Principle of journalizing all
transactions is the universal system of book-keeping. It is perfect for a small
concerns having few and non repetitive transactions, but for large business
concerns it is inconvenience to journalize large number of transactions which
are repetitive in nature. Besides it is difficult for a single man to
journalize a number of transactions in a single journal. Therefore for accurate
and quick recording of transactions, the journal is divided into a number of
special journals in a classified manner.
In trading concerns through the transactions are numerous they can be a grouped
into special journals on the basis of their nature. Receipt and payment
of cash can be recorded in cash book, credit purchase of goods can be recorded
in purchase book, credit sale of goods can be recorded in sales book and goods
return can be recorded in purchase return book and sales return book. Thus, the
journal is divided in such a way that separate book is used for each type of
transaction.
Meaning of Subsidiary Book:
Sub-division of journal is known as subsidiary books. It helps in maintaining
separate book for particular type of transactions which are representative and
large in Number. Journal sub divided into numbers of special journals on
the basis of nature of transactions. Subsidiary books are also books of original
entry or prime entry because when a transaction takes place in it first
recorded in one of these books are subsequently posted to the respective
accounts in the ledger. Subsidiary books are also called as special journals or
day books.
Need for maintaining subsidiary book
-
Need for maintaining subsidiary
books is as follows...
1) Time Savings and economical:
Different accounting procedures can be taken up at the same time this will save
time and prove to be economical.
2) Helps in preventing fraud: Subsidiary books are helpful to prevent fraud. Since,
transactions are recorded in a chronological order it prevents fraudulent
entries in an account.
3) Verification of correctness: It enables effective internal control which helps in
verifying the correctness of book of accounts.
4) Quick information and
future reference:
Similar transaction is recorded
together in the same book therefore quick information and future reference to
any of them becomes easy.
5) Division of work:
The work of recording transactions
into subsidiary book and posting it to the ledger account can be assigned to
several clerks simultaneously.
6) Specialization:
Since, clerk assigned same type of
work, it leads to specialization and increase in efficiency.
Types of Subsidiary books:
To achieve the
purpose of accounting for modern business, subsidiary books are divided into
following 8 types:
1) Cash book
2) Purchase book
3) Sales book
4) Purchase return book
5) Sales return book
6) Bill receivable book
7) Bill payable book
8) Journal proper.
(Continued....)
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