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ZIMSEC O-Level Accounting: Books of Original Entry (Subsidiary Books)
ZIMSEC O-Level Accounting: Books of
Original Entry (Subsidiary Books)
Accounts • SOURCE DOCUMENTS
## Introduction to Subsidiary Books
In accounting, it is impractical to record every single transaction directly into the Ledger.
Instead, transactions are first recorded in preliminary books known as **Subsidiary Books** or
**Books of Original Entry**.
### Definition of Subsidiary Books
Subsidiary books are the books of first entry in which transactions are recorded on a daily basis
from source documents before they are posted to the ledgers.
### Reasons for Subsidiary Books
1. **To manage high volume:** Prevents the General Ledger from becoming cluttered with too
many details.
2. **Division of Labour:** Different clerks can work on different books simultaneously (e.g., one
on Sales, one on Purchases).
3. **Error Reduction:** Recording transactions first in journals helps in identifying and
correcting errors before posting to the ledger.
4. **Reference:** They provide a chronological record of all transactions for future audit
purposes.
--## Types of Subsidiary Books
### Subtopic A: Sales Journal (Sales Day Book)
* **Purpose:** To record only **credit sales** of inventory (goods intended for resale).
* **Source Document:** Outgoing Invoice (Duplicate Invoice).
* **Note:** Cash sales are NOT recorded here; they go to the Cash Book.
### Subtopic B: Purchases Journal (Purchases Day Book)
* **Purpose:** To record only **credit purchases** of inventory.
* **Source Document:** Incoming Invoice (Original Invoice).
* **Note:** Credit purchases of non-current assets (e.g., machinery) are recorded in the General
Journal, not here.
### Subtopic C: Returns Inwards Journal (Sales Returns Day Book)
* **Purpose:** To record goods returned to the business by customers (debtors).
* **Source Document:** Credit Note Issued (Duplicate Credit Note).
### Subtopic D: Returns Outwards Journal (Purchases Returns Day Book)
* **Purpose:** To record goods returned by the business to suppliers (creditors).
* **Source Document:** Credit Note Received (Original Credit Note).
### Subtopic E: Cash Book
* **Purpose:** A dual-purpose book that acts as both a subsidiary book and a ledger account. It
records all receipts and payments of money (cash and bank).
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ZIMSEC O-Level Accounting: Books of Original Entry (Subsidiary Books)
* **Source Documents:** Receipts, Cheque counterfoils, Bank statements.
### Subtopic F: General Journal (The Journal Proper)
* **Purpose:** To record transactions that do not fit into any other subsidiary book.
* **Common entries include:**
* Purchase or sale of non-current assets on credit.
* Correction of errors.
* Opening entries.
* Writing off bad debts.
* **Source Document:** Journal Voucher.
--## Source Documents for Subsidiary Books
| Subsidiary Book | Source Document |
|-----------------|-----------------|
| Sales Journal | Duplicate Invoice |
| Purchases Journal | Original Invoice |
| Returns Inwards Journal | Duplicate Credit Note |
| Returns Outwards Journal | Original Credit Note |
| Cash Book | Receipts / Cheque Counterfoils |
| Petty Cash Book | Petty Cash Vouchers |
| General Journal | Journal Vouchers |
--## Link to the Accounting Cycle
1. **Transaction Occurs** (e.g., Goods sold on credit).
2. **Source Document Created** (Invoice issued).
3. **Subsidiary Book Entry** (Recorded in Sales Journal).
4. **Ledger Posting** (Debit Customer Account; Credit Sales Account).
5. **Trial Balance** (Summarized values).
--## Advantages of Subsidiary Books
* **Specialization:** Allows for specific staff to handle specific types of transactions.
* **Efficiency:** Simplifies the posting process by using totals from the journals.
* **Information Availability:** Provides quick access to specific data like total credit sales for a
month.
Key Definitions
Source Document: The original paper evidence of a business transaction.
Invoice: A document sent by a seller to a buyer showing details of goods sold on credit.
Credit Note: A document issued to a buyer to reduce the amount they owe, usually due to
returned goods or overcharges.
Trade Discount: A reduction in the list price of goods given by a wholesaler to a retailer,
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ZIMSEC O-Level Accounting: Books of Original Entry (Subsidiary Books)
never recorded in the ledger accounts.
Examples
Example 1: On 5 June, T. Phiri bought 10 bags of cement at $10 each on credit. This is
recorded in the Purchases Journal using the Original Invoice as the source document.
Example 2: A customer, S. Moyo, returned faulty goods worth $50. The business issues a
Credit Note and records this in the Returns Inwards Journal.
Example 3: Buying a delivery van on credit from ZimMotors Ltd. This is NOT recorded in the
Purchases Journal; it is recorded in the General Journal because a van is a non-current asset,
not inventory.
Summary
Subsidiary books are the first place transactions are recorded before being posted to the
ledger. They categorize transactions into groups like credit sales, credit purchases, and cash
movements to ensure efficiency and accuracy in the ZIMSEC accounting cycle.
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