Key Takeaways
- The accounts receivable subsidiary ledger shows the transactions and payment history of each customer that has been extended credit.
- The balance in the accounts receivable subsidiary ledger is reconciled with accounts receivables in the general ledger.
- Tracking outstanding customer payments is one benefit of the accounts receivable subsidiary ledger.
What is the difference between a subsidiary and general ledger?
What is a General Ledger (GL)?
- General ledger account. A general ledger account (GL account) is a primary component of a general ledger. ...
- Controlling Accounts vs. Subsidiary ledger. ...
- General Ledgers and Double-Entry Bookkeeping. ...
- Link to Balance Sheet and Income Statement. ...
- Decentralized Ledger – Blockchain Technology. ...
- Additional Resources. ...
What are the advantages of special or subsidiary ledgers?
What Are the Advantages of a Subsidiary Ledger?
- Types of Subsidiary Ledgers. Companies incorporate several types of subsidiary ledgers in their accounting systems. ...
- Detailed Information. One advantage of using a subsidiary ledger includes the detailed information maintained in the subsidiary ledger.
- Control. ...
- Limited Access. ...
What is sub-account ledger and why is this used?
A subledger or subsidiary ledger provides the details that make up the balance of specific general ledger accounts . Because general ledger accounts only provide an ending balance for each particular account, a subsidiary ledger is used to provide the details that result in that general ledger balance.
What is difference between general ledger and sub ledger?
Here are the functions of subledgers that are used for reporting a company's financial records:
- A subledger's total amount is included as part of the general ledger.
- A subledger reports summary amounts to the general ledger.
- A subledger represents smaller categories within a company's financial information.
- A subledger does not have its own trial balance report.
What is a subledger in accounting?
Small or medium-scale businesses or entities that have a small number of transactions may not benefit from the subsidiary ledger. Subledger eliminates the chances of fraud and errors, and it can be segregated into three types- fixed asset sub-ledger, accounts receivable sub-ledger, and accounts payable sub-ledger.
What is a subsidiary ledger?
Subsidiary Ledger is a list of individual accounts that bears a similar nature. It can also be regarded as an expansion of the conventional general ledger that is separately used to record all the transactions related to the accounts payable and accounts receivables in a detailed manner.
What are the advantages of a subsidiary ledger?
The different advantages related to the Subsidiary Ledger are as follows: 1 Elimination of Frauds and Errors – It uses only a control account, which ultimately eliminates even the slightest possibility of frauds and errors. 2 Balances remain Updated- The balances remain updated since all the transactions concerning buyers and creditors are recorded in detail in their respective accounts. 3 Minimal Error and Enhanced Efficiency – The responsibility to prepare and maintain every single ledger is entrusted upon one person only. It helps in minimizing errors and enhances the efficiency of the ledger. 4 Easy Movement- The size of the ledger remains small since the same is segregated into numerous parts. It allows the ledger to have an easy movement.
What is general ledger?
, discounts, etc. to provide support to the general ledger. General Ledger A general ledger is a book of accounts that records the everyday business transactions in separate ledger accounts.
What is a general account?
A General Account General Account is a deposit account where an insurance company puts all its premiums collected from the policies it underwrites.
Can a general ledger have multiple accounts?
In a general ledger, there can be just ledger accounts , while in a subsidiary ledger, there can be multiple ledger accounts. The general ledger contains minimal data, while subsidiary ledger contains extensive data. It is just a part of the general ledger while the latter controls the former.
Do subsidiary ledgers have errors?
It may contain undetected errors. Subsidiary ledgers do not assure the accuracy of ledger accounts. The items may be posted to irrelevant accounts, which may add to errors in the individual ledgers and ultimately impact the overall accuracy of the subsidiary ledger.
What is a subsidiary ledger?
A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable contains the information for each of the company's credit sales to customers, each customer's remittance, return of merchandise, discounts, and so on.
Can employees access accounts receivable without access to the general ledger?
By having the details of the accounts receivable activity in a subsidiary ledger, employees in a company's credit department of a company can access the credit sales information without having access to any information in the general ledger.
What Does Subsidiary Ledger Mean?
A subsidiary ledger is useful to accountants and bookkeepers for a variety of reasons. First, it groups related accounts into one ledger that can be easily totaled and analyzed. It is much easier to review data when it is organized and grouped together. Take the accounts payable ledger for example.
Example
This sub ledger lists contains all of the account details for every credit customers including dates, balances, payments, and purchases made by each customer. Even a small company can have hundreds of customers who purchase goods on credit.
What is the purpose of a subsidiary ledger?
What Is the Purpose of Subsidiary Ledgers? Some general ledger accounts such as accounts receivable or accounts payable are made up of many sub-components, For example, a company may have many debtors (credit customers) and multiple transactions (credit sale, sale return, receipts) with each customer. All such transactions will be recorded in ...
Is the sum of balances of subsidiary ledgers always equal to the balance of main ledger account/ control
As a result, the sum of balances of subsidiary ledgers is always equal to the balance of main ledger account/ 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.
What is backup card?
Often, backup cards are maintained for each item of equipment. These cards show such information as the cost of each item; its estimated life; its salvage, or residual, value; and its insurance coverage. These individual cards serve as a subsidiary ledger to the controlling Equipment 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 Subsidiary Ledger?
What is a subsidiary ledger? The subsidiary ledger in business accounting is a list of detailed accounts that serve as backup for the general ledger. The general ledger is the main list of accounts a business owns that lists all the transactions connected to each account.
Subsidiary Ledger Purpose
The purpose of a subsidiary ledger in a business is to help organize important financial information and monitor transactions. One way for a business to grow and increase sales is to allow customers to purchase products on credit. Credit purchases are tracked on subsidiary ledgers to forecast financial situations for a company.
Subsidiary Ledger Examples
ABC company starts the year off with an opening balance of $100,00 in their accounts payable. The company owes $25,000 to four different companies: Company D, Company E, Company F, and Company G. The transactions in the accounts payable on the general ledger look like this:
What is a subsidiary ledger?
Like other subsidiary ledgers, the accounts receivable subsidiary ledger merely provides details of the control account in the general ledger. Other subsidiary ledgers include the accounts payable subsidiary ledger, inventory subsidiary ledger, and property, plant, and equipment subsidiary ledger.
What is the account receivable subsidiary ledger?
The accounts receivable subsidiary ledger shows all the sales made on credit by a business. It provides details on these sales by showing invoice dates and numbers, credit memorandums, payments made against the credit sales, discounts, and returns and allowances. The sum of all invoices in the accounts receivable subsidiary ledger should equal that of the accounts receivables on the general ledger, also known as the control account.
Is a general ledger a subsidiary ledger?
The general ledger is not able to provide this much detail and so having an accounts receivable subsidiary ledger, or any other subsidiary ledger for that matter, is a real benefit to a company's operations.
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What are subsidiary ledgers?
Companies incorporate several types of subsidiary ledgers in their accounting systems. Common subsidiary ledgers include an accounts receivable ledger and an accounts payable ledger. An accounts receivable ledger includes individual accounts that apply to each individual customer. Each credit sale is recorded in the specific customer account along with each payment. Each customer account includes a current balance. The current balances for all customers add up to the total accounts receivable balance. The accounts payable ledger includes individual accounts for each vendor. Each invoice received and every payment made is recorded for each specific vendor account. Each vendor account includes a current balance. The current balances for all vendors add up to the total accounts payable balance.
What is the advantage of using a subsidiary ledger?
One advantage of using a subsidiary ledger includes the detailed information maintained in the subsidiary ledger. Each vendor listed in the accounts payable ledger includes detailed transaction information. The ledger includes each invoice, the date received, the dollar amount and every payment mailed to the vendor.
Why is it important to limit access to a subsidiary ledger?
The other employees lack the ability to see the details of accounts contained in the subsidiary ledger. This allows the company to maintain confidentiality regarding customer or vendor accounts.
What is a general ledger?
A general ledger contains the balances from every account the company uses for financial recording and forms the central location for reporting financial transactions. Subsidiary ledgers contain detailed information from selected accounts.
