Question

Explain the nature of subsidiary ledgers, and give two specific examples. For each of these examples, explain (1) the unit of organization within this ledger, and (2) the usefulness of this ledger in business operations.

Answer 1

A subsidiary ledger have all the details which supports a general ledger and its control account(s).

The two subsidiary ledgers are:

Accounts receivables: As said, the subsidiary ledger regarding the accounts receivables have all the details of each customers, their invoices, their remittances, returning of goods, discounts, credit notes provided, etc. The importance of these ledgers is that it quantify the sales made to customers and payments received from them and amount of dues from the clients.

Accounts payables : On the other hand, the subsidiary ledger regarding the accounts payables have all the details regarding the business creditors who have supplied goods to business, invoices raised by them, payments released to them, discounts provided by them, credit notes received from them, etc. These ledgers provide informations for creditors who have supplied goods to the business.