The sub-division of the journal into various books for recording transactions of similar nature are called subsidiary books.
Every business company records its day to day transactions in journal. But in big organizations, the number of transactions is large hence, recording of all the transactions in one journal becomes very difficult.
In order to avoid this, the Journal is subdivided into various books known as subsidiary books. This makes the recording of transactions easy and accurate.
Each subsidiary book is meant for recording all the transaction of a similar nature. For e.g. all-cash transaction may be recorded in one book, all credit purchase transaction in another book and all credit sales transaction in yet another book, and so on.
TYPES OF SUBSIDIARY BOOKS
Subsidiary books are basically of 8 types , namely :-
- Cash Book :- A cash book is a book of prime entry which records all transactions made by a business in both cash and a bank instrument.
- Purchase Book :- It is a book which records all the credit purchases of goods of the company.
- Sales Book :- Sales book is mainly used for recording credit sales of goods and services in an organization. This will not record any cash sales or assets sales.
- Purchase Return Book :- The purchases returns book (also referred to as Bought Returns Book or Returns Outwards Book) records the details of the goods returned by the business to the suppliers.
- Sales Return Book :- It is a book which records all the return of credit sales of goods of the company.
- Bills Receivable Book :- This book can be used to document the details of bills receivable on which the business will get the amounts from other parties in future.
- Bills Payable Book :- This book is used to record the acceptances given to the suppliers for credit purchase.
- Journal Proper :- All the transactions which are not recorded in the above books are recorded here.
ADVANTAGES OF SUBSIDIARY BOOKS :-
- It helps to save time and labour by recording similar type of transactions in a separate book.
- It helps to maintain accounts and thus avoids the necessity of journal entries.
- These books help in minimizing errors and early detection of frauds.
- Subdivision of the journal would provide the information on a prompt basis.
Thus, in simple words, subsidiary books are those books in which transactions of similar nature are recorded in an orderly manner, thereby simplifying the process.