General ledger
A general ledger contains all the accounts for recording transactions relating to a company's assets, liabilities, owners' equity, revenue, and expenses.
Which general ledger account summarizes a subsidiary ledger's account balances?
The general ledger account that summarizes a subsidiary ledger's account balances is called a control account or master account.
What is the difference between accounts receivable and subsidiary ledger?
The ‘accounts receivable’ is the general ledger account that is a sum total of the balances of all the individual customer accounts. After all general ledger accounts are prepared and balanced, a trial balance is drawn up. Subsidiary ledger is essentially a sub-set of the general ledger.
What is an example of a subsidiary ledger?
For example, an accounts receivable subsidiary ledger (customers' subsidiary ledger) includes a separate account for each customer who makes credit purchases. The combined balance of every account in this subsidiary ledger equals the balance of accounts receivable in the general ledger.
What is the difference between general ledger and sub ledger?
Sub-ledgers can have a large number of accounts within each main account. If you have five bank accounts, each one will have its own sub-ledger. The same is true for your customer accounts, vendors, credit cards, and assets. The general ledger shows summaries of your double-entry accounting at any given point in time.
What is the relationship between the general ledger and the subsidiary ledger?
General ledger is the master ledger account which consolidates all subsidiary ledger accounts and which is posted to the trial balance. Subsidiary ledger is a categorization of general ledger to which journal entries are first posted.
What is the relationship of a subsidiary ledger to a general ledger account and why is it important to reconcile balances monthly?
An accounts receivable subsidiary ledger is an accounting ledger that shows the transaction and payment history of each customer to whom the business extends credit. The balance in each customer account is periodically reconciled with the accounts receivable balance in the general ledger to ensure accuracy.
How do you reconcile subsidiary ledger to general ledger?
The reconciliation process involves the following steps:Compare the entries in the general ledger to those in the subledger.Identify the differences between the subledger and general ledger, decide if a correction is necessary, and in which of the two the correction should be recorded.More items...•
Is an account in the general ledger that shows all the total balance of the subsidiary accounts related to it?
A subsidiary ledger is a group of similar accounts whose combined balances equal the balance in a specific general ledger account. The general ledger account that summarizes a subsidiary ledger's account balances is called a control account or master account.
How do you reconcile intercompany balances?
How to Improve Intercompany ReconciliationPerform high-speed data matching at any scale.Create matching schemes automatically from historical activities.Automatically improve matching schemes based on daily activity.Automatically find the resolution to a problem.More items...•
What could cause a discrepancy between the accounts receivable subsidiary ledger and the general ledger?
Accounts Receivable Reconciling Items One reason is that a journal entry was made to the general ledger account that bypassed the subsidiary sales ledger. This is the most common reason for a difference. Another reason is that a billing was accidentally posted to an account other than the trade receivables account.
What is GL reconciliation process?
General ledger reconciliation is the process of comparison between accounts and data. Those tasked with the process will have to verify the books against other financial documents like statements, reports, and accounts.
How do you reconcile accounts receivable subsidiary ledger?
The reconciliation process follows these steps:Update all transactions for the period of the reconciliation. ... Run an aged trial balance report. ... Ask the customer for a copy of their accounts payable ledger if they will, and compare your AR ledger with their A/P ledger.More items...•
Should trial balance and general ledger match?
The total of both should be equal. read more are two primary actions in the accounting cycle. The critical difference is that a general ledger is a set of accounts containing complex transactions. At the same time, the trial balance is a statement that records the general ledger ending balances.
What side of the general and subsidiary ledgers an accounts payable will be recorded?
The subsidiary ledger records all of the accounts payables that a company owes whereby the aggregate total is carried over to the general ledger.
Why should the total of the individual subsidiary ledgers for accounts receivable agree with the general ledger balance of accounts receivable?
The purpose of keeping subsidiary ledgers is for accuracy and efficiency. They aid us in keeping accurate records. Since the total of the accounts receivable subsidiary ledger must agree with the balance shown in the accounts receivable general ledger account, the system helps us find mistakes.
What is difference between general ledger and subledger?
General ledger accounts provide summaries, while subledger accounts provide details. Your general ledger is designed to provide the balance of each of the accounts in your chart of accounts, while the subledger is designed to provide you with the details that make up that particular account.
What is the purpose of subsidiary ledgers?
A subsidiary ledger stores the details for a general ledger control account. Once information has been recorded in a subsidiary ledger, it is periodically summarized and posted to a control account in the general ledger, which in turn is used to construct the financial statements of a company.
How do you reconcile accounts receivable subsidiary ledger?
The reconciliation process follows these steps:Update all transactions for the period of the reconciliation. ... Run an aged trial balance report. ... Ask the customer for a copy of their accounts payable ledger if they will, and compare your AR ledger with their A/P ledger.More items...•
What do you think is the difference between the accounts receivable subsidiary ledger and accounts payable subsidiary ledger?
The amounts of debts owed by customers recorded in this subsidiary ledger is compared with the accounts receivable balance in the general ledger. An accounts receivable subsidiary ledger is the opposite of accounts payable subsidiary ledger.
What is the purpose of an accounts receivable subsidiary ledger?
The main purpose of having an accounts receivable subsidiary ledger is to keep a record each individual customer's account. Each customer will have their own account within the ledger which records all the credit transactions between the customers and the business.
What is a subsidiary ledger?
A subsidiary ledger is a group of similar accounts whose combined balances equal the balance in a specific general ledger account. The general ledger account that summarizes a subsidiary ledger's account balances is called a control account or master account. For example, an accounts receivable subsidiary ledger (customers' subsidiary ledger) includes a separate account for each customer who makes credit purchases. The combined balance of every account in this subsidiary ledger equals the balance of accounts receivable in the general ledger. Posting a debit or credit to a subsidiary ledger account and also to a general ledger control account does not violate the rule that total debit and credit entries must balance because subsidiary ledger accounts are not part of the general ledger; they are supplemental accounts that provide the detail to support the balance in a control account.
Why do companies create subsidiary ledgers?
Companies create subsidiary ledgers whenever they need to monitor the individual components of a controlling general ledger account. In addition to the accounts receivable subsidiary ledger, companies often use an accounts payable subsidiary ledger (creditors' subsidiary ledger), which has separate accounts for each creditor, ...
What is account receivable ledger?
The accounts receivable subsidiary ledger is essential to most businesses. Companies may have hundreds or even thousands of customers who purchase items on credit, who make one or more payments for those items, and who sometimes return items or purchase additional items before they finish paying for prior purchases.
Why is it impossible to calculate credit card balance?
Recording all credit purchases, returns, and subsequent payments in a single account would make an individual customer's balance virtually impossible to calculate because the customer's transactions would be interspersed among thousands of other transactions.
Does a post to a subsidiary ledger account violate the rule that total debit and credit entries must balance?
Posting a debit or credit to a subsidiary ledger account and also to a general ledger control account does not violate the rule that total debit and credit entries must balance because subsidiary ledger accounts are not part of the general ledger; they are supplemental accounts that provide the detail to support the balance in a control account.
What is the schedule of accounts receivable called?
This schedule of accounts receivable often called an accounts receivable trial balance, is totaled, and the total should equal the balance in the related general ledger account.
Do you have to post to a subsidiary account?
Posting to Subsidiary Accounts. When subsidiary accounts are maintained, it is necessary to post journal entries to both the general ledger or controlling account and the subsidiary account. Thus, if an entry is made to record a sale on account, two postings must be made, one to the general ledger receivable account and the other to ...
What is a general ledger?
It is a journal of all your financial transactions that take place every day. General ledgers use T accounts to show debits and credits to each account that makes up the ledger. It explains every single transaction that has occurred.
Why do accountants use sub-ledgers?
Accountants have been using the sub-ledger to explain parts of the general ledger to their clientele. To understand your general ledger better, you need to have sub-ledgers. This article will explain what a general ledger and sub-ledger are and how they are different. We will also discuss how this information can help you grow your business.
What is the purpose of a subledger and general ledger?
The general ledger allows us to check account balances at any given moment. Subledger and general ledgers are often confused as being the same thing. The reality is that they are different and they work with each other. Accountants have been using the sub-ledger to explain parts of the general ledger to their clientele.
What are the categories of accounts in a general ledger?
A general ledger has a few accounts in the following categories; assets, liabilities, income, expenses, and equity. They also have a few sub-accounts, such as accounts payable and accounts receivable. Accounts are often created as needed.
What is the inventory account?
Inventory. Purchases. Fixed Assets. This is due to the fact that these accounts have the most transactions than any other accounts in the general ledger. When it comes to Inventory, items for that account come from the Purchases account. The Inventory account keeps track of the number of items in the warehouse.
How long does it take to convert a bank account into cash?
More often than not, that account is the cash you have available in your bank accounts and short-term investments (something you can convert into cash within 90 days). A sub-ledger account will show each bank account and the transactions within it to show why the amount is $180,000.
Why do you use sub-ledger accounts?
For those that decide to use sub-ledger accounts to improve their understanding of their financial health, there are some things you need to remember to do. By implementing these to your accounting process, you will keep your books balanced and easy to understand.
What is a Subsidiary Ledger in Accounting?
In certain situations, there is a need for additional information to be recorded that supports the transactions being logged in the books of prime entry and the general ledger. They contain information that helps track numbers in a business or offers additional details to help understand more about where numbers have come from and what they mean.
What is the Difference between General Ledger and Subsidiary Ledger?
The subsidiary ledgers are a subset of the general ledger and although the subsidiary ledgers contain valuable information that supports key accounts in the general ledger, the numbers included are not actually entered into the general ledger.
Control Account v. Subsidiary Account
A control account, such as the purchase ledger control account, is a summary of total payments and total credit invoices received by a business. The subsidiary account, which would be the purchase ledger is a breakdown of the individual suppliers who are owed money.
What is the general ledger?
The general ledger is the main accounting ledger containing a record of all transactions. As the business expands the general ledger is divided into subsidiary ledgers to allow for the larger volume of transactions and to allow access to the ledgers by the increased number of staff. The sub-division of the ledger into subsidiary ledgers is ...
What is a private ledger?
The private ledger contains accounts relating to the management and ownership of the business, including the personal accounts of owners. As the name implies it is used to maintain the privacy of the individuals involved.
Is a real account a personal account?
It should be noted that although accounts receivable and accounts payable are real accounts they are also personal accounts and therefore held in the personal ledger. Real accounts are balance sheet accounts and are therefore permanent accounts.
What are the differences between subledger and general ledger?
There are three types of differences; differences for which adjustments are necessary for the subledger, differences for which adjustments are necessary for the general ledger, and valid reconciling items. No subledger is maintained for accrued liabilities, but rather entities maintain a schedule or memo of accrued liabilities, ...
What is a subledger reconciliation?
What Are Subledger and General Ledger Reconciliations? The general ledger for accounts payable is the ledger account in which the totals of all transactions with suppliers are recorded, including purchase invoices and returns, payments to suppliers, and trade and settlement discounts. The balance of the general ledger account at any point ...
How to reconcile accounts payable?
Accounts payable reconciliation should be performed at least monthly, and it is important to be systematic and meticulous when doing it. The reconciliation process involves the following steps: 1 Compare the entries in the general ledger to those in the subledger. 2 Identify the differences between the subledger and general ledger, decide if a correction is necessary, and in which of the two the correction should be recorded. We will look at the type and reasons for differences and the appropriate response to them in the next section. 3 Prepare the reconciliation statement and process adjusting entries. We will show an example of a reconciliation statement below. 4 Compare the balance of the general ledger and the subledger total. If there is still a difference, you'll have to start again.
What is accounts payable reconciliation?
An accounts payable reconciliation is the comparison of the general ledger account balance and the total of the subledger, the identification of differences, and the processing of adjustments, and it results in a reconciliation statement that shows agreement between the sub-ledger and the general ledger. The reconciliation process involves ...
How often should a payable reconciliation be performed?
The Reconciliation Process. Accounts payable reconciliation should be performed at least monthly, and it is important to be systematic and meticulous when doing it. The reconciliation process involves the following steps: Compare the entries in the general ledger to those in the subledger. Identify the differences between ...
Can you produce a list of outstanding balances per supplier?
You can produce a list of outstanding balances per supplier from the subledger, and in theory, the total of this list should agree with the balance of the accounts payable general ledger account. This proves that the accounts payable liability in the general ledger is valid, accurate, and complete. However, in practice, these balances often do not ...
Does a subledger have to be maintained for accrued liabilities?
No subledger is maintained for accrued liabilities, but rather entities maintain a schedule or memo of accrued liabilities, the total of which should agree with the balance of the accrued liabilities general ledger account. To unlock this lesson you must be a Study.com Member.
Subsidiary Ledgers Explained
Nora O'Malley covers small business finance and entrepreneurship topics for The Balance. Along with her writing work, Nora is an entrepreneur and consultant who opened an all-tap wine bar in New York's East Village dubbed Lois and owns a sophisticated snack food business Aida.
Definition and Examples of Subledgers
A subledger contains details of transactions within different categories on a business’s chart of accounts. Those detailed transactions determine a subsidiary ledger total, which then is relayed to the general ledger to provide a larger financial snapshot of a business.
How Subledgers Work
Although a business may look to a general ledger for a basic financial overview, the details in the subsidiary ledgers are important when it comes to analyzing all the transactions in a particular category. By segmenting different types of transactions, accountants, analysts, and auditors can see a more granular picture of specific business areas.
Types of Subledgers
Private companies can choose how to structure their chart of accounts and subsequently decide which subledgers are important to include. For example, a restaurant will have very different accounting needs from those of a real estate developer. Common types of subledgers include:
