Subsidiary ledger is the supporting ledger of related accounts that in total equals the control account appearing in the General Ledger. In some cases, a business may need more detailed information, such as individual customer receivable balances or the amount owed to a particular vendor. This is accomplished through the use of subsidiary ledgers.
Examples are individual creditor accounts agreeing with accounts payable (creditor’s ledger) and individual factory overhead items such as factory rent and factory insurance agreeing with the factory overhead account (factory overhead ledger). A business might maintain an accounts receivable ledger consisting of separate ledger accounts for each customer, arranged alphabetically or by account number. Each entry to the sales journal or to the cash receipts journal (if the transaction was a collection of a receivable) would be posted to the appropriate customer ledger so customer records would be constantly updated. At the end of the month, the total of the subsidiary ledger accounts should balance to the controlling account (the general ledger account). A similar process could be used for individual vendors (using the purchases and cash disbursements journal) or for any general ledger account that involves subsidiary accounts.
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