In order to avoid details from the General ledger we create subsidiary ledgers. The combined account balance of a subsidiary ledgers brought in a single account of general ledger called control account or master account.
Example of Subsidiary Ledger
An examples of subsidiary ledger is Debtors subsidiary ledger or Accounts receivable subsidiary ledger. The total of all accounts in the subsidiary ledger posted in Accounts receivable ledger or debtors subsidiary ledger monthly or yearly.
Use of Subsidiary Ledger
The subsidiary ledger is extremely useful in large business organisations where large number of credit sales are happening. Such business has to deal with sales of goods to customers multiples payments from customers, sales returns etc. In such cases creating a separate department and creating a subsidiary ledger helps to manage accounts receivables so as to better customer services.
Some other subsidiary ledger
- Accounts payable subsidiary ledger for managing sundry creditors.
- Inventory Subsidiary ledger for dealing Individual products.
- Plant & machinery subsidiary ledger for managing each machinery and plant