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.
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.