After going through this lesson you will be able to understand the Types of Subsidiary Books properly.
The accounting process starts with the identification of transactions of financial and non-financial nature. All financial transactions are first recorded in Journal. This is known as Books of Original Entry. A small business has a lesser number of transactions and therefore, it is possible to record all business transactions in one book i.e. Journal. However, when business grows, the number of business transactions also increases. It is a very time-consuming, difficult, and tedious task for a firm to record such voluminous transactions and events in one single book. Thus, in order to save time and effort, it is advisable to subdivide the Journal into Subsidiary Books to record the transactions of similar nature in a separate book.
These sub-divided Journals are popularly known as Subsidiary Books. These books are also termed as Special Purpose Books or Special Journals or Books of Original/Primary/Prime Entry. Sub-division of Journal provides scope for division of work which leads to the improvement in efficiency and effectiveness. In other words, subsidiary books provide ease and convenience to record transactions of similar nature in a separate book. Journal entry is not required for the transactions which are entered in these books.
Types of Subsidiary Books
Different Types of Subsidiary Books are
Cash Book: This book is maintained to record all the cash receipts and cash payments. In addition to this, all the transactions related to the bank such as payment into the bank and withdrawals from the bank are also recorded in this book.
Sales Book: This book is maintained to record the credit sale of goods and services done by a firm.
Purchases Book: This book is maintained to record the credit purchase of goods and services by a firm.
Sales Return Book or Return Inward Book: This book is maintained to record the return of goods by the customers, which were previously sold to them on credit.
Purchases Return Book or Return Outward Book: This book is maintained to record the return of goods by the business to the suppliers, which were previously purchased from them on credit.
Journal Proper: This book is maintained to record all other similar transactions which cannot be incorporated or recorded in any of the above books.
Also, Read Ledger in Accounting?