Accounts Receivable Subsidiary Ledger: Definition and Purpose


In subsidiary ledgers, individual ledger accounts are maintained in alphabetical order. Detail data of subsidiary ledger are accounted for in the general ledger in brief. The four sections in a general ledger are financial transactions, accounting periods, a chart of accounts, and account balances. But you don’t have to be intimately acquainted with journals and ledgers to keep tabs on the financial health of your business. Using the best accounting software or working with a professional bookkeeper or accountant makes it easier to record every transaction and make sure they balance every time.

  • The user would have to provide the computer with information about adjusting entries at the end of the period.
  • Within most accounting systems, the process is performed via accounting software.
  • The ledger will show, for example, that Customer A owes $15,000, Customer B owes $25,000, Customer C owes $5,000, and so on.

The number of subsidiary accounts used, as well as the level of detail with which they are maintained, depends on the needs of the firm’s management. For example, the general ledger account, Equipment, shows the historical cost of the total equipment owned by the firm. This article looks at meaning of and differences between two types of ledgers – general ledger and subsidiary ledger. (Figure)Maddie Inc. has the following transactions for its first month of business.

Check out the post “Maintaining a General Ledger” from Wolters Kluwer for a more extensive list of general ledger accounts that might apply to medium to large businesses. The ledger shows the account’s opening balance, all debits and credits to the account for the period, and the ending balance. As an example, let’s say The Ford Motor Company has a general ledger balance that shows a total accounts payable balance of $106 million. However, management wants to see which suppliers are owed and the amounts owed.


What are the three types of subsidiary ledger?

Other subsidiary account ledgers include the accounts receivable subsidiary ledger, the inventory subsidiary ledger, and the equipment subsidiary ledger. A subsidiary ledger stores the details for a general ledger control account. Most accounts in the general ledger are not control accounts; instead, individual transactions are recorded directly into them. Subsidiary ledgers are used when there is a large amount of transaction information that would clutter up the general ledger. This situation typically arises in companies with significant sales volume.

Usually, the date of purchase, price and details are noted along with the depreciation rate being applied. Postings to the general ledger accounts are likewise indicated by noting the general ledger accounts in the Ref. column. The individual cards serve as a subsidiary ledger to the controlling Equipment account. Similar subsidiary accounts are maintained for payables and, depending on the firm’s needs, for other accounts such as Property, Plant, and Equipment.

In order to research accounting information when a subsidiary ledger is used, you need to drill down from the general ledger to the appropriate subsidiary ledger, where the detailed information is stored. With a clear understanding of subsidiary ledger; for more learning use our complete guideline on principles of accounting. We would record the purchase of equipment for cash in the cash disbursements journal. If you’re still using a manual accounting system, there are some things you’ll need to pay close attention to when using a subledger. The stock ledger is a count of stock held by a business, by type of stock. It provide detail to the stock figure in the accounts to break down exactly what stock is held and in what quantities.

This involves recording all financial transactions in the primary books of accounts and subsequent posting to the secondary accounts. A ledger is the accounting book that comprises of all accounts to which the journal entries are posted. Balanced ledger accounts are compiled into a trial balance from which the entity’s profit and loss and balance sheet are prepared. Preparation of and posting to ledger accounts is thus an important step in the preparation of financial statements.

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Thus, we also refer to the general ledger as the ‘set of master accounts’ since it contains all the information in the subledgers. Using accounting software also eliminates the need to roll subledger account totals up into your general ledger at month-end. Additionally, it automates the entire journal entry process, so the only month-end entries you’ll need to complete are adjusting entries for interest, depreciation, and amortization. Instead, all of these customer accounts are contained into one subsidiary ledger and reported on the main record as a single number. Accountants and bookkeepers can look through the sub if they want more details about individual customer accounts. This section will look at the transactions for Fooz Ball Town and how to post to subsidiary ledgers for accounts receivable and accounts payable.

It provides the user with the ability to continuously update the balance after posting each transaction. A subsidiary ledger is an addition to an expansion of the general ledger. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent. If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

Most businesses use accounting software that posts all financial transactions directly to the general ledger. However, if you want to create your own general ledger, you’ll first need to understand the basics of double-entry bookkeeping. At the end of the accounting period, the subtotal for the accounts-receivable subledger is updated in the general ledger, so that there is an accurate snapshot of the amount of cash owed to the business. This process allows the general ledger to stay streamlined without too many clunky details, but those details recorded still are parts of the business’s accounting history. While the general ledger may be enough for day-to-day financial maintenance, detailed subledgers are crucial components of accurate accounting, especially for businesses with a large sales volume. Subledgers help to segment data and transactions into manageable categories, which can be individually analyzed.

The user would have to provide the computer with information about adjusting entries at the end of the period. Some adjusting entries can be set up to be done automatically every month, but not all. The computer can then follow those instructions and do it “automatically” without human intervention.

The general ledger is a set of accounts that consists of transaction records of all principal accounts. It consists of all the entries of debit and credit for a particular period in different accounts. Ledgers may contain detailed transaction information for one account, one type of transaction, or—in the case of a general ledger—summarized information for all of a company’s financial transactions over a period. Fourth, dividing subsidiary accounts into related sub-ledgers, multiple people can perform bookkeeping procedures. For instance, one person can be in charge of the accounts receivable listings and another person can be in charge of the accounts payable listings. Note that each account used by the company has its own account section in the general ledger.

Make sure to complete your closing entries after reconciliation

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. Only high-activity accounts in your general ledger will use a subledger.

In such cases, individual subsidiary ledger accounts are created within a broader general ledger account. At the end of an accounting period, the balance of every control accounts of general ledger becomes equal to the total of balances of individual accounts of the related subsidiary ledger. By maintaining subsidiary ledgers, companies can easily track and manage transactions for individual accounts, reconcile account balances, and generate reports on specific subsets of their financial data.

What Is an Accounts Payable Subsidiary Ledger?

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. For balance sheet accounts, the opening balance is usually the closing balance from the previous period. Income statement accounts start with an opening balance of zero because revenues and expenses should have been closed to retained earnings at the end of the prior period. It includes the transaction date, particulars of the transaction, folio number, debit amount, and credit amount.

Use the perpetual inventory method and the gross method of dealing with sales terms. 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 how to record accrued rent income journal entry who are owed money. Periodically, especially when it comes to a manual accounting system, the total of all the individual suppliers ledgers should be added together and the total compared to the purchase ledger control account. A subsidiary ledger contains the details to support a general ledger control account.

The accounts payable subsidiary ledger is helpful in providing internal accounting controls. The accounts payable subsidiary ledger amounts can be crosschecked with the aggregate amount reported on the general ledger to prevent errors in reporting. Management can also check to ensure that each invoice from the vendors and suppliers are being recorded. The subsidiary ledger is essentially a worksheet for all of the payables owed to suppliers.





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