Chapter 8
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Chapter 8. The Subsidiary Ledger System. Three Ledger System. As a business grows so do the number of credit customers (debtors) and suppliers (creditors) General Ledger may have too many accounts to track Create “subsidiary ledgers” A/R sub ledger A/P sub ledger. A/R Sub ledger.

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Chapter 8

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Chapter 8

Chapter 8

The Subsidiary Ledger System


Three ledger system

Three Ledger System

  • As a business grows so do the number of credit customers (debtors) and suppliers (creditors)

  • General Ledger may have too many accounts to track

  • Create “subsidiary ledgers”

    • A/R sub ledger

    • A/P sub ledger


A r sub ledger

A/R Sub ledger

  • Contains all credit customers

  • Each has an account, e.g. A/R – Hocking

Duties of A/R Clerk

  • Process sales invoices

  • Record sales invoices

  • Process cash received from customers

  • Prepare a schedule of accounts receivable


A r sub ledger1

300

150

570

Must equal the A/R control account in the general ledger

A/R Sub ledger

J. Rain

N. Furtado

D. Woo

V. Singh

30050

500570

500

200

400

350

50


A p sub ledger

A/P sub ledger

  • Same as A/R but for amounts owed to suppliers

  • Each supplier has an account in A/P sub ledger

Duties of the A/P clerk

  • Process purchase invoices

  • Record purchase invoices

  • Pay creditors

  • Update creditors accounts

  • Prepare a schedule of accounts payable


Duties of accounting supervisor

Duties of Accounting Supervisor

  • Maintain general journal and ledger

  • Journalize and post to A/R and A/P “control” accounts

  • Compare control accounts to A/R and A/P schedules

  • Concerned with

    • Sales, profits, expenses

    • Expansion, processes, employee efficiency, etc.


Advantages of sub ledgers

Advantages of sub ledgers

  • Division of labour

    • Specialize and become efficient

    • Helps deal with large volume of transactions

  • Accounting control

    • Checks accuracy of records

    • Less fraud


Posting

110

Posting

  • Direct:

    • Source documents to general journal and general ledger

    • A/R and A/P accounts posted directly

  • Indirect:

    • All source documents to general journal first

    • All posted to general ledger

    • All posted to sub ledgers

  • Pr column of journal indicating posting to general and sub ledger:


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