Why are subsidiary ledgers necessary and what is their relationship to the general ledger?

Facts. Subsidiary ledgers contain detailed information regarding business transactions and financial accounts. This information is maintained separately from the company’s general ledger. Large business organizations often use subsidiary ledgers because they have large numbers of financial transactions.

The key difference between General Ledger and Sub Ledger is that General ledger prepared by the company is the set of the different master accounts in which the transactions of the business are recorded from the related subsidiary ledgers, whereas, Sub ledger act as an intermediary account set that is linked with the

One may also ask, what is the relationship between a control account and a subsidiary ledger? A controlling account summarizes all accounts in a subsidiary ledger. The balance of a controlling account equals the total of all account balances in its related subsidiary ledger.

Beside this, what is the purpose of 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.

Why we may use a subsidiary ledger system as well as a general ledger system?

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. Accounts receivable ledger. Fixed assets ledger.

What are the two types of ledger?

General Ledger – General Ledger is divided into two types – Nominal Ledger and Private Ledger. Nominal ledger gives information on expenses, income, depreciation, insurance, etc. And Private ledger gives private information like salaries, wages, capitals, etc.

What is General Ledger with example?

Examples of General Ledger Accounts asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and Equipment. liability accounts including Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits.

What are the two common kinds of subsidiary ledgers?

Two common subsidiary ledgers are: 1. The accounts receivable (or customers’) subsidiary ledger, which collects transaction data of individual customers. 2. The accounts payable (or creditors’) subsidiary ledger, which collects transaction data of individual creditors.

What are the subsidiary ledgers?

A subsidiary ledger is 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 called a control account or master account.

What is SL GL reconciliation?

Reconciliation of the general ledger to sub-ledgers is another type we will review. The general ledger also contains all journal entries posted to accounts. In currently computerized world, the ledger is maintained in an electronic form. A sub-ledger is a thorough record of transactions for an individual account.

What are the advantages of using subsidiary ledgers?

The advantages of using subsidiary ledgers are that they: Permit transactions affecting a single customer or single creditor to be shown in a single account, thus providing necessary up-to-date information on specific account balances.

What is GL Size in banking?

A general ledger (GL) is a set of numbered accounts a business uses to keep track of its financial transactions and to prepare financial reports. Each account is a unique record summarizing each type of asset, liability, equity, revenue and expense.

What is an accounts receivable subsidiary ledger?

An accounts receivable subsidiary ledger is an accounting ledger that shows the transaction and payment history of each customer to whom the business extends credit. The balance in each customer account is periodically reconciled with the accounts receivable balance in the general ledger, to ensure accuracy.

What is purpose of ledger?

Accounting Ledger Basics For monthly reporting, businesses rely on ledgers. The purpose of the ledger is to take the entries made in the journal and logs and tallies up all transactions that affect a specified account. To locate that information, you need to refer to the journal.

What is another name for the A P ledger?

Definition: The accounts payable ledger, also called the creditors ledger, is a subsidiary ledger that lists all of the vendors and suppliers that a company owes along with their account balances and details. In other words, the A/P ledger is a summary of all the current and outstanding accounts payable.

What is the meaning of journal entry?

A journal entry is a recording of a transaction into a journal like the general journal or another subsidiary journal. Journal entries for accounting require that there be a debit and a credit in equal amounts.

What is a contra ledger?

A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account allows a company to report the original amount and also report a reduction so that the net amount will also be reported.

What is contra accounting?

contra account definition. An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account. The contra accounts cause a reduction in the amounts reported.

Why do we prepare subsidiary journals?

-Journal Proper : Used to record those transactions for which there is no separate book. These subsidiary books are maintained because it may be impossible to record each transaction into the ledger as it occurs. And these books record the details of the transactions and therefore help the ledger to become brief.