Subsidiary Books

When a business becomes large and performs a large number of transactions daily, it finds the single journal book insufficient to keep a primary record of all the transaction. The task of journalizing all the transaction is troublesome and expensive. It does not provide classified information immediately. It fails to report the total amount of credit purchases and credit sales. The practical system of primary record of the transaction is subsidiary books.

Meaning and Definition:

Instead of maintaining a single journal book, a large sized business maintains some journal books. The collective form of all these journal books is known as subsidiary books. They are a subdivision of Journal. They are the set of a primary book in which the transactions of the business are recorded at the first time in a classified way.

"Subsidiary books of accounts are also called books of original entry because all the transactions are recorded originally or in the first instance in this subsidiary book." -Dr. A. N. Agrawala

"Subsidiary records are also known as the book of original entry, as transactions are entered there in the first instance so that they may be subsequently transferred to their respective accounts in the ledger." -J.R. Batliboi

Types of Subsidiary Book

1. Purchase Book: Purchase Book is the first entry of all goods purchased on credit. It is the primary record of all the credit purchases, which are either for reselling or further processing. It does not record cash purchase.
   Example:
   Ashoj 6 = Purchased from Khusboo, Kathmandu 25 pieces of register@ Rs. 60 10 dozens of pencil @Rs.15
   Ashoj 9 = Sangam, Balaju 20 pieces of board marker@Rs. 35 15 pieces of duster @Rs. 10

2. Purchase Return Book: Purchase return book is the first entry of all goods returned to suppliers. It is the primary records of all the purchase returns. When the good purchased is found defective, damaged, in an excess quantity and not as per the order placed, they can be returned to the supplier. It is prepared on the basis of a debit note.
   Example:
   Jan 4 = Goods of Rs 1700 returned to Burning store, Baneshwor
   Jan 16 = Returned to Shinning Store, Banepa 2 quintals Basmati rice@ Rs. 2800 25 kg Mansuli rice@ Rs. 22

3. Cash Book: A cash book is the primary records of all the receipts and payments made in cash and through a bank. It has the features of the subsidiary book as well as the principal book. Mainly, it is a subsidiary book as it is the first entry of all the cash and banking transaction. It is a part of the principal book or ledger as it serves the purposes of cash and bank accounts in the ledger.
   
   
   
4. Sales Book: Sales book is the first entry of all the goods sold on credit. It is also known as sales journal. It is the primary record of all the credit sales. It does not record cash sales. It is prepared on the basis of the outward invoice sent out to the customer.

Example:

Kartik 29= Sold to Kritika, Basundhara 2 sets 20"LG TV@Rs. 17500 3 sets 21"Sony TV@ Rs. 27500

Kartik 30 = Sold to Anshu, Kathmandu

5 pieces of calculator @Rs. 650 3 sets of Telephone @ Rs. 1050

5. Sales Return Book: Sales return book is the first entry of all the goods returned by customers. It is the primary records of all the sales returns. The sales return book is prepared on the basis on the basis of credit note sent to the customer.
   Example:
   a. Returned by Comfort Furniture Center: 3 chairs@ Rs. 1300
   b. Returned by Luxury Furniture Center: 2 sofa sets@ Rs. 6500 3 Tables @ Rs. 1500

6. Journal Proper: Journal proper is a subsidiary book that records only non- recurring transactions in chronological order. It records those transactions for which no separate subsidiary book has been provided. Credit purchase and sale of assets, bad debts, depreciation and goods withdrawn by the proprietor are some of the examples of transactions, which are recorded in the journal proper.

Importance and Advantages of Subsidiary Book

Subsidiary books are important and advantages to a large- scale trading house due to the following reason:

1. They avoid the need of passing journal entry for repeated type of transactions.
2. They keep classified records of the business transactions in a systematic manner.
3. They help in making the job of audit easier and economical.
4. They help in minimizing errors and frauds and controlling the transactions effectively.
5. They make the books of accounts clearer, clean and informative.
6. They help in saving time and money for recording transactions.

Invoice:

An invoice is received from the supplier while buying goods and it is sent to the customer while selling goods. It is a statement, which is prepared and sent out by the seller along with the goods to buyer mentioning the details of the goods. It states the items of goods, quantity, unit price, total amount, and discount allowed, expenses incurred on behalf of the buyer and net payable amount. It represents the sale transaction. It serves as the basis for maintaining records in the purchases and sales book.