Aastha In: Category - Accounting OthersWhy are subsidiary books maintained in accounting?subsidiary books ShareFacebook0 AnswersVotedRecent Dheeraj 2020-08-23T21:22:41+05:30Added an answer on August 23, 2020 at 9:22 pm Sure, Aastha, I would like to explain the purpose and use (utility) of the subsidiary books. I hope this will help you to develop a better understanding of subsidiary books.Purpose of subsidiary books-Big business concerns have record numerous financial transactions in one accounting period and journalizing them all in one single book can be very difficult such organizations choose subsidiary books for maintaining many transactions of similar nature in chronological order. The following are the purpose of maintaining a subsidiary book1. The main purpose of maintaining subsidiary books is to create a differentiation between cash and credit transactions that occurs in an organization. All the credit transactions are further recorded in the various subsidiary books (say- purchase of good on credit is recorded in purchase book). All the cash transactions are recorded in the cash book.2. Subsidiary books are maintained when numerous (say-5000) transactions take place in a single day. This helps the accountant (or), bookkeeper, to keep a track of the total purchases and sales which takes place on a particular day.3. Subsidiary books eliminate the problem of recording all the financial transaction in a single journal and later on posting them in the various ledger which makes the task difficult and confusing. There are chances of missing multiple transactions that create problems in the later accounting process.4. The format of subsidiary books is designed in such a way that even a non-commerce graduate can easily understand and interpret the functioning of every business transaction with a nill accounting knowledge when compared to the Journal Entries.5. The totals of all subsidiary books are generally done on a timely basis. This helps the organization to know the total amount of purchases and sales (both cash and credit) that takes place in one day, month, quarter (or) year.6. Another important purpose of maintaining subsidiary books is that it provides information on price per unit of goods purchased in a bulk amount. This acts as an aid for large organizations to make future decisions. Subsidiary books attract huge trade discounts and price negotiations from the suppliers.Uses of Subsidiary BooksThe following are the uses of maintaining a subsidiary book-1. Subsidiary books are classified into several types so instead of having one single book for recording all the transactions we have various books. Therefore the work can be easily divided among the several members of an organization. This, in turn, improves the quality of work, precision and results in fewer mistakes.2. Recording of business transactions in the subsidiary books saves time and reduces clerical hours. The best part of the subsidiary book is that there is no need for journalizing a transaction and passing a narration after every transaction. Hence, various accounting process can be performed at a single time.3. If a person maintains any part of subsidiary books for a longer period (say for many years) then he obtains full knowledge and understanding of the work. In simple words, he becomes an expert of that particular subsidiary book (for example- sales book). This improves his transparency, efficiency and accuracy.4. When all the business transaction of the similar nature is recorded in the subsidiary books as per chronological order then it becomes simple for the accountant/clerk to trace any transaction whenever and wherever needed.5. Subsidiary Books makes further accounting process to run smoothly. If the trial balance does not agree due to any errors or omissions then it can be easily detected and corrected. This is only possible because of the existence of the subsidiary book.0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerCancel replyYou must login or register to add a new answer.