 Hello learners, I welcome you to this session. In this session we will discuss the second part of the Unit 5 Accounting Process 2. In the first part we have discussed about journal book. Journal is the primary book where transactions are recorded on the basis of dates. In this particular session we will discuss subsidiary books. So let us begin the discussion by defining what is a subsidiary book. A subsidiary book is the subdivision of the journal. We are aware that transactions are first recorded in the journal and these are recorded on the basis of dates. But for a very big organization there are numerous transactions which takes place on a daily basis. So for a bigger organization it is difficult to record all the transactions in a particular book in the journal book. So for convenience of recording the journal book can be classified, can be subdivided. So these are known as subsidiary books. These are the books of primary entry and the journal is classified into different subsidiary books to record the different types of transactions. So bigger organizations generally follow this otherwise for a smaller organization all the entries can be done in the journal book. So how these books are divided? The journal is divided into different subsidiary books. These are known as purchase book, purchase return book, sales book, sales return book, then bills receivable book and bills payable book. In this way we can classify, we can subdivide the journal book. So let us see what is purchase book. So what is recorded in purchase book? In purchase book generally the credit purchase of goods are recorded. Goods means the items which the business deals in regularly. So all credit purchase of goods are recorded in the purchase book. So only the credit purchase will be recorded. So there will be no entry of cash purchase and there will be no entry of purchase of fixed assets even if it is in credit. So a business man will record cash transactions in a different book suppose in the journal or in the cash book. But the credit transactions, credit purchase transactions will be recorded in this particular book that is the purchase book. So the benefit will be that all credit transactions if any have to be looked down then we can see the purchase book to see the purchase entry, the credit purchase entry. The important thing is that in this purchase book we never record any cash purchase and purchase of fixed assets even if it is on credit. Then purchase return book. So this book is also known as returns outward book. So what will be recorded in this particular book? All transactions relating to return of goods. Suppose we have purchased some goods and the goods have been returned because of damages or not according to the specifications this has been returned. So all the returns will be recorded in the purchase return book. So all the returns and entry related to the purchase return, the goods that have been purchased now return will be recorded in purchase return book. Then another book that is known as sales book. Sales book is for recording the credit sales. So all entries relating to credit sale of goods means the items that are regularly deal seen by the business will be recorded in the sales book. Now what will not be recorded in sales book? In sales book we will not record cash sales of goods and sale of fixed assets. So anything which relate to sale of goods on credit will be recorded on sales book. But cash sales and sale of fixed assets will not be recorded in the sales book. So in this way the credit purchase and credit sale transactions will be recorded in two different books. So journal entries will be minimized in the journal book. And against that we have just recorded all the credit purchase in purchase book and all the credit sales in sales book. Then there is another book that is known as sales return book. This book is also known as return in one book. Means the goods that we have sold on credit may be returned by the customers because of various reasons. Maybe we have sent less amount of goods or not according to their specifications or some damage goods are there. So there are different reasons for which goods are returned. And all this return will be recorded in a particular book instead of the main journal book. So this is sales return book. All the returns related to credit sales that have been returned by the customers will be recorded in this particular book. Sometimes it may also be referred to as returns in one book. So all transactions relating to return of goods which have been sold on credit will be recorded in the sales return book. So we are now aware of four different books. Purchase book, number two purchase return book, number three sales book and number four sales return book. So let us take certain examples. In this particular example goods purchased from Narayan & Company for Rs. 20,000 on credit on 15 October. So this is a transaction of purchase transactions and this is a credit transaction. It is clearly written as goods purchased from Narayan & Company for Rs. 20,000 on credit. So as it is a credit purchase transaction it will be recorded in the purchase book. Then in the second transaction goods worth Rs. 5,000 return to Narayan & Company on 17 October. So this is a transaction related to return of goods that have been purchased on credit. So this particular transaction will be recorded in the returns outward book. In case of third transaction goods sold for Rs. 10,000 to XYZ company on credit on 20 October. So we will record it in the sales book in a particular format. That is we will include the date of the transaction 20 October. Then we will record the details of the transactions. The company is then XYZ company and the amount is Rs. 10,000. So this particular transaction will be recorded in the sales book. That is the book for recording credit sales entries. Then in the fourth transaction goods returned by XYZ company worth Rs. 2000 on 21 October. So accordingly we will record it in returns inward book. It is a return transaction related to the goods that have been sold on credit. So this entry will be for returns inward book and not for any other book. So in this way we have classified the journal and we have subdivided the journal and the transactions have also been routed to different books to reduce the wage on the journal book. Then there is another book it is known as bills receivable book. So what will be recorded? All promissory notes received and bills of exchange received. And there is another book that is known as bills payable book. What will be recorded? All promissory notes given and bills of exchange accepted. So promissory notes and bills of exchange are the credit instruments that facilitate the credit transactions. So these are the promissory notes signifies a promise to pay a certain sum of money. Whereas bill of exchange refers to the order and unconditional order to pay a certain sum of money. So these bills may be from customers who have received certain bills or we have given some promise to pay a certain sum of money to our suppliers. So all these transactions related to the promissory notes and bills of exchange will be recorded in bills receivable book. If the promissory notes have been received and all transactions that relate to the bills of exchange and promissory notes that have been accepted will be recorded in the bills payable book. So this is about the different subdivision of the journal in the defined books purchase book, purchase return book, sales book, sales return book and bills receivable book and bills payable book. This will help in recording the different transactions relating to two different aspects of the business. So this is all about the subsidiary books. Thank you.