Book 📝: Simplest form of cash book, used only for recording cash receipts and payments.
• Double Column Cash Book 📊: Includes additional columns for discount allowed and received, useful when discounts are frequently involved.
• Three Column Cash Book 📈: Has an extra bank column, used when businesses also have significant bank transactions.

How the Cash Book Works ⚙️

Recording cash transactions follows a clear process, ensuring accurate financial tracking. For example:

• All cash receipts and payments are recorded chronologically.
• The book is balanced regularly to reflect the available cash at any point.
• Three-column cash books are often reconciled with bank statements to verify transaction accuracy.

Purpose of Journal Proper 📋

The journal proper records non-routine transactions, which cannot be directly recorded in the subsidiary books. Such transactions include:

• Depreciation 💰
• Accruals 📅
• Provisions 📊
• Other adjustments for accurate reporting 🔄

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.

Importance of the Sales Day Book 📊

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.

Purpose of the Purchases Day Book 📋

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.

Sales Returns Day Book 🔄

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.

Benefits of the General Ledger 💼

Using a general ledger offers several advantages to businesses, such as:

• Accurate financial reporting 📊
• Tracking financial performance over time ⏳
• Providing a detailed audit trail for financial transactions 🔍
• Serving as a reference for preparing financial statements 📄

How the General Ledger Works ⚙️

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.

How the Cash Book Works

Recording cash transactions follows a clear process, ensuring accurate financial tracking. For example:

• All cash receipts and payments are recorded chronologically.
• The book is balanced regularly to reflect the available cash at any point.
• Three-column cash books are often reconciled with bank statements to verify transaction accuracy.

Purpose of Journal Proper

The journal proper records non-routine transactions, which cannot be directly recorded in the subsidiary books. Such transactions include:

• Depreciation
• Accruals
• Provisions
• Other adjustments for accurate reporting

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.

Importance of the Sales Day Book

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.

Purpose of the Purchases Day Book

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.

Sales Returns Day Book

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.

Benefits of the General Ledger

Using a general ledger offers several advantages to businesses, such as:

• Accurate financial reporting 📊
• Tracking financial performance over time ⏳
• Providing a detailed audit trail for financial transactions 🔍
• Serving as a reference for preparing financial statements 📄

How the General Ledger Works ⚙️

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.