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Subsidiary Books are books of Original Entry. They are also known as Day Book or special journals. We record transactions of similar nature are in Subsidiary Books. They are helpful in overcoming the limitations of journal book or journal entries.
Subsidiary books are the sub-divisions of journal, in which specific transactions of similar nature are recorded. We know that the transactions involving cash or bank are recorded in the cash book, a book of original entry. However, it is not possible that all the time, the business transactions should only be in cash. In other words, there are several credit transactions which may also affect the operations of the business to a great extent.
These transactions can be classified as credit sales, credit purchases, sales return and purchase return of goods. If we record all these transactions in the journal then the journal will be unnecessarily over-burdened and bulky. Hence, instead of recording these transactions in the journal, special books are to be opened in which the transactions related to only those books are recorded.
Types of Subsidiary Books
1)Cash Book – A cash book is a book of prime entry which records all transactions made by a business in both cash and a bank instrument.
2. Purchase Book – A purchase book is one of the special purpose books where all the credit purchases are recorded by a business.
3. Sales Book – A sales book is one of the subsidiary books where all the credit sales are recorded by a business.
4. Purchase Returns Book – Also known as returns outward book, a purchase returns book is prepared to record goods returned by a business to its suppliers.
5. Sales Return Book – Also known as returns inward book, a sales return book is prepared to record goods returned to a business by the customers.
6. Journal Proper – It is a book in which all miscellaneous transactions which are not recorded in any other subsidiary book is called a journal proper.
7. Bills Receivable Book – is a book that records all bills receivable to a business, the total of bills receivable book is posted on the debit side of the B/R account.
8. Bills Payable Book – is one of the subsidiary books that records all bills payable by a business, the total of bills payable book is posted on the credit side of the B/P account.