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Home Ledgers 2. Subsidiary Ledger or Personal Ledger

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Subsidiary Ledger

The subsidiary ledger is also called the personal ledger, and there are two subsidiary ledgers: sales ledger/debtors ledger and purchases ledger/creditors ledger. The former is also known as the sold ledger and the latter bought ledger.

A subsidiary ledger is absolutely essential to businesses that have a high number of customers who purchase on credit or suppliers who supply on credit. Maintaining one account for them would be virtually impossible to keep track of individual debtor’s or creditor’s balances as there are other items involved such as discounts allowed, discounts received, cash paid, cash received, return inwards and returns outward. Having individual accounts in the subsidiary ledgers allows financial information of each customer or supplier to be easily accessible and better control can be exercised, especially in the area of credit control.

There are control accounts for the sales ledger and the purchases ledger. They are the debtors control account and the creditors control account and each is a summary of the details in the respective sales ledger and the purchases ledger. Both debtors control account and creditors control account are found in the general ledger.

The general ledger is thus supported by the subsidiary ledgers as they provide details for the control accounts in the general ledger. The total of each subsidiary ledger item, e.g. sales, discount received, etc must equal to the total of the same item that appears in the control account. Failure of the two totals to tally means errors in addition in the sales or purchases day book, or posting from the day books to the subsidiary ledgers.

A subsidiary ledger can be readily created whenever a need arises. For example, an inventory subsidiary ledger has separate accounts for the wide diversity of stock items, or an asset subsidiary ledger for the different types of assets.

Last Updated (Friday, 03 September 2010 13:27)