Subsidiary Ledgers Explained

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. 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. To maintain control, postings to subsidiary accounts should be made on a daily basis.

This way all vendor balances are located in one spot and can be analyzed individually or as a group. A subsidiary ledger, or subledger, tracks the details of specific types of transactions and what happens in specific categories within a business’s chart of accounts. The ‘accounts receivable’ is the general ledger account that is a sum total of the balances of all the individual customer accounts. Each entry is posted to both the appropriate general ledger accounts and the individual customer accounts.

The subsidiary ledger is also commonly referred to as the subledger or subaccount. A subsidiary ledger is an accounting record that contains detailed information about a specific subset of a company’s accounts, such as accounts receivable, accounts payable, inventory, or fixed assets. 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. Subsidiary ledgers are created for those account categories in which there are high volume of transactions. In such cases, individual subsidiary ledger accounts are created within a broader general ledger account. A subsidiary ledger can be set up for virtually any general ledger account.

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• HighRadius’ Autonomous accounting solution uses AI-based anomaly detection, saving your teams from manual work during the month-end close.
• 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.
• Control accounts, sometimes called adjustment or controlling accounts, are summary accounts within the general ledger.
• The balance in the customer accounts is periodically reconciled with the accounts payable balance in the general ledger to ensure accuracy.
• Today, computerized accounting information systems use the same method to store and total amounts, but it takes a lot less time.

Similar posting procedures are followed for subsidiary Accounts Payable and any other subsidiary accounts that are maintained. Similar subsidiary accounts are maintained for payables and, depending on the firm’s needs, for other accounts such as Property, Plant, and Equipment. Balances of subsidiary account remain up-to-date as the postings are given daily.

General ledgers and subledgers have different numbers of accounts

The analysis that can go into the detail provided by the accounts receivable subsidiary ledger helps organize a company and allows it to perform in a more targeted manner. Since companies are integrating accounting records with their other information into one database, I assume there will be less use of the term subsidiary ledgers in the future. There will likely be reports generated to provide the information formerly contained in the subsidiary ledger. 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.

• The accounts payable subsidiary ledger is similar to other subsidiary ledgers in that it merely provides details of the control account in the general ledger.
• Fourth, dividing subsidiary accounts into related sub-ledgers, multiple people can perform bookkeeping procedures.
• The chart also includes a listing of each account (sales, inventory, salary, utilities, etc.) and a number to represent it so that it functions similar to a table of contents in a novel.
• You may have heard someone talking about a company’s “books.” The books are a record of a company’s financial information, the general ledger, and sub-ledgers.
• By segmenting different types of transactions, accountants, analysts, and auditors can see a more granular picture of specific business areas.

By segmenting different types of transactions, accountants, analysts, and auditors can see a more granular picture of specific business areas. When subsidiary accounts are maintained, it is necessary to post journal entries to both the general ledger (or controlling account) and the subsidiary account. Each individual account in the subsidiary accounts receivable ledger should show the customer’s name, address, credit rating, and credit limit, along with any other vital payment information. These are called subsidiary accounts and are placed in a subsidiary accounts receivable ledger.

Don’t miss out to balance the records

Connect with our experts to learn how our account reconciliation platform identifies and resolves variances for general ledger accounts through configurable matching criteria and algorithms. Subledger, which is also known as a subsidiary ledger, is a detailed report of accounts that consists of transaction information. It includes the transaction date, particulars of the transaction, folio number, debit amount, and credit amount.

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Accounts Payable Subsidiary Ledger: Meaning, Overview, Examples

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It helps in knowing receivable – payable, bill payment and realization and satisfying quarries of customers. For example, account receivable $4,000 and balances of individual accounts (A – $2,000 + C – $2,000) $4,000 as shown in the above example are equal. These purposes enhance tracking, management, and reliable reporting in subledger accounting systems. Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time.

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