Subsidiary Books Meaning
Accounting is indeed a tedious task. For this the companies who have an abundant financial transaction in a year to journalize them all is really bothersome. Hence, the companies prepare the subsidiary books, where the recording of the transactions of a similar nature is done in a chronological manner.
The Subsidiary books are known as the books of original entry. In daily business transactions, a majority of the transactions are either related to sales, or to purchases or to cash. Thus, we record the transactions of the same or similar nature in one place, that place is a subsidiary book. We record the transactions chronologically to facilitate the accountant.
Types of Subsidiary Books
The subsidiary books are of various types which suit the needs of an organization. The types are as follows:
Purchases return or return outwards book
Sales return or return inwards book
Bills receivable book
Bills payable book
Subsidiary Books of Accounts
The Subsidiary Books are the books of Original Entry. These books are also called Day Books or special journals. We record the transactions in this book which are of similar nature, the recordings are done in chronological manner in Subsidiary Books. Subsidiary books actually are helpful in overcoming the limitations of journal books or journal entries.
Subsidiary Books Format
Format of Purchase Book
Format of Sales Book
Format of Purchase Return Book
Format of Sales Return Book
Format of Bills Receivable Book
Format of Bills Payable Book
Advantages of Subsidiary Books
The advantages of the subsidiary book are as follows:
1. Proper With Systematic Record of the Business Transactions
The business transactions are classified and grouped properly in cash and non-cash transactions, these are further classified as credit purchases, credit sales, and returns, etc. The books facilitate individual transactions, as they can be properly and systematically recorded in the subsidiary books.
2. Convenience While Posting
The transactions of a nature are recorded at a single place, in one of the subsidiary books. Example, all the credit purchases of the goods are recorded in the purchases book while all the credit sales of goods are recorded in the sales book.
The work is being divided here which gives the advantage of specialization. When the same work is done by a person repeatedly and continuously the person becomes efficient in handling it.
4. Helpful in Decision Making
Subsidiary books provide accurate and complete details about each type of transaction separately. Thus, the management can use the information as the basis for deciding the future actions.
5. Errors and Frauds are Prevented
The Internal check becomes more effective as now the work can be divided in such a manner, where the work of one person is automatically checked by another person. With this internal check, the possibility of occurrence of the errors or fraud may be avoided and to the least minimized.
6. Availability of Requisite Information at a Glance
The transactions are entered in only one journal thus, it becomes difficult to locate the information about a particular item. When the subsidiary books are maintained, the details about a particular type of transaction can be easily obtained from the subsidiary books. The maintenance of these subsidiary books helps in obtaining the necessary information at a single glance.
FAQs on Subsidiary Books
1. What do you mean by Books of Original Entry?
The Books of original entry is an accounting book or a journal where all the transactions are initially or originally recorded. The business transactions are solved with great details and its descriptions are the first recorded in this book of original entry. Books of original entry refer to the accounting journals where the business transactions are generally recorded. The information in these books is later summarized and posted into a general ledger, from this the financial statements are produced.
Popularly, the journal is known as the book of original entry because in this book, the business transactions are initially recorded at the very beginning.
2. What is meant by journal proper?
Journal proper is a book of original entry, this is known as the journal also. In this miscellaneous credit transactions are recorded which do not fit in any other books which are recorded. This is also called the miscellaneous journal. The form and procedure for maintaining this type of journal is the same as the simple journal.
A Journal proper in an accounting system is the book of original entry where all types of miscellaneous credit transactions are recorded.
3. What is the full form of L.F?
The meaning of LF or the full form of L.F is ledger folio number. Generally, the folios are used for reference purposes or to divide the books into several parts. This term is also referred to as the number of pages in which the book or the document is recorded. A folio has similar applicability in the term of accounting. It is used in financial journals and the ledgers to indicate the aligned entries.
4. How much time does it take to prepare this topic for exams?
It took me about two weeks to prepare for the exam. I would recommend studying for at least four hours each day to make sure you understand all of the material.
5. What are some good resources that I can use to study this topic?
Some good resources include your textbook, class notes, and practice problems provided by your instructor or on the internet. You can also try solving exercises in a workbook specifically designed for subsidiary books.
6. Do I need to know how to use excel in order to study this topic? What are some commonly used types of Subsidiary books?
No, you do not need to know how to use excel in order to study subsidiary books, however, it is helpful if you do know how to use the program. Excel can be used to solve some practice problems and to help you understand how subsidiary books work. The three main types of Subsidiary Books include Cash Books, Purchase Books, and Sales Books.
7. What type of jobs will I be able to get with this knowledge?
With this knowledge, you will be able to get a job in accounting, bookkeeping, or finance. You may also be able to find a job as a controller or an accountant in a business setting.
8. How are subsidiary books related to the general ledger?
Subsidiary books are not part of the balance sheet but they provide information about what is going on within a company's financial transactions which can be used to create the balance sheet.
9. How do I prepare for tests?
You should review your notes, practice problems, and try solving exercises in a workbook specifically designed for subsidiary books. It is also important that you get enough sleep before taking any exams because fatigue affects cognition negatively.
10. Can I use Subsidiary books even if my company is not incorporated?
Yes, any company can use Subsidiary books, whether it is incorporated or not. The main purpose of Subsidiary books is to help track a company's financial transactions and to provide information about the company's financial status.
11. What should I do if I don't understand something?
If you don't understand something, don't be afraid to ask your classmates or the instructor for help. They will be more than happy to assist you in any way they can. It is also helpful if you try solving exercises in a workbook specifically designed for subsidiary books because this will improve your understanding of the material.