Importance of Subsidiary Books

Subsidiary books are books that are derived from the original entries. The majority of transactions in the normal course of business involve either sales, purchases, cash etc. As a result, we record transactions of the same or similar nature in a single location, namely the subsidiary book. We also take account of these transactions in chronological order.

This helps to save the time of person and tedious clerical work. Instead of journalizing each registration, they are recorded in separate books. Consider your subsidiary publications to be sub-journals that only record one type of transaction. There is no separate entry in the general ledger for these transactions. The posting to the Ledger Accounts is done directly from the subsidiary book.

Meaning of Subsidiary Books

Subsidiary Books are books that maintain track of all transactions that are similar in nature in such an orderly way. They’re also referred to as special journals or daybooks. It is complicated in large business institutions to record all transactions in one journal and post them to various accounts. As a result, the journal is divided into several subsidiary books to facilitate the quick and efficient recording of all transactions. There is a separate book for each type of transaction.

Types of Subsidiary Books

There are various types of subsidiary books in accounting which are given below:

Cash Book: It is strongly suggested that cash transactions be recorded as quickly as possible in order to prevent errors, inactions, or forgery. This may also assist the trader in evaluating the cash position in real-time. As a result, the cash book is both a book of the original post and a ledger account where all-cash data is recorded as they occur.

Purchases Book: The purchases book is being used to record credit-only purchases of goods. If any estate other than goods is acquired on credit, it should not be documented in this book. Thus, before a business transaction is entered into the purchases book, it must satisfy the following pair of conditions:

• Credit purchases that do not require immediate cash payment.
• The articles, goods, or merchandise purchased are those that are intended for sale rather than as a commercial building or asset.

Sales Book: The sales book, also recognised as the sales day book, is written in the same manner as the purchases book. It can only be used to record the sale of goods on credit. As a result, before a sale is recorded in this book, the two following factors must be considered:

• The transaction is a credit-only sale with no immediate cash payment.

• The sale is of the commodities with which the business enterprise is involved.

Purchases Return Book: The purchases returns book (also defined as the Bought Returns Book or Returns Outwards Book) takes account of the goods returned to suppliers by the business.

Debit note: This is a declaration that is sent to the person who receives the returned products. This feedback helps him that his account has been debited in the amount of the returned items.

Credit note: When customers return products along with the debit note, the seller acknowledges the transaction with a document known as the credit note.

Sales Return Book: As the goods are returned to the business, the sales returns book (or Returns Inward Book) can be used to record them to the business by customers because the goods were not as ordered, or because they were faulty, damaged, or otherwise unacceptable. The sections in this book are similar to those in the Sales Day Book, except that the Credit Note Number is recorded instead of the Invoice No. The trader issues a credit note in photocopy to demonstrate that the amounts noted therein have been credited to the customer’s account. 

Bills Receivable Book: This book is being used to record the details of reimbursing on which the business will receive payments in the future from third parties. The acceptor’s (debtor’s) identity, terms, due date, amount, and some other details must all be recorded in this book.

Bills Payable Book: It is also an original entry book that is used to record the particulars of all the ‘bills payment’ accepted by the business with the intention of paying the due amount by it (the organisation or the trader) to its creditors at a later date. The entries to be made in this book concern the drawer’s name, the payee’s name, the timeframe, and the amount.

Conclusion

Subsidiary Books are the books that are used to record transactions that are similar in nature in an organised manner, Additionally, they are referred to as Daybooks or Special Journals. In large commercial organisations, it is difficult to record all transactions in a single journal and then publish them to many accounts at the same time.