What is the reason for subsidiary ledgers?

What is the reason for subsidiary ledgers?

A subledger or subsidiary ledger provides the details that make up the balance of specific general ledger accounts. Because general ledger accounts only provide an ending balance for each particular account, a subsidiary ledger is used to provide the details that result in that general ledger balance.

Why is it important to update the balance of subsidiary ledgers?

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.

Why do you think general ledger and subsidiary ledgers are important in recording business transactions?

The general ledger includes information that does not meet the specific requirements of subsidiary ledgers. However, companies prefer to use subsidiary ledgers when recording financial transactions to limit the amount of detailed information in the general ledger.

When using a subsidiary ledger the accounts receivable account in the general ledger is called the?

The general ledger account that summarizes a subsidiary ledger’s account balances is called a control account or master account. For example, an accounts receivable subsidiary ledger (customers’ subsidiary ledger) includes a separate account for each customer who makes credit purchases.

Why is an accounts receivable ledger or an accounts payable ledger necessary for a business with large numbers of credit customers or large numbers of vendors suppliers?

Why is an accounts receivable ledger or an accounts payable ledger necessary for a business with large numbers of credit customers or large numbers of vendors/ suppliers? It helps to know the amount due from a customer or amount due to a supplier at any given point of time.

Why is it necessary to reconcile the accounts payable and accounts receivable subsidiary ledger systems with the general ledger?

What is the relationship between general and subsidiary ledgers?

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 …

What does AP stand for in accounts payable subsidiary ledger?

What is an ‘Accounts Payable Subsidiary Ledger’. The balance in the customer accounts is periodically reconciled with the accounts payable (AP) balance in the general ledger to ensure accuracy. The AP subsidiary ledger is also commonly referred to as the AP subledger or subaccount.

How is the subsidiary ledger related to the general ledger?

The subsidiary ledger records all of the accounts payables that a company owes whereby the aggregate total is carried over to the general ledger. The balance in the customer accounts is periodically reconciled with the accounts payable balance in the general ledger to ensure accuracy.

Where does accounts payable subsidiary ledger go on a balance sheet?

When the financial statements are prepared, the accounts payable total is listed with other short-term financial obligations under the current liabilities section of the balance sheet. The accounts payable subsidiary ledger is a breakdown of the total amount of payables listed on the general ledger.

Why do you need an accounts payable Ledger?

The accounts payable ledger tracks all of the expenses that your business has incurred and that must still be paid. If you have a high volume of payable activity, the specifics can easily be lost in a standard general ledger.