Question

In: Accounting

what is difference between ledger and sub ledger

what is difference between ledger and sub ledger

Solutions

Expert Solution

Sub ledger is the subset of General ledger in the accounting terms. The relation between sub ledger to general ledger is many to one. i.e. there can be multiple sub ledger accounts linked to same general ledger account.

In general terms, General ledger refers to the Chart of Account master and Sub ledger refers to the sub master of accounts which are linked to the main chart of account through posting profiles.

For example; ABC Company Ltd has 10 bank accounts which linked to different bank institutions. Company wants to maintain only one bank ledger account at chart of account level but at the same time wants separate tracking of transaction details of every bank account as well. Here company will maintain the details of all the bank accounts at sub ledger level and link all the sub ledger accounts to the main bank ledger account at general ledger or chart of account level. In this way if company wants to check its net bank balance, it will refer to the main account at chart of account level and if it wants to check the balance of a specific bank account, it will refer to the sub ledger level.

The total of the sub ledger should match to the line item amount on the general ledger. This corresponding line item in the general ledger is referred to as the controlling account.

Some of the more examples of General ledger account (controlling account) and Sub ledger account (Subsidiary Accounts):

>Account Receivables (General ledger account) & multiple Customer accounts (sub ledger or subsidiary accounts)

>Account Payables (General ledger account) & multiple Vendor accounts (sub ledger or subsidiary accounts)


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