Subsidiary Ledgers and Controls Financial Accounting

In this article, we will explore how to use Pastel’s tools and settings to prevent errors, fraud, and data loss in your general ledger and subsidiary ledger accounts. By maintaining subsidiary ledgers, companies can easily track and manage transactions for individual accounts, reconcile account balances, and generate reports on specific subsets of their financial data. A subsidiary ledger is an accounting record that contains detailed information about a specific subset of a company’s accounts, such as accounts receivable, accounts payable, inventory, or fixed assets. The subsidiary ledger provides a more detailed and organized view of transactions related to a specific account than what is available in the general ledger. After determining that the information reconciles, the accounts payable clerk enters the vendor invoice into Accounts Payable.

Post the transactions to the subsidiary ledger and (using T-accounts) to the general ledger accounts. We post entries from the sales journal daily to the accounts receivable subsidiary ledger but monthly to Sales and to the Accounts Receivable general ledger account. Only the accounts receivable and accounts payable columns are posted to the subsidiary ledgers. This sub ledger lists contains all of the account details for every credit customers including dates, balances, payments, and purchases made by each customer. Even a small company can have hundreds of customers who purchase goods on credit.

Overview of Accounts Payable Subsidiary Ledger

The Accounts Receivable account summarizes information about the beginning balance, the total of all sales and cash collected on account for the period, and the total owed by all of the firm’s customers at the end of the period. While using a subledger can provide more detail, it also requires more effort and time to manage. Additionally, since the subledger may live outside of the general ledger, it is key to reconcile the two sources of data. If the general ledger does not reconcile with the subledger, then your financial statements will be inaccurate. Now that you have seen four special journals and two special

ledgers, it is time to put all the pieces together. (Figure)Evie Inc. has the following transactions during its first month of business.

When we say the computer can do a specific step “automatically,” this presumes that a programmer wrote the programs (i.e., detailed step-by-step instructions in a computer language) that tell the computer how to do the task. The computer can then follow those instructions and do it “automatically” without human intervention. In contrast to this, in a computerized system, for each transaction, the user determines the type of transaction it is and enters it in the appropriate data entry screen.

Pastel Accounting

Subsidiary ledgers track transactions within their control accounts in greater detail. Control accounts, sometimes called adjustment or controlling accounts, are summary accounts within the general ledger. For every control account, there is also a corresponding subsidiary ledger. Accounts payables are the liabilities of the business arising out of business operations and are to be settled within one year or one operating cycle, whichever is longer.

In FAMIS, SL accounts must be used to record detailed revenue and expense activity. The full set of revenue and expense subcodes are only available at the SL account level. We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. If you’re still using a manual accounting system, there are some things you’ll need to pay close attention to when using a subledger.

General ledger accounts provide summaries, while subledger accounts provide details

Instead, all of these customer accounts are contained into one subsidiary ledger and reported on the main record as a single number. Accountants and bookkeepers can look through the sub if they want more details about individual customer accounts. The subsidiary ledger is a chart of specific accounts that are not included in the general ledger. The accounts in the subsidiary ledgers hold more specific information about the accounts that make up the general ledger. However, do not include the specific accounts in this ledger because it would result in tedious work. The Accounts Receivable subsidiary ledger shows sales on credit by a business.

You should also utilize appropriate tax codes and rates for your transactions. Moreover, you should check and correct any errors or warnings before updating your transactions, and reconcile your bank accounts and control accounts regularly. (Figure)Brown Inc. records purchases in a purchases journal and purchase returns in the general journal. Record the following transactions using a purchases journal, a general journal, and an accounts payable subsidiary ledger.

How to secure general ledger and subsidiary ledger data in Pastel?

Each entry is posted to both the appropriate general ledger accounts and the individual customer accounts. To maintain control, postings to bank reconciliation exercises and answers subsidiary accounts should be made on a daily basis. By contrast, postings to general ledger accounts need to be made only periodically.