In accounting, subsidiary books are a set of books of original entry that are used to record transactions of similar nature in an orderly manner. These books are subdivisions of the journal and are used for easy and accurate recording of transactions.
Key Facts
- Subsidiary books are books of original entry that record transactions of similar nature in an orderly manner.
- Subsidiary books are subdivisions of the journal and are used for easy and accurate recording of transactions.
- There are different types of subsidiary books, including cash book, purchase book, sales book, purchase return book, sales return book, bills receivable book, bills payable book, and journal proper.
- The cash book records all cash and bank receipts and payments.
- The purchase book is used to record credit purchases.
- The sales book is used to record credit sales.
- The purchase return book records returns made to suppliers.
- The sales return book records inward returns from customers.
- The bills receivable book records bills drawn in favor of the business.
- The bills payable book records bills drawn on the business and payable by the business.
- The journal proper is used to record miscellaneous transactions that cannot be recorded in other subsidiary books.
Types of Subsidiary Books
There are different types of subsidiary books, each used for recording a specific type of transaction. Some common types of subsidiary books include:
- Cash BookRecords all cash and bank receipts and payments.
- Purchase BookRecords credit purchases.
- Sales BookRecords credit sales.
- Purchase Return BookRecords returns made to suppliers.
- Sales Return BookRecords inward returns from customers.
- Bills Receivable BookRecords bills drawn in favor of the business.
- Bills Payable BookRecords bills drawn on the business and payable by the business.
- Journal ProperRecords miscellaneous transactions that cannot be recorded in other subsidiary books.
Advantages of Subsidiary Books
Subsidiary books offer several advantages over using a single journal to record all transactions. These advantages include:
- Proper and Systematic RecordingSubsidiary books allow for the proper and systematic recording of transactions, making it easier to track and manage financial data.
- Convenience in PostingTransactions recorded in subsidiary books can be easily posted to the ledger, reducing the risk of errors and omissions.
- EfficiencyBy dividing the journal into subsidiary books, the accounting process becomes more efficient, as transactions can be processed more quickly and accurately.
- Decision-MakingSubsidiary books provide detailed information about specific types of transactions, which can be useful for making informed business decisions.
- Error PreventionThe use of subsidiary books helps to prevent errors and frauds, as transactions are recorded in a clear and organized manner.
- Easy Access to InformationSubsidiary books allow for easy access to information about specific types of transactions, eliminating the need to search through multiple journals.
Conclusion
Subsidiary books are an essential tool for businesses of all sizes. They provide a systematic and efficient way to record transactions, facilitate decision-making, and prevent errors. By using subsidiary books, businesses can improve the accuracy and reliability of their financial records and gain a better understanding of their financial performance.
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FAQs
What is another name for subsidiary book?
**Answer:** Subsidiary books are also known as daybooks or special journals.
What is the purpose of a subsidiary book?
**Answer:** Subsidiary books are used to record transactions of similar nature in an orderly manner, making it easier to track and manage financial data.
What are the different types of subsidiary books?
**Answer:** Common types of subsidiary books include cash book, purchase book, sales book, purchase return book, sales return book, bills receivable book, bills payable book, and journal proper.
What are the advantages of using subsidiary books?
**Answer:** Subsidiary books offer several advantages, including proper and systematic recording, convenience in posting, efficiency, decision-making, error prevention, and easy access to information.
When should subsidiary books be used?
**Answer:** Subsidiary books should be used when a business has a large volume of transactions of a similar nature.
How are subsidiary books different from the general journal?
**Answer:** Subsidiary books are used to record specific types of transactions, while the general journal is used to record all other transactions that cannot be recorded in a subsidiary book.
What is the relationship between subsidiary books and the ledger?
**Answer:** Subsidiary books are linked to the ledger through the posting process. Transactions recorded in subsidiary books are periodically posted to the ledger accounts.
Are subsidiary books mandatory?
**Answer:** Subsidiary books are not mandatory, but they are highly recommended for businesses with a large volume of transactions.