December 7, 2021

SB-Accounting

Accounting + Finance Blog

Subsidiary Books (Prime Books) Meaning and Explanations

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It is not proper to delve into the ledger and double-entry without going through the rudiments of subsidiary books. If you take the word in this form “sub-sidiary” then you will understand what accountants mean when they state the term. What exactly is it?

Definition of Subsidiary Books

Subsidiary books are books of original entry where financial transactions are recorded on a daily basis before been posted to the ledger.

It can also be defined as a principal book of account in which business transactions are entered regularly before it is transferred to the ledger.

Key Explanations

It is a book of original entry. By original entry, we meant that it is a book to locate the first entry point of a business transaction.

To explain further, when a source document is issued, say a cash receipt. The first entry point is a subsidiary book. In this case, cash book. From here it is posted to the ledger.

It is also a principal book of account. In accounting, there are two principal books of account. That is the subsidiary books and ledger books. Therefore, defining it as a principal book is not a bad idea.

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Financial transactions are entered into a subsidiary book. I have earlier explained transactions and financial transactions. However, when an item is sold for cash or on credit by a business, it is termed to be a financial transaction. This transaction(s) goes through a source document and then a subsidiary book.

The transactions are recorded daily. Business transactions occur on a daily basis. Every day, the business makes sales and incurs certain expenses. Subsidiary books record these transactions as they occur.

Entries in the subsidiary books are posted to the ledger. At the end of the month, the entries in the subsidiary books are summed up and transferred or posted to the ledger books. That is, the total is transferred to the appropriate account in the ledger book.

In the next article, the types of subsidiary books will be explained.

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