Accounting Practices
501
Chapter 5
Subsidiary ledgers
Cathy Saenger, Senior Lecturer,
Eastern Institute of Technology © Pearson 2011
Accounts receivable subsidiary ledger
Let’s start by looking at the
Accounts Receivable account in the General
Ledger
General Ledger
Date
Details
Ref no
Debit
Credit
Balance
8,000
20,000 Dr
12,000 Dr
ACCOUNTS RECEIVABLE (acct nr 1200)
SJ1
30 Sales
20,000
30
Bank
So far, we have only looked at Accounts Receivable in the
General Ledger as one summarised amount
This account is actually called the Accounts Receivable
Control account
Ch5A - Intro to subs ledgers
General Ledger
Date
Details
Ref no
Debit
Credit
Balance
8,000
20,000 Dr
12,000 Dr
ACCOUNTS RECEIVABLE CONTROL (acct nr 1200)
SJ1
30 Sales
20,000
30
Bank
But, these amounts are made up of many different
individual customers’ amounts
Ch5A - Intro to subs ledgers
General Ledger
Date
Ref no
Details
Debit
Credit
Balance
8,000
20,000 Dr
12,000 Dr
ACCOUNTS RECEIVABLE CONTROL (acct nr 1200)
SJ1
30 Sales
20,000
30
Bank
Sales : T Woods $5,000
Sales : M Campbell $3,000
Sales : E Els $8,000
Receipts : T Woods $3,000
Receipts : E Els $5,000
Sales : V J Singh $4,000
Ch5A - Intro to subs ledgers
Accounts Receivable Subsidiary Ledger
The business could have thousands of credit
customers
So, what to do?
Mmm…
Can you imagine how very cluttered the General Ledger
would be if we put each customer's account in our main
ledger?
Ch5A - Intro to subs ledgers
General Ledger
1-1000 Current Asset
1-1100 Bank
1-1200 Accounts Receivable
1-1201 T Woods
1-1202 M Campbell
1-1203 E Els
1-1204 V J Singh
1-1205 N Faldo
1-1206 G Norman
1-1207 G Player
1-1208 R Goosen
……..
1-1300 Inventory
$20,000
$2,000
$3,000
$3,000
$4,000
$4,000
$8,000
$1,000
$7,000
Do you see the problem? It’s cluttered and very bulky and
not easy to use.
Ch5A - Intro to subs ledgers
General Ledger
1-1000 Current Asset
1-1100 Bank
1-1200 Accounts Receivable
1-1201 T Woods
1-1202 M Campbell
1-1203 E Els
1-1204 V J Singh
1-1205 N Faldo
1-1206 G Norman
1-1207 G Player
1-1208 R Goosen
……..
1-1300 Inventory
$20,000
$2,000
$3,000
$3,000
$4,000
$4,000
$8,000
$1,000
$7,000
Let’s get rid of the bulk and move it somewhere else
Ch5A - Intro to subs ledgers
Accounts Receivable
Subsidiary Ledger
General Ledger
1-1000 Current
1-1100
1-1200
1-1300
Asset
Bank $20,000
Accounts Receivable $50,000
Inventory
T Woods
M Campbell
E Els
V J Singh
N Faldo
G Norman
G Player
R Goosen
……..
……..
TOTAL
$2,000
$3,000
$3,000
$4,000
$4,000
$8,000
$1,000
$7,000
$50,000
We move it out to a subsidiary ledger, where it is easier to
maintain each customer’s account
Ch5A - Intro to subs ledgers
Accounts Receivable
Subsidiary Ledger
General Ledger
1-1000 Current
1-1100
1-1200
1-1300
Asset
Bank $20,000
Accounts Receivable $50,000
Inventory
T Woods
M Campbell
E Els
V J Singh
N Faldo
Wow, that makes
sense!!
G Norman
G Player
R Goosen
……..
……..
TOTAL
$2,000
$3,000
$3,000
$4,000
$4,000
$8,000
$1,000
$7,000
$50,000
Our General Ledger is now streamlined once more
Ch5A - Intro to subs ledgers
Accounts Receivable
Subsidiary Ledger
General Ledger
1-1000 Current
1-1100
1-1200
1-1300
Asset
Bank $20,000
Accounts Receivable $50,000
Inventory
T Woods
M Campbell
E Els
V J Singh
N Faldo
Subsidiary ledgers are also a
form of internal control, as
the total of the subsidiary
ledger has to balance with
the control account in the
General Ledger
Ch5A - Intro to subs ledgers
G Norman
G Player
R Goosen
……..
……..
TOTAL
$2,000
$3,000
$3,000
$4,000
$4,000
$8,000
$1,000
$7,000
$50,000
Exactly the same applies to the
Accounts Payable Subsidiary Ledger
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What have we done so far
and where are we heading?
?
Ch5A - Intro to subs ledgers
Financial transactions
Evidenced by source
documents
Summarisation of like
transactions
Journals
General &
Subsidiary Ledgers
Chart of accounts used as
index to Gen Ledger
Trial balance
Financial Statements
Ch5A - Intro to subs ledgers