what do you mean by subsidiary book
What do you mean by subsidiary book
Answer: Subsidiary books, also known as special journals, are used in manual accounting systems to record similar types of transactions together. These books help in summarizing, categorizing, and simplifying the recording process of various transactions. Subsidiary books are usually maintained for transactions such as sales, purchases, receipts, and payments to provide a detailed breakdown of financial activities. Some common types of subsidiary books include:
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Sales Journal: This book records all credit sales of goods or services made by a business. It includes details such as the date of the sale, the customer’s name, the invoice number, and the amount of the sale.
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Purchases Journal: The purchases journal is used to record all credit purchases of goods or services by a business. It includes information like the date of purchase, the supplier’s name, the invoice number, and the amount purchased.
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Cash Receipts Journal: This book records all cash received by the business. It includes details of the source of the cash, like customer payments, interest received, or any other cash receipts.
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Cash Payments Journal: The cash payments journal records all cash payments made by the business. It includes information such as the date of payment, the recipient of the cash, and the purpose of the payment.
By using subsidiary books, accountants can maintain organized records, easily track transactions, and generate accurate financial reports for the business.