Subsidiary Books – A Register for Similar Nature Transactions
In big organisations there are numerous transactions going on, in the midst of these transactions, it is not possible to keep and maintain a record of each and every business affair. While non-recording any minute transaction can be a havoc which the business will never resort to. This is when the subsidiary books come into the action and play as a saviour.
Subsidiary books are nothing but an order of maintenance of recording similar natured transactions. Subsidiary books are the subdivisions of Journal. In this content, we will know in detail about these books and types of subsidiary books with its function.
Define Subsidiary Books
Subsidiary Books are the books that record the transactions which are similar in nature in an orderly manner. They are also known as special journals or Daybooks. In big business institutions, it is not easy to record all the transactions in one journal and post them into various accounts. So, for the easy and accurate recording of all the transactions, the journal is subdivided into many subsidiary books. For every type of transaction, there is a separate book.
Types of Subsidiary Books
8 Types of subsidiary books are used for recording different types of transactions. So, let us know the types.
The 8 Subsidiary books are as follows:
Cash Book
Purchase Book
Sales Book
Purchase Return Book
Sales Return Book
Bills Receivable Book
Bills Payable Books
Journal Proper
Set of Subsidiary Books – A Brief Study
Cash Book
The first and most important subsidiary book is the cash book. It records all the transactions related to cash and bank receipts and payments. There are 3 types of cash books that are maintained by an organisation. They are:
Single Column Cash Book: A single column cash book is like a ledger account. It contains a debit side and a credit side. All Cash receipts are recorded on the debit side, and all the cash payments are recorded on the credit side of the cash book.
Format of Single Column Cash Book:
Double Column Cash Book: Double Column Cash Book is the same as that of Single Column Cash Book; only an extra column of discount is added on both the debit and credit sides of the cash book. It records discounts allowed on the debit side and discounts received on the credit side of the cash book.
The format of the double-column cash book is given below.
Triple Column Cash Book: Triple Column Cash Book contains all the columns of a double column cash book and also has an extra column for the bank. The format of the triple column cash book is given below:
Purchase Book
Purchase Book is a subsidiary book that is used to record all the transactions related to credit purchases. The purchases of the asset are never recorded in the purchase book.
Format of Purchase Book:
Sales Book
The Sales Book records all the transactions related to credit sales. The sales book cannot record the sale of assets. The sales book format is given below.
Purchase Return Book
The purchase return book, also known as the return outward book, is used to record transactions of all the returns made to the supplier. A debit note is issued against every return and is recorded in the Purchase Return Book.
Format of Purchase Return Book:
Sales Return Book
The sales return book records all the transactions related to inward returns. It is also known as a return inward book. When the customer returns goods, a credit note is issued to the customer for every return, and it is recorded in the Sales Return Book.
Sales Return Book Format:
Bills Receivable Book
The Bills Receivable Book records all the transactions of bills drawn in favour of the business. The total of the bills receivable book is posted on the debit side of the Bills Receivable account. The Format of Bills Receivable Book is as follows.
Bills Payable Book
The Bills Payable Book records all the transactions related to bills that are drawn on the business and are payable by the business. The Bills Payable Books Format is as follows.
Journal Proper
Certain transactions cannot be recorded in any of the above-mentioned books; these transactions are termed miscellaneous transactions. So, the Journal Proper is used to record all the miscellaneous transactions. It includes transactions such as credit purchase and sale of assets, depreciation, etc.
Solved Examples on Subsidiary Books
In this section, we will be providing a few solved examples to make the content on subsidiary books clearer to our students.
Mentioned below is a five-set of transactions of Moksha Ltd. Company, we will determine the type of subsidiary books that will be used in recording each transaction.
Transactions:
Purchase of goods from MA Ltd.
This is to be recorded in the Purchase Book.
Purchase of stationery in cash.
This is recorded in Cash Book.
Depreciation on buildings
Journal Proper is the book.
Sale of goods in exchange for cash.
Cash Book
Bad Debts from Banyan Tree Ltd. transaction
Journal Proper
FAQs on Subsidiary Books: What You Need to Know
1. What is meant by subsidiary books?
Subsidiary books are special accounting records used to document and organize similar types of business transactions. Common types of subsidiary books include
- the sales book,
- purchases book,
- cash book,
- and returns book.
2. What is the advantage of a subsidiary book?
A key advantage of a subsidiary book is that it saves time and reduces mistakes by recording similar transactions together. This system helps
- easier referencing,
- prevention of duplication,
- and better organization,
3. What is the main purpose of subsidiary books?
The main purpose of subsidiary books is to record all routine business transactions of a similar nature. By using these books, businesses ensure that each type of transaction is properly categorized, making it straightforward to prepare the final accounts and financial statements.
4. What is the difference between a ledger and a subsidiary book?
Ledger and subsidiary book differ in function. Subsidiary books record the initial details of each transaction, while the ledger classifies these entries under specific accounts. The ledger is used to prepare financial statements and to check the overall balances.
5. What types of subsidiary books are commonly used?
Common types of subsidiary books include
- the cash book for all cash transactions,
- the purchases book,
- the sales book,
- the purchases returns book,
- and the sales returns book.
6. How do subsidiary books improve accuracy in accounting?
By recording each transaction in a proper subsidiary book, errors are minimized since entries are categorized and documented as they occur. This structured approach promotes accurate record-keeping and helps in regular reconciliation of accounts within the business.
7. Why are subsidiary books important in large businesses?
Subsidiary books are especially important in large businesses because they process a high volume of transactions. By dividing entries among specialized books, work is distributed among several staff, making accounting faster and more controlled.
8. Can subsidiary books be used for all types of transactions?
Not all transactions are recorded in subsidiary books. Only routine and repetitive transactions are entered, such as sales or purchases. Unusual or one-time transactions, like purchasing machinery, are often recorded directly in the journal.
9. How do subsidiary books relate to a company's general journal?
For routine transactions, subsidiary books are used instead of the general journal. Only non-routine or special entries, such as adjustments or rare purchases, go to the general journal, making accounting more organized and efficient.
10. Are subsidiary books part of the double entry system?
Yes, subsidiary books are part of the double entry system. Each entry made in these books is later posted to the ledger, ensuring that every transaction affects at least two different accounts, as required by the double entry bookkeeping method.
11. What information is recorded in subsidiary books?
Each subsidiary book records specific details such as date, party name, invoice details, quantity, rate, and amount related to its transaction type. This structured recording ensures that important transaction information is stored and easily retrievable for further accounting processes.
