Question

why does a business hse a subsidairy ledger for accounts receivable? What types of information will be kept there?

Answer 1

The purpose of keeping subsidiary ledgers is for accuracy and efficiency. They aid us in keeping accurate records. Since the total of the accounts receivable subsidiary ledger must agree with the balance shown in the accounts receivable general ledger account, the system helps us find mistakes.

The main purpose of having an accounts receivable subsidiary ledger is to keep a record each individual customer's account. Each customer will have their own account within the ledger which records all the credit transactions between the customers and the business.

The accounts receivable subsidiary ledger shows the transactions and payment history of each customer that has been extended credit. The balance in the accounts receivable subsidiary ledger is reconciled with accounts receivables in the general ledger.

Subsidiary ledgers are used when there is a large amount of transaction information that would clutter up the general ledger. This situation typically arises in companies with significant sales volume. Thus, there is no need for a subsidiary ledger in a small company.

To prove the accounts receivable subsidiary ledger, the total of the schedule of accounts receivable is compared with the balance of the accounts receivable controlling account in the general ledger. The use of special amount columns eliminates the need to post individual amounts to general ledger accounts.

The accounts receivable ledger is a subledger in which is recorded all credit sales made by a business