Reasons For Subsidiary Books - SS1 Accounting Lesson Note
Subsidiary books are records entered in the separate book of accounts in order to enumerate and categorize the stated transactions by date as they are carried out. They are created to provide a more detailed and efficient method of recording financial transactions than the general ledger. Some of the reasons why businesses use subsidiary books include:
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Efficiency: Subsidiary books allow for a more efficient system of recording transactions. By keeping records of similar transactions in a single book, it becomes easier to record, update, and retrieve information.
Accuracy: Because subsidiary books are designed to capture specific types of transactions, they are more accurate than the general ledger. This is because they reduce the risk of errors or omissions that can occur when recording transactions in a general ledger.
Organization: Subsidiary books help to organize financial transactions according to their nature, making it easier for businesses to track their finances and make informed decisions.
Simplify the general ledger: By using subsidiary books, businesses can reduce the number of entries in their general ledger. This makes it easier to manage the ledger, and reduces the likelihood of errors.
Analysis: Subsidiary books provide a means for businesses to analyze their financial transactions more easily. By categorizing transactions into specific books, businesses can identify patterns and trends in their financial data. This helps in decision making and financial planning.