About The Accounts Receivable Subsidiary Ledger
Keeping an accurate and detailed Accounts Receivable Subsidiary Ledger is useful to companies whether they specialize in freight, transportation, financial, or manufacturing. An Accounts Receivable Subsidiary Ledger is a listing of detailed accounts, usually in the form of a book with pages devoted to each customer.
It shows how much each customer owes. Each transaction that generated a receivable is listed under that customer and a balance for each customer is determined. The balance in this ledger should agree with that shown in the General Ledger. The general ledger account that summarizes an accounts receivable subsidiary ledger account balances is called a control account or master account.
Look at this example: An accounts receivable subsidiary ledger (customers' subsidiary ledger) includes a separate account for each customer who makes credit purchases. The combined balance of every account in this subsidiary ledger equals the balance of accounts receivable in the general ledger. Posting a debit or credit to a accounts receivable subsidiary ledger account and also to a general ledger control account does not violate the rule that total debit and credit entries must balance because accounts receivable subsidiary ledger accounts are not part of the general ledger; they are supplemental accounts that provide the detail to support the balance in a control account.
The accounts receivable subsidiary ledger is essential for almost all businesses. Companies may have hundreds or even thousands of customers who purchase items on credit. These companies may make one or more payments for those items or sometimes return items or purchase additional items before they finish paying for prior purchases. Recording all credit purchases, returns, and subsequent payments in a single account would make an individual customer's balance virtually impossible to calculate because the customer's transactions would be interspersed among thousands of other transactions. The accounts receivable subsidiary ledger provides quick access to each customer's balance and account activity. Companies accounts receivable subsidiary ledgers whenever they need to monitor the individual components of a controlling general ledger account. In addition to the accounts receivable subsidiary ledger, companies often use an accounts payable subsidiary ledger (which has separate accounts for each creditor), an inventory subsidiary ledger (which has separate accounts for each product), and a property, plant, and equipment subsidiary ledger (which has separate accounts for each long term asset). We hope you found this guide helpful in your understanding of the Accounts Receivable Subsidiary Ledger concept and will come back to use for other Accounts Receivable information.
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