2. You can have separate accounts receivable
accounts with only a handful of customers but
what if the business had 500 credit customers?
You can have separate accounts payable
accounts with only a handful of vendors but what if
the business dealt with numerous different
vendors?
Having numerous individual accounts receivable
and accounts payable accounts in the general
ledger would be difficult to manage.
3.
Subsidiary: secondary, controlled by another
The Accounts Receivable and Accounts Payable
accounts in the general ledger are the controlling
accounts for their respective subsidiary ledgers.
The general ledger accounts summarize or controls
the information in the subsidiary ledgers.
After posting is complete the total of all of the
individual balances in each subsidiary ledger will equal
the ending balance of the related controlling account
in the general ledger.
4. Instead of having numerous accounts payable
accounts in the general ledger a business that
deals with numerous vendors will set up special
ledger known as a subsidiary ledger.
The Accounts Payable Subsidiary Ledger contains
an account form for each individual vendor.
The A/P Subsidiary Ledger contains an alphabetical
record of each vendor and the balance owed the
vendor.
5. Each vendor has their own form. The transaction data
comes from the different journals used by the business.
Jan 8, from the purchases journal, an amount the
business now owes ABC Company. Then, on Feb 15, a
payment made to ABC Company as posted from the cash
payment journal. Notice the Credit Balance heading.
Since this subsidiary ledger represent the amount the
business OWES, the accounts payable liability will have a
normal credit balance.
6. Now you see why we identify the vendor. The POST REF is the
vendor number from the A/P Subsidiary Ledger.
7. In this transaction the debit will be posted to Accounts Payable
(account number 201) in the general ledger AND will be recorded
to Smith’s Merchandise (vendor number 125) in the A/P Subsidiary
Ledger. Now you know why that diagonal line is entered so both
POST REF numbers can be added.
8. Prepared after all journal entries are posted.
A listing of vendor accounts, account balances
and the total amount due all vendors.
The total of the schedule should match the
balance in the controlling account, accounts
payable.
9. Instead of having numerous accounts receivable
accounts in the general ledger a business that
deals with numerous customers will set up special
ledger known as a subsidiary ledger.
The Accounts Receivable Subsidiary Ledger
contains an account form for each individual
customer.
The A/R Subsidiary Ledger contains an alphabetical
record of each customer and the balance owed to
the business by the customer.
10. Each customer has their own form. The transaction data
comes from the different journals used by the business. Feb
20, from the sales journal, an amount the customer, Paul
Miller, now owes the business. Then, on Apr 4, a payment
made to the business by Paul Miller as posted from the cash
receipts journal. Notice the Debit Balance heading. Since this
subsidiary ledger represent the amount customers owe the
business, the accounts receivable asset will have a normal
debit balance.
11. Now you see why we identify the customer. The POST REF is the
customer number from the A/R Subsidiary Ledger.
12. In this transaction the credit will be posted to Accounts Receivable
(account number 115 in the general ledger AND will be recorded to
Paul Miller(customer number 155) in the A/R Subsidiary Ledger.
Now you know why that diagonal line is entered so both POST REF
numbers can be added.
13. Prepared after all journal entries are posted.
A listing of customer accounts, account balances
and the total amount due from all customers.
The total of the schedule should match the
balance in the controlling account, accounts
receivable.
14. Being able to post special amount column totals
save times and is more accurate than posting all
of the individual amounts.
The column heading for the special amount
column identifies the account and whether the
column total is a debit or credit.
