21 de junho de 202119 de dezembro de 2023 Bookkeeping

What Is a Subsidiary Ledger? Importance, Posting, & Example

The individual accounts are then added together periodically and compared to the sales ledger control account, carrying out what is known as the sales ledger reconciliation. An accounts payable subsidiary ledger is an accounting ledger that shows the transaction history and amounts owed to each supplier and vendor. An accounts payable (AP) is essentially an extension of credit from a supplier that gives a business (the buyer in the transaction) time to pay for the supplies. The subsidiary ledger records all of the accounts payables that a company owes. Record all transactions using the sales journal, purchases journal, cash receipts journal, cash disbursements journal, and the general journal and post to the accounts receivable and accounts payable subsidiary ledgers. Then prepare a schedule of accounts receivable and a schedule of accounts payable.

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.
If the number of late invoices starts to increase, it may point to problems with your accounts receivable collections.
Accountants and bookkeepers can look through the sub if they want more details about individual customer accounts.

Accounting software automates some of the most tedious aspects of general ledger reconciliation, such as automatically generating journal entries and streamlining bank reconciliation. For the most part, general ledgers included with accounting software come pre-built with the most common account types (Figure A). Depending on the software and plan, you can also add custom accounts unique to your specific business. General ledgers are made up of (and organized by) accounts, or subsections that categorize financial transactions by type. The accounts in turn may include sub-accounts or sub-ledgers, which record more precise details about each transaction.

subsidiary ledger definition

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. 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.

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. General ledger reconciliation is the process https://intuit-payroll.org/ of making sure your GL is accurate. You (or your accountant) will check the transactions recorded in your general ledger against primary documents like receipts, tax documents, invoices and other records.

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The subsidiary ledger provides a more detailed and organized view of transactions related to a specific account than what is available in the general ledger.
In contrast, a general ledger breaks down exactly how much money your business makes, showcases how you spend that money and documents how much you owe your creditors and how much is owed to you in return.
The accounts in the this ledger are predominantly customer accounts with some exceptions.

Subsidiary ledgers track transactions within their control accounts in greater detail. Control accounts, sometimes called adjustment or controlling accounts, are summary accounts within the general ledger. For every control account, there is also a corresponding subsidiary ledger. In job order costing systems, the job cost sheets (or job cost records) will serve as the subsidiary ledger containing the details for the general ledger account Work in Process. The Work in Process account will now be a control account containing summary amounts for direct materials, direct labor, factory overhead applied, transfers to finished goods, etc.

What Is an Accounts Payable Subsidiary Ledger?

Accountants and bookkeepers can look through the sub if they want more details about individual customer accounts. 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.

Real Ledger

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Definition and Examples of Subledgers

At the same time, the financial statements would become increasingly dense as a consequence. Therefore, make a subsidiary ledger up of the individual accounts so that each specific account can be dealt with on a singular basis. Furthermore, a subsidiary journal entry is no different than an entry in the general ledger.

Examples of Subsidiary Accounts

Free software options like Wave Accounting make general ledger creation as easy and simple as possible. The subsidiary ledger is a chart of specific accounts that are not included in the general ledger. The accounts in the subsidiary ledgers hold more specific information about the accounts that make up the general ledger. However, do not include the specific accounts in this ledger because it would result in tedious work. A subsidiary ledger is used to keep track of the details for a specific control account within a company’s general ledger.

You can use the information in your accounts payable subsidiary ledger to create an accounts payable aging report. The aging report shows the name of the vendor and lists the individual overdue invoices. The aging report also shows the outstanding amount for https://personal-accounting.org/ each invoice and how long the invoice has gone unpaid. Because of this, changes in cash flow can first show up on your aging report. If the number of late invoices starts to increase, it may point to problems with your accounts receivable collections.

In this guide, you’ll find out more about the subsidiary ledgers, the common types used and how they fit into the accounting process. 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. Rather than having multiple related accounts clogging up the main ledger system, a single subsidiary ledger can sum and report the totals of all related accounts with a single entry. As a business grows, there are often individuals or entire departments dedicated to the oversight, maintenance, and analysis of subledgers like accounts receivable. Important subledgers can often become their own ecosystem, forming an important foundation to a business’s general ledger as well as larger financial reports.