The process of accounting can be deemed as a pretty tiring one. There are thousands of transactions that tend to happen in a company and that too in a single year. So, naturally, the process of journalizing every single one of those transactions can be quite a bothersome process for some people. So, to make things a little bit simpler, some companies always go for a better approach known as subsidiary books. These books are made for recording the transactions which have a similar nature and type. The order for recording the transactions is chronological. In the chapter introduction to subsidiary books notes, students can learn what the process is and how important it is for bookkeeping.
What Exactly Are Subsidiary Books?
In the Subsidiary Books Introduction, it can be said that Subsidiary Books are basically the books that are made for the original entry. When a business is running its normal course, many transactions are related to cash, purchases, or sales. So, the transactions which tend to have a similar type or nature are recorded by the people in a single place and that is known as the subsidiary book.
Subsidiary books save a lot of time. Not to mention that a lot of effort is saved too. Clerical work can take up a lot of time for some people and this saves them that effort and time. Instead of having a journal of every single entry, these transactions are carefully recorded in the subsidiary books in an easier manner. Subsidiary books can also be considered as some sub-journals that are meant for recording just a single type of financial transaction. When it comes to the introduction of subsidiary books, students can put their faith in our notes because these notes are created after thorough research and reading.
Different Types of Subsidiary Books
Here in the subsidiary books introduction, we are going to mention some of the types of subsidiary books that students need to know about.
Cask Book: The book that holds all the records of payments and receipts of different transactions of cash.
Purchase Book: The book that holds all the different records of credit purchases and returns of the company goods.
Sales Book: The book that holds all the different records of credit sales regarding the company goods.
Sales Return Book: The book that holds the records of different credit sales and returns of the company goods.
Bills Receivable Book: The book that holds the records of all the different bills that are still receivable.
Bills Payable Book: The book that holds all the records of different bills that are still payable.
Journal Proper: The book that holds the records of all the different transactions that are not present in all of the books which have been mentioned above.
The Advantages of Having Subsidiary Books
After learning more about the introduction of subsidiary books, it is now time for students to focus on the advantages of having subsidiary books for sure.
It Saves Labor Hours
One of the main advantages of subsidiary books is that it tends to save a lot of effort and clerical time. First of all, there is simply not any need to provide narrations or keep journals of all the transactions. So, the time taken for completing every single transaction is significantly reduced. Also, with the use of different subsidiary books, different processes of accounting can be considered.
Dividing The Work
Another one of the main benefits of having subsidiary books is that in place of having a single journal, there are now several such books. So, the resulting labour or the work done by the people can also be divided and hence efficiency is improved.
Specializing In Work
In case a single person is tasked to maintain a single subsidiary book every single year for a long period, that person will gain a lot of knowledge about the books for sure. So, they can become a certain type of specialist in the preparation of that subsidiary book.
Referencing Become Easier
We all know that the transactions of different types are kept in different subsidiary books. So, when you are searching for a particular type of subsidiary book, it becomes really easy to find which one is where. Hence, the searching of information becomes a lot easier which in turn makes the process of referencing a bit easier too.
Easier Error Locating
In certain cases, the trial balance doesn’t add up or match the results. In such cases, the locating of errors becomes a lot easier because there are separate books for different transactions. So, detection of fraud is also pretty easy too.
FAQs on Subsidiary Books: A Comprehensive Introduction
1. What exactly are subsidiary books in accounting?
In accounting, subsidiary books are special journals used to record specific types of high-volume, repetitive transactions. They are also known as books of original entry because transactions are recorded here first. This practice helps to reduce the workload of the main journal and makes the accounting process more efficient.
2. What are the main types of subsidiary books a business might use?
A business typically uses several types of subsidiary books to categorise its transactions. The most common ones include:
- Cash Book: For all cash and bank transactions.
- Purchase Book: For recording credit purchases of goods.
- Sales Book: For recording credit sales of goods.
- Purchase Return Book: For goods returned to suppliers.
- Sales Return Book: For goods returned by customers.
- Bills Receivable Book: To record all bills of exchange received.
- Bills Payable Book: To record all bills of exchange issued.
- Journal Proper: For transactions that do not fit into any other subsidiary book.
3. What is the primary advantage of maintaining subsidiary books?
The main advantage is efficiency and division of work. By having separate books for different transactions (like sales, purchases, cash), the accounting work can be divided among several clerks. This speeds up the recording process, makes it easier to find information, and simplifies error checking.
4. Can you give a real-world example of a transaction recorded in a Sales Book?
Certainly. Imagine a furniture store sells 10 chairs to a local school on credit for ₹15,000. This transaction would not be recorded in the Cash Book (as no cash was received) but would be entered into the Sales Book. The entry would detail the date, the customer's name (the school), and the amount of the sale.
5. How are subsidiary books different from the Journal Proper?
Subsidiary books are used for specific, frequent transactions like credit sales or purchases. The Journal Proper, on the other hand, is a catch-all book for entries that cannot be recorded in any other subsidiary book. Examples include opening entries, closing entries, depreciation, or the purchase of an asset on credit.
6. Why are cash purchases of goods not recorded in the Purchase Book?
This is a key concept. The Purchase Book is designed exclusively for recording credit purchases of goods that the business deals in. All transactions involving cash, whether it's a purchase or a sale, are recorded directly in the Cash Book. This rule prevents transactions from being recorded twice and keeps all cash-related activities in one place for easy tracking.
7. What is the importance of a Cash Book in the accounting process?
The Cash Book is uniquely important because it serves a dual purpose. It acts as both a subsidiary book (a book of original entry) and a principal book (a ledger account). It records all cash receipts and payments, and at the end of a period, the balance shows the cash on hand, eliminating the need for a separate cash account in the general ledger.
8. What happens to the information after it is recorded in the subsidiary books?
After recording daily transactions in the subsidiary books, the information is then posted to the general ledger. Typically, periodic totals from each subsidiary book are posted to the corresponding control account in the ledger. For example, the monthly total of the Sales Book is credited to the Sales Account. This step summarises the transactions and prepares the data for creating the trial balance and financial statements.
