![]() ![]() ![]() That is the job of the subsidiary ledger. ![]() Because the general ledger account is a chronological listing of every transaction, it would be very difficult to find how much a particular customer owes at any given moment. Thus, the control account and the subsidiary ledger always match. The figure below illustrates the difference between a general and subsidiary ledger.Īny transaction posted to the general ledger control account would also be posted to the correct subsidiary ledger account. The subsidiary ledger would also have a balance of $25,000. For example, assume the accounts receivable general ledger account has a balance of $25,000. The account balance in the subsidiary ledger is the same as the account balance in the control account, but the subsidiary ledger is sorted by customer, in the case of accounts receivable, and by item in the case of inventory. Control Accounts and Subsidiary LedgersĪssets like accounts receivable and inventory are also called control accounts, since they show a balance, with transactions, that is backed-up by a subsidiary ledger. On the other hand, long term liabilities include long-term debt and other debts that are due in more than 12 months. These current liabilities are those debts that must be paid within one year or within the normal operating cycle of the business. Current liabilities include accounts payable (amounts owed to vendors that have granted credit terms) and other payables like income tax, payroll taxes, and sales tax, as well as accruals such as wages payable. In addition to current assets and long-term assets, the company tracks current and long-term liabilities. Long-term assets are those assets that would take longer than 12-months to convert them to cash and usually includes things such as land, equipment, building, furniture and fixtures. Current assets are those assets that will turn into cash within the next twelve months. In addition to the checking account, a company will have assets such as accounts receivable (amounts that customers owe the company), prepaid expenses (such as insurance paid in advance), and inventory (goods held for sale in the ordinary course of business.) These accounts belong to a subclass of assets called current assets. The accounting ledger is a chronological listing of all financial transactions of a business, in date order. Pre-computer, the general ledger was an actual book with a page (actually, pages) for each account. All of the accounts taken together are called the general ledger. The ledger is chronological and includes the current balance. The list of transactions in a particular account is called a ledger. Note that in accounting we usually show negative numbers in parenthesis instead of with a minus sign. ![]() When you make a cash sale in the amount of $500 and deposit the cash into the bank, you increase the balance in your company records. When you write a check for rent in the amount of $110, you subtract that from the balance. Assume an ending balance of $1,000 from last month in your company checking account. Transactions such as paying bills decrease this account and making deposits increases the account. However, recording transactions into broad categories does not provide enough detail for managers to make decisions and actually use accounting information, so they are broken down further into more detailed accounts.įor instance, one of the most common accounts is the company checking account. The categories into which transactions are classified are called accounts, and, as you have seen, there are three broad categories: assets, liabilities, and equity.
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