CONTENT
- Definition of Subsidiary Books
- Uses of the Subsidiary Books
- Preparation of the Subsidiary Books
- Transfer of the Totals of the Subsidiary books to the Ledger.
NOTES
Subsidiary books are the books of prime entry (or books of original entry) into which transactions are first recorded in details before they are posted in totals into the Ledger.
Businesses use subsidiary books to record goods sold on credit, goods purchased on credit, sales returns, purchases returns etc. The subsidiary books are basically listing devices, which means that a lot of detail is removed from the ledger. It also means that bookkeeping can be divided between several people. The name book of original (or prime) entry has arisen because all transactions should be recorded in one of these books before they are entered in the ledger.
The subsidiary books are:
- Sales Journal
- Purchases Journal
- Returns Inwards Journal
- Returns Outwards Journal
- General Journal
- Cash Book
- Petty Cash Book
Uses of the Subsidiary Books
- Sales Journal or Sales Day Book: This is used to record goods that are sold on credit to the customers of the business.
- Purchases Journal or Purchases Day Book: This is used to record goods bought on credit from the suppliers
- Return Inwards Journal or Returns Inwards Day Book: This is used to record goods returned by the customers to the business.
- Returns Outwards Journal or Returns Outwards Day Book: This is used to record goods returned by the business to suppliers.
- General Journal / Principal Journal / Journal Proper or The Journal: The general Journal has multiple uses.
Uses of the General Journal
- It is used to record opening entries.
- It is used to record closing entries.
- It is used to correct errors.
- It is used to record the purchase of fixed assets on credit.
- It is used to record the sale of fixed assets on credit.
- It is used to record one-off transactions.
- It is used to effect transfers of balances between ledgers.
- It is used to demonstrate the principle of double entry.
- It is used to record transactions that cannot be conveniently passed through any other subsidiary book.
- It is used to write off bad debts.
- It is used to record the purchase of business.
- It is used to record the issue, redemption and conversion of shares and debentures.
- Cash book: This is a subsidiary book of account that is used to record the receipt and payment of money (cash or cheque) to or by a business organization. The cash book is part of the double entry system. It functions both as a ledger and a subsidiary book of account.
- Petty Cash Book: This is the subsidiary book of account that is used to record the minor (low – value or petty) cash payments made by a business. Like the Cash Book, the Petty Cash Book is a subsidiary book and since it is part of the double entry system, it is also a ledger account.
EVALUATION
- What are books of prime entry?
- List eight uses of the General Journal.
EVALUATION
- List seven books of original entry.
- State the use of each of the following.
(a) Sales Journal (b) Purchases Returns Journal (c) Petty Cash Book
GENERAL EVALUATION QUESTIONS
- What are books of prime entry?
- List any seven books of prime entry.
- State ten uses of the General Journal.
- Explain the principle of double entry.
- What is a source document?
WEEKEND ASSIGNMENT
- Which of the following is entered in the general journal? A. Purchase of good B. Sales of goods on credit C. Returns inwards D. Acquisition of fixed assets
- Which of the following subsidiary books involves cash movement? A. Sales Day Book
B. Purchases Day Book C. Returns Inwards Book D. Petty Cash Book
- Which of the following is an example of a subsidiary book? A. Cash book B. Bank statement C. Trial balance D. Suspense
- Which of the following is used to record the purchase of fixed asset on credit? A. Sales journal B. Purchases Journal C. Journal proper D. Cash book
- A sales journal is used to record A. Cash sales B. Credit sales C. Sales expenses D. Sales returns
THEORY
- State one advantage of sub-dividing the Journal into different classes.
- List ten books of account used in recording financial transitions of a business.
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