Meaning of Subsidiary Book: Advantage and Types of Subsidiary Book
Arjun EP
(A) Meaning of Subsidiary Books
Subsidiary book is the set of original entry of financial transactions.
All the credit transactions like purchase book, sales books, purchase return book, sales return book bills receivable book and bills payable book are the set of subsidiary book.
In double entry system bookkeeping, first-of-all transactions are recorded in journal entry before recording them in ledger.
When size of the business grows and the number of transactions becomes large, it is not possible to record all the transactions by preparing journal entry.
Therefore, journal is divided into number of journals known as subsidiary book.
Each subsidiary book records similar nature transactions.
First of all, transactions are recorded in subsidiary books so they are also called original entry and primary entry.
The main reasons to apply subsidiary book are as follows:
The journal entries can be very bulky and takes more time; as-a-result, it becomes difficult to manage,
For Journal entries, a single person can work at a time; division of labour may not be possible,
Periodical information of some business transactions cannot be known easily from the journal,
Some details for VAT and exercise duty cannot be obtained fully from the journal;
When the Journal entries are taken for posting or auditing, the other accounting work will have to be postponed.
All transactions are first classified as cash transactions and credit transactions.
Cash transactions are those in which the payment is made immediately.
Payment will be paid later on credit transactions.
Cash transactions are recorded in cash book.
Credit transactions are recorded in purchases book, sales book, purchase returns book, sales returns book respectively.
When transactions are related to bill, they are recorded in bills receivable and bills payable.
Keep in Mind (KIM)
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We record only credit transactions in subsidiary book. Cash transactions are recorded in cash book. |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger Account |
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Subsidiary Book |
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Cash Book |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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(B) Advantages of Subsidiary Books
The major advantages of subsidiary book are given below:
Different persons perform the accounting work on different books, so the accounting work is completed within short period of time.
Each person is entrusted the work of a book, so he becomes efficient in its handling.
Accounting work is performed at same time in separate books. Many person can do work at the same time. So, accounting work is completed quickly.
In case of disagreement of trial balance, the existence of separate books helps in detection of errors quickly.
Work of accounting is divided and assigned to various people, so there is less chance of frauds. Internal check system also may be introduced automatically.
Each person is entrusted to maintain a particular book; he will be responsible for the errors and frauds for particular book.
(C) Types of Subsidiary Books
There are six types of subsidiary books; they are as follows:
1. Purchases book
2. Sales book
3. Purchases return book
4. Sales return book
5. Bills receivable book
6. Bills payable book
Popular and most usable subsidiary books
Purchases book
In this book, we record credit purchase of business goods only.
Goods purchase in cash and assets purchased are not entered in purchase book.
Sales book
In this book we record credit sales of business goods only.
Assets sold and goods sold in cash are not recorded in sales book.
Purchases returns book
In this book we record goods returned to the creditors or suppliers when they are purchased on credit.
Generally, defective, damaged and excess goods are returned.
Sales returns books
In this book we record goods returned by the debtors or customers when they are sold on credit.
Generally, defective, damaged and excess goods are returned.
Bills receivable book
In this book we record bills receivable received from different debtors or customers.
At the time of goods selling on credit we write bill and accepted by debtor.
Bills payable book
In this book we record bills payable due to creditors and suppliers.
At the time of goods purchased on credit, we accept bill and return to supplier.
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