Subsidiary Books | Advantages of Subsidiary Books | Types of Subsidiary Books

 

 

Subsidiary Book | What is Subsidiary Book

In double entry system of 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.

 

 

 

 

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Keep in Mind (KIM)

We record only credit transactions in subsidiary book. Cash transactions are recorded in cash book.

 

 

Advantages of Subsidiary Books | What are the 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. 

 

 

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Ledger	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
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Types of Subsidiary Books

There are seven 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

 

 

Purchases book

We record only credit purchase of business goods in purchase book.  

Goods purchase in cash is not entered in purchase book.

We do not record any assets purchase for cash or on credit in purchase book.

 

Sales book

We record only credit sales of business goods in sales books.

We do not record any goods sale for cash in sales book.

We do not record any asset sales for cash or on credit in sales book.

 

Purchases returns book

We record only purchase return of business goods in purchase return books.

We do not record any asset return.

 

Sales returns books

We record only sales return of business goods in sales return books.

We do not record any asset return.

 

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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