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Cash Book

Subsidiary Books- Meaning and Introduction

Objectives After going through this lesson, you shall be able to understand the following concepts.

• Introduction • Need for Subsidiary Books • Kinds of Subsidiary Books • Advantages of Subsidiary Books 

Introduction Accounting process starts with identification of transactions of financial and non-financial nature. All financial transactions are first recorded in Journal. This is known as Books of Original entry. A small business has lesser number of transactions and therefore, it is possible to record all business transactions in one book i.e. Journal. However, when business grows, the number of business transaction also increases. It is very time-consuming, difficult and tedious task for a firm to record such voluminous transactions and events in one single book. Thus, in order to save time and efforts, it is advisable to sub-divide the Journal into Subsidiary Books to record the transactions of similar nature in a separate book. These sub-divided Journals are popularly known as Subsidiary Books. These books are also termed as Special Purpose Books or Special Journals or Books of Original/Primary/Prime Entry. Sub-division of Journal provides scope for division of work which leads to the improvement in efficiency and effectiveness. In other words, subsidiary books provide an ease and convenience to record the transactions of similar nature in a separate book. Journal entry is not required for the transactions which are entered in these books. Need for Subsidiary Book or Special Purpose Books The following are needs for drawing up the subsidiary books.  

i. Quick and Efficient Recording- When the size of a business is large, then definitely its number of business transaction will also be high. It is very tedious and time consuming process to record all the transaction in a Journal. By maintaining separate books, then recording of such voluminous transactions can be done in lesser time and more efficiently. So, due to this reason the need for maintaining special purpose books arises.

ii. Similar Nature- In every business organisation, there are various transactions which are similar and repetitive in nature. It will be more convenient to record all similar transactions at one place as it helps in division of work among the employees. Thus, this need can be fulfilled by preparing the special purpose books.

iii. Economical- Maintaining the subsidiary books are more economical as it saves time and at the same time it also enhances the efficiency of the employees.

iv. Easy Posting- In the subsidiary books all the similar transactions are recorded at a single place. This helps in its easy posting in the ledgers. For example, all credit sales are recorded in sales book and the total of sales book is to be posted to the sales account in the ledger.

v. Complete Information at One Place- All information related to similar transactions such as credit sales, credit purchases, cash receipts, cash payments, etc. are easily and readily available at a single place.

Kinds of Subsidiary Books The following are the most popular subsidiary books that are used in a business.

1. Cash Book- This book is maintained to record all the cash receipts and cash payments. In addition to this, all the transactions related to bank such as payment into bank and withdrawals from bank are also recorded in this book.

2. Sales Book- This book is maintained to record the credit sale of goods and services done by a firm.

3. Purchases Book- This book is maintained to record the credit purchase of goods and services by a firm.

4. Sales Return Book or Return Inward Book- This book is maintained to record the return of goods by the customers, which were previously sold to them on credit.

5. Purchases Return Book or Return Outward Book- This book is maintained to record the return of goods by the business to the suppliers, which were previously purchased from them on credit.

6. Journal Proper- This book is maintained to record all other similar transactions which cannot be incorporated or recorded in any of the above books.

Advantages of Subsidiary Book or Special Purpose Books The given below are the various advantages of maintaining the subsidiary books.

i. Division of Work- In the absence of sub-division of Journal, the large number of business transactions needs to be recorded in one single book i.e. in the Journal by more than one person. This may lead to chaos and confusion. At the same time, there will be more inflexibility and lack of accountability among the accountants. Sub-division of Journal enables different persons to maintain different books. This division of work will not only avoid confusions but also enhance the sense of accountability among the accountants.

ii. Time Saving- The recording of huge business transactions through subsidiary books leads to time saving as various accounting processes can be undertaken simultaneously due to use of different books as compared to its recording through entries in a Journal.

iii. Prompt Information- The transactions of similar nature are recorded in a particular subsidiary book. This acts as a ready or available source to access the information in a quick manner at a single place.

iv. Accountability- Sub-division of Journal entrusts its employees with high degree of responsibility and accountability for maintaining subsidiary books that are particularly assigned to them.

v. Easy Checking- As the volume of transactions is less in the subsidiary books, so, it helps in easy and quick detection of any discrepancies or errors.

vi. Specialisation- The accountability, responsibility and division of work together enhance the specialisation of each accountant or employee. This is because, routine and repetitive tasks are performed by a single person which helps in improving the efficiency.

Objectives After going through this lesson, you shall be able to understand the following concepts.

• Introduction • Need for Subsidiary Books • Kinds of Subsidiary Books • Advantages of Subsidiary Books 

Introduction Accounting process starts with identification of transactions of financial and non-financial nature. All financial transactions are first recorded in Journal. This is known as Books of Original entry. A small business has lesser number of transactions and therefore, it is possible to record all business transactions in one book i.e. Journal. However, when business grows, the number of business transaction also increases. It is very time-consuming, difficult and tedious task for a firm to record such voluminous transactions and events in one single book. Thus, in order to save time and efforts, it is advisable to sub-divide the Journal into Subsidiary Books to record the transactions of similar nature in a separate book. These sub-divided Journals are popularly known as Subsidiary Books. These books are also termed as Special Purpose Books or Special Journals or Books of Original/Primary/Prime Entry. Sub-division of Journal provides scope for division of work which leads to the improvement in efficiency and effectiveness. In other words, subsidiary books provide an ease and convenience to record the transactions of similar nature in a separate book. Journal entry is not required for the transactions which are entered in these books. Need for Subsidiary Book or Special Purpose Books The following are needs for drawing up the subsidiary books.  

i. Quick and Efficient Recording- When the size of a business is large, then definitely its number of business transaction will also be high. It is very tedious and time consuming process to record all the transaction in a Journal. By maintaining separate books, then recording of such voluminous transactions can be done in lesser time and more efficiently. So, due to this reason the need for maintaining special purpose books arises.

ii. Similar Nature- In every business organisation, there are various transactions which are similar and repetitive in nature. It will be more convenient to record all similar transactions at one place as it helps in division of work among the employees. Thus, this need can be fulfilled by preparing the special purpose books.

iii. Economical- Maintaining the subsidiary books are more economical as it saves time and at the same time it also enhances the efficiency of the employees.

iv. Easy Posting- In the subsidiary books all the similar transactions are recorded at a single place. This helps in its easy posting in the ledgers. For example, all credit sales are recorded in sales book and the total of sales book is to be posted to the sales a

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