Meaning & Benefits of Subsidiary Ledger
On our previous post on Leger we have discussed Definition and Format of Leger. This free online accounting training class on Subsidiary Ledger will help you to understand:
- What is Subsidiary Ledger in Accounting
- Meaning & Definition of Subsidiary Ledger in Accounting
- Advantages or Benefits of using Subsidiary Ledger in Accounting
A larger company has to deal with many customers that results many transactions to be recorded. Sometimes some transactions happen on account. Moreover the company also receives service on account. Basically a general ledger contain entire group of account. So if a general ledger record all the transactions of accounts receivable and payable then it will be difficult to recognize individual receivable customer or to find the payable individual or organization within proper accounting period, the whole process will be very much time consuming and tougher as well. So in order to save time and remove complexity company use subsidiary ledger.
A Subsidiary Ledger also performs the function like a general ledger. But a subsidiary ledger provides extra benefit to general ledger and reduce the task by recording those group of accounts which are similar nature. For example, all accounts payable can be recorded in subsidiary ledger. A subsidiary ledger frees general ledger by having group of transaction in it.
Subsidiary ledger is categorized into 2 parts:
- Accounts receivable subsidiary ledger shows the balance of individual debtor.
- Accounts payable subsidiary ledger shows the balance of individual creditors.
Subsidiary ledger maintains the detail information of similar group of accounts and general ledger precise information from subsidiary ledger by a process which is called “Control Account”. The total balance of subsidiary ledger must equal the balance of general ledger control account at the end of given accounting period.
The benefits of using subsidiary ledger:
- Subsidiary ledger shows the updated information on individual account’s balance.
- Subsidiary ledger is helpful for identifying the error of individual account as it is used control account and shows the similar group of account.
- As general ledger precise the data of Subsidiary ledger, so trial balance will also be precised.
- Like special journal Subsidiary ledger also allows division of labor.