Preparation of Various Subsidiary Books

Further, the total of the purchase book will be posted to the debit of the Purchase Account, at the end of the month. Want to know about the subsidiary books, their meaning, types and significance? Read more and know about subsidiary books format, subsidiary books examples, etc. Rectification entries are recorded in the book of original entry (i.e Journal) So, (d) is correct answer.

Trading, profit & Loss accounts ascertain the net profit for an accounting period and balance sheet reflects the position of the business. The debtors accept them and subsequently return them to the creditors. Bills accepted by debtors are called as ‘Bills Receivables’ in the books of creditors, and ‘Bills Payable’ in the books of debtors. We keep them in our record called ‘Bills Receivable Books’ and ‘Bills Payable Book’. These are original entry books that record similar or repeating transactions in chronological order.

The various types of subsidiary books are

All banking transactions are routed through this cash book and there is no need to open a separate bank account in ledger. There is no need to open a separate cash account in the ledger. The balance of cash book is directly posted to the trial balance. Since cash account is a real account, ruling is followed, i.e. what comes in – debit, and what goes out – credit. All the received cash is posted in the debit side and all payments and expenses are posted in the credit side of the cash book.

This book keeps a track of all the credit sales of goods made by the firm during the course of the accounting period. Sales invoices form the base for recording sales transactions. It is worth noting that credit sales of assets are entered in the Journal Proper. It shows the name of those customers to whom the goods are sold on credit, which are technically the debtors of the firm. Further, the account of the debtors needs to be debited with the respective amount. Also known as books of original entry, special purpose books, special purpose subsidiary books, and subsidiary books of accounts are various books recording financial transactions of a similar nature.

Financial Accounting – Subsidiary Books

These items are recorded through passing adjusting entries. Through opening entries, the balances in respect of various assets, liabilities and capital appearing at the end of previous accounting year are brought forward at the beginning of current accounting year. The number of invoice (i.e., the source document) showing the sales of goods shall be recorded in this column. Page number of the ledger of the supplier on which the transaction is recorded shall be recorded in this column. Goods here mean the items or articles in which business enterprise is dealing with or we can say that goods are the items which are used by the business enterprise for regular sale. For example, purchase of computer by a business enterprise which is dealing in cloth shall not be treated as its goods and items related to computers shall be regarded as its assets.

• All payments in cash and by cheque are recorded in cash book.
• It records transactions involving receipts or payment of cash.
• For this purpose, the journal is sub-divided into special journals, which we call subsidiary books.

The total of the purchases returns or returns outwards book is credited to returns outward account or purchases return account (being the goods sent out). Individual suppliers to whom goods are returned are debited (because they receive the goods). The total values of the goods returned by customers are posted to various ledger accounts concerned periodically. It is to be noted that the sales book is a book of original entry and hence perodic posting must be completed to ledger accounts concerned.

How many books are separate from the main books?

The totals of all subsidiary books are generally done on a timely basis. This helps the organization to know the total amount of purchases and sales (both cash and credit) that takes place in one day, month, quarter (or) year. Instead of maintaining single journal book, a large sized business maintains some journal books.

One of his friends, who is a Chartered Accountant advised him to maintain subsidiary books. The total of the bills receivable book indicates the total value of bills receivable drawn during the period. Information about bill discounting, dishonour, encashment etc is noted in the remark column.

Preparation of Bills Payable Book:

Trial balance is prepared on the last day of the accounting cycle. The features of a sale book are same as a purchase book, except for the fact that it records all the credit sales. If goods purchased on credit is returned to the supplier, a debit note is issued by the buyer to the supplier (creditor).

• Also known as the return inward book, this book maintains a record of goods returned by the customers which are sold by the firm.
• For this purpose, a separate book is to be kept in record which is known as Bills Receivable Book.
• All transactions related to credit purchases of goods are primarily recorded in this book.
• Only the credits sale of goods in which you are dealing for trading purpose are recorded in sales book.
• Cash book records all transactions made in both cash and a bank instrument.

They are used instead of Journal to record similar or repetitive transactions. Goods sold for Cash were returned by a customer but cash was not given immediately. When goods are returned by the customers, a ‘Credit Note’ is made out of in his name by the supplier.

The total of this book will give the total credit purchases made during the month. Read this article to learn about the preparation of various subsidiary books. Hence, it is very important to keep a close watch on all the bills due for payment. For this purpose, a separate book is to be kept in record which is known as Bills Receivable Book. Date of receipt, name of the party, period of the bill, due date of the bill, Ledger Folio (L.F.), amount of the bill etc. are to be recorded in this book. When the business enterprise returns the goods to the supplier, a debit note is sent to the party to whom this document is sent.

For example, credit purchases are recorded in a subsidiary book, credit sales are recorded in another subsidiary book, and so on. The subdivision of journals systemize your business is a set of bonks of original entries in which different classes of financial transactions are recorded systematically in chronological orders and when they arise. When a business becomes large and performs a large number of transactions daily, it finds the single journal book insufficient to keep a primary record of all the transaction. The task of journalizing all the transaction is troublesome and expensive.