Conceptual Introduction to Subsidiary Books
Subsidiary books are a set of specialized books used in accounting to manage and simplify the process of recording frequently occurring transactions. They help reduce the workload of the general journal by allowing specific types of transactions to be recorded in separate books. These books are also known as sub-journals or sub-divided books and form part of the journal system in accounting.
Instead of recording all transactions in the main journal, businesses use subsidiary books to categorize and record transactions such as sales, purchases, returns, cash, and bank-related transactions. This makes the recording process more organized and efficient.
Features of Subsidiary Books
1. Original Entry:
All transactions recorded in subsidiary books are considered original entries because they are entered directly from source documents. For example, when a sale transaction occurs, it is recorded directly in the Sales Book. Similarly, purchase transactions are recorded in the Purchase Book. These entries serve as the first and original record of the business transactions.
2. Group of Books:
Subsidiary books form a group of books that are each dedicated to recording specific types of transactions. The most common subsidiary books include:
- Cash Book
- Sales Book
- Purchase Book
- Sales Return Book
- Purchase Return Book
These books make it easier to record transactions based on their nature, resulting in more structured and efficient accounting.
3. Easy to Use:
Subsidiary books are designed to be easy to use and manage. They follow simple and standardized formats, which means that only basic accounting knowledge is required to maintain them. The predefined formats for recording transactions make it simple for businesses to track their financial activities.
4. Division of Work:
The use of subsidiary books helps in the division of work within an organization. Different books are maintained by different people responsible for specific transactions. For instance, a designated person may be responsible for maintaining the Sales Book, while another person manages the Purchase Book. This division allows for better management of tasks and improves the overall workflow.
5. Increased Efficiency:
By dividing tasks among specialized personnel, the use of subsidiary books increases the efficiency of the accounting process. When individuals focus on a specific type of transaction, they become more skilled and efficient at managing that particular aspect of the business’s finances. Repeated handling of the same tasks leads to greater speed and accuracy in recording.
6. Error Reduction:
As efficiency improves, the chances of making errors decrease. By specializing in one area of accounting, individuals are less likely to make mistakes, leading to error reduction. This is especially important for large businesses, where accurate record-keeping is critical. The separation of tasks and the use of subsidiary books help prevent common errors that might occur when managing all transactions in one central book.
Common Types of Subsidiary Books
- Cash Book: Records all cash transactions, including both cash receipts and cash payments.
- Sales Book: Records all credit sales transactions made by the business.
- Purchase Book: Records all credit purchases made by the business.
- Sales Return Book: Records the return of goods sold on credit.
- Purchase Return Book: Records the return of goods purchased on credit.
Conclusion
Subsidiary books are an essential part of accounting that simplifies the recording process by dividing transactions into different categories. They not only make it easier to manage frequent transactions but also improve efficiency, reduce errors, and allow for better division of work within an organization. Their structured and easy-to-use format ensures that businesses can maintain accurate and organized financial records.