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 • 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
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 • 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 • 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 • Division of labour • Specialize and become efficient • Helps deal with large volume of transactions • Accounting control • Checks accuracy of records • Less fraud
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: