Subsidiary ledger is in short "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 calles a control account or master account" . A bit more detailed it is described in another book. There is information in it that in a separate book called a subsidiary ledger, there can be individual accounts that combine common characteristics. In the primary ledger, there are included profit and loss accounts and balance sheets. This in turn is called, as already mentioned, the general ledger. In this book there is also an subsidiary ledger, presented by means of a summarizing/controlling account. Balance amounts in both cases must be consistent .
Common Subsidiary Ledgers
We stand out three common subsidiary ledgers. These are :
- The accounts receivable subsidiary ledger, otherwise customers ledger, contains an alphabetical list of individual customer accounts. The checking account in the general ledger takes the form of Accounts Receivable.
- The accounts payable subsidiary ledger, otherwise creditors ledger, contains an alphabetical list of individual creditor accounts. The checking account in the general ledger takes form of Accounts Payable.
- The inventory subsidiary ledger, otherwise inventory ledger, contains an list of individual inventory according to item number/bar code. The checking account in the general ledger takes form of Inventory.
It is worth adding that the last book is used in a continuous inventory system.
Advantages of Subsidiary Ledgers
They have some advantages such as :
- "They show in a single account transactions affecting one customer or one creditor, thus providing up-to-date information on specific account balances.
- They free the general ledger of excessive details. As a result a trial balance of the general ledger does not contain vast numbers of individual account balances.
- They help locate errors in individual accounts by reducing the number of accounts in one ledger and by using control accounts.
- They make possible a division of labor in posting. One employee can post to the general ledger while someone else posts to the subsidiary ledgers".
- E.A. Minbiole 2007, pg. 103
- C.S. Warren, J.M. Reeve, J. Duchac 2009, pg. 1266
- C.S. Warren, J.M. Reeve, J. Duchac 2009, pg. 218
- J.J. Weygandt, P.D. Kimmel, D.E. Kieso 2010, pg. E3
- Gilbertson C.B., Lehman M.W. (2009), "Fundamentals of Accounting: Course 1", Cengage Learning, USA, vol. 9
- Kimmel P.D, Weygandt J.J, Kieso D.E. (2011), "Accounting: Tools for Business Decision Makers", John Wiley & Sons, USA, vol. 4
- Minbiole E.A. (2007), "CliffsQuickReview Accounting Principles I", Houghton Mifflin Harcourt, USA
- Needles B.E., Powers M., Crosson S.V. (2011), "Principles of Accounting", Cengage Learning, USA, vol. 11
- Warren C.S, Reeve J.M., Duchac J. (2009), "Financial And Managerial Accounting", Cengage Learning, USA, vol. 10
- Weygandt J.J., Kimmel P.D., Kieso D.E. (2010), "Financial Accounting", John Wiley & Sons, USA, vol. 7
Author: Angelika Guzik