Terms used in subsidiary books

Subsidiary books are books of accounts that are used to post business transactions in the source documents before they are posted to the ledger. They are referred to as books of prime entry or original entry. Smaller entities do not necessarily need all types of subsidiary books. They can simply use the journal proper as their first line that transactions are posted before they enter the principal book.

Subsidiary books explained

A subsidiary book helps in organizing the large volume of transactions that occur in a business daily. Therefore, instead of the bulk of transactions passing through a funnel, say a journal book before they are posted to the ledger, several subsidiary books are opened and business events are posted there before they are posted to the ledger book.

Therefore, anyone with sound accounting knowledge can trace the accounts from the ledger to the source document and vice versa. There is a column for source document number and folio. This aids the tracking of transactions. With this errors can be detected easily and any fraud will be located in time. 

Six (6) Types of subsidiary books

Sales day book

A sales journal is a book of prime entries that is used to record transactions in the sales invoice. Primarily used for credit sales transactions. 

Purchases day book

A purchases journal is a book of accounts used to record purchase invoice transactions. It is mainly for credit purchase transactions.

Return inwards day book

This journal is used to record transactions from debit notes issued to customers.

Return outwards day book

Return outwards journal also referred to as purchases return day book is used to record credit notes received from supplies.

Cash book

The cash book is the book of account for all cash transactions. It serves as a subsidiary and ledger book.

Journal proper

Useful for recording any other transaction that cannot be done with the other types of subsidiary books and whose transactions are on credit. Such as the purchases of plants and machinery on credit terms.

Terms used in subsidiary book

The following terms are common with subsidiary books

Folio: 

This is a tracking number used to track transactions from the prime book to the ledger account.

Posting

This is when transactions in the source documents are recorded in their subsidiary books. 

Transferred

The term “transferred” is used when the sum of money in a book of original entries is posted to the ledger account. For example, when the total in the sales day book is transferred to the sales account.

General ledger (GL): 

GL is the name of the ledger book you can track a transaction. For example, if in the folio there is GL 7, it means that you can track the transaction in the general ledger on page 7. This is also true with purchases ledger (PL) and sales ledger (SL).