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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

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: