Subsidiary Ledger
Accounting
Many businesses have only a few accounts
receivable and a few accounts
payable.
However; when a business starts to get a large number of
Accounts Receivable and
Accounts Payable they may decide to keep separate ledgers
for these accounts.
On the balance sheet the Accounts Receivable and Accounts
Payable accounts appear as
Individual accounts.
What would the balance sheet look like if you had 1000 Accounts Receivable
and 500 Accounts
Payable?
Take the example of the store Canadian Tire, it has 4, 000,
000 customers ( Accounts Receivable).
It would be crazy to list every Accounts Receivable on the
balance sheet.
Subsidiary Ledgers
We will create two new subsidiary
ledgers to go with the General Ledger:
Accounts Receivable Subsidiary Ledger (All the
Customers)
Accounts Payable Subsidiary Ledger ( All the Vendors)
Accounts Receivable Example
Each customer has its own
ledger account and it should be updated on a daily basis
to keep an updated record of
all the sales and payments made by individual customers.
The Accounts Receivable Control account in the main General Ledger will report the
total of the subsidiary ledger
balance. Where as the Subsidiary ledger
is updated on a
continuous basis, the Accounts
Receivable Control Account may need only to be updated
on a weekly or monthly
basis.
Note: The total balance of the subsidiary ledger
must equal the Accounts Receivable Control.
What invoices will affect the
Accounts Receivable?
1. Sales on
account
2. Cash Received
on account
Accounts Payable Example
Accounts Payable (Vendors) are
people that you owe money to for services and goods
Purchased from other people or
companies by you company. The example below shows
The A/P- Control Account and the A/P – Subsidiary Accounts.
