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 are subsidiary books in accounting and why are they used?
Subsidiary books, also known as Day Books or books of original entry, are specialised journals used to record a high volume of similar and repetitive transactions. They are a sub-division of the General Journal, designed to make the recording process more efficient and organised. Instead of recording every single transaction in one journal, businesses use separate books for categories like cash, credit sales, and credit purchases.
2. What are the 8 main types of subsidiary books and what does each one record?
The eight common types of subsidiary books in accounting are:
- Cash Book: Records all transactions involving cash and bank receipts and payments.
- Purchase Book: Records all credit purchases of goods meant for resale.
- Sales Book: Records all credit sales of goods.
- Purchase Return Book: Records goods returned by the business to its suppliers.
- Sales Return Book: Records goods returned to the business by its customers.
- Bills Receivable Book: Records all bills of exchange received from debtors.
- Bills Payable Book: Records all bills of exchange accepted by the business to pay creditors.
- Journal Proper: Records transactions that do not fit into any of the other subsidiary books, such as opening entries, closing entries, and the purchase of assets on credit.
3. What is the main difference between a subsidiary book and the General Ledger?
The main difference lies in their function and level of detail. A subsidiary book is a book of original entry where transactions are first recorded in detail. The General Ledger, on the other hand, is the principal book of accounts where transactions are posted from subsidiary books in a summarised form under specific account heads. Subsidiary books provide the detailed data, while the ledger provides the summary.
4. What are the key advantages of maintaining subsidiary books for a business?
Maintaining subsidiary books offers several advantages:
- Division of Work: Accounting work can be divided among several clerks, leading to specialisation and efficiency.
- Saves Time: Recording and posting become faster as transactions are grouped together.
- Easy Reference: Detailed information about a specific type of transaction (e.g., all credit sales) can be found easily in one place.
- Error Detection: It simplifies the process of locating errors as each book can be checked independently.
- Reduces Ledger Bulk: The General Ledger remains concise as only periodic totals are posted from the subsidiary books.
5. Are credit purchases of assets like machinery recorded in the Purchase Book? Explain why or why not.
No, the credit purchase of an asset like machinery is not recorded in the Purchase Book. The Purchase Book is exclusively used for recording the credit purchase of goods, which are items bought for the purpose of resale. The credit purchase of a fixed asset is a non-recurring transaction and is therefore recorded in the Journal Proper.
6. Why is the Journal Proper considered the book for miscellaneous transactions?
The Journal Proper acts as a catch-all book for any transaction that cannot be logically recorded in the other seven specialised subsidiary books. Since books like the Purchase Book or Sales Book are designed for very specific, high-frequency transactions, any unique or infrequent entry, such as opening entries, closing entries, depreciation on assets, or rectification of errors, must be recorded in the Journal Proper to ensure a complete accounting record.
7. How do subsidiary books help in the prevention and detection of fraud?
Subsidiary books enhance internal control by segregating duties. When different clerks are responsible for different books (e.g., one for the cash book, another for the purchase book), it becomes difficult for a single individual to manipulate records without collusion. This separation of responsibilities and the ease of cross-checking totals during audits make it easier to detect irregularities and prevent fraudulent activities.
8. What is the practical difference between a Purchase Return Book and a Sales Return Book?
The key difference is the direction of the goods returned. The Purchase Return Book (or Returns Outward Book) is used when the business returns goods to its supplier, usually due to defects. A Debit Note is issued to the supplier. In contrast, the Sales Return Book (or Returns Inward Book) is used when a customer returns goods to the business. A Credit Note is then issued to the customer's account.
9. Can a small business with very few transactions manage without using subsidiary books?
Yes, a very small business with a low volume of transactions can technically manage by recording everything directly in the General Journal. However, as the business grows, this becomes highly impractical. Without subsidiary books, the journal would become extremely long and cumbersome, making it difficult to find information, post to the ledger efficiently, and check for errors, thereby slowing down the entire accounting cycle.
