Subsidiary Books are specialized accounting records that systematically document transactions of a similar nature. They serve as subdivisions of the general journal, allowing businesses to maintain organized records without overwhelming a single journal with numerous entries. This method is particularly beneficial for large organizations where various transactions occur simultaneously.
Purpose and Importance
The primary purpose of subsidiary books is to streamline the recording process for specific types of transactions. By categorizing these transactions, businesses can enhance efficiency, reduce errors, and facilitate easier access to financial information. The use of subsidiary books also aids in decision-making by providing clear insights into different areas of business operations.
Types of Subsidiary Books
There are eight main types of subsidiary books, each designed for specific transaction categories:
- Cash Book: Records all cash and bank transactions, including receipts and payments. It can be further divided into:
- Single Column Cash Book: Contains only cash transactions.
- Double Column Cash Book: Includes an additional column for discounts.
- Triple Column Cash Book: Adds a bank column alongside cash and discount columns.
- Purchase Book: Used exclusively for recording credit purchases of goods intended for resale, excluding asset purchases.
- Sales Book: Similar to the purchase book but focuses on credit sales transactions.
- Purchase Return Book (Return Outward Book): Documents returns made to suppliers, accompanied by debit notes issued against each return.
- Sales Return Book (Return Inward Book): Captures returns from customers, with credit notes issued for each return recorded.
- Bills Receivable Book: Tracks bills drawn in favor of the business that are expected to generate future payments.
- Bills Payable Book: Records bills drawn on the business that it is obligated to pay at a later date.
- Journal Proper: Used for miscellaneous transactions that do not fit into any other subsidiary book, such as depreciation or asset sales.
Advantages of Using Subsidiary Books
- Systematic Recording: Provides a structured approach to documenting similar transactions.
- Efficiency: Simplifies posting processes by allowing direct postings from subsidiary books to ledger accounts.
- Error Reduction: Minimizes the chances of errors and fraud through organized record-keeping.
- Time-Saving: Facilitates quick access to transaction details without sifting through extensive journals.
- Enhanced Decision-Making: Offers clear insights into specific areas of business performance.
