What is a Subledger?

For a large company, the general ledger could contain thousands of accounts, known as the chart of accounts, representing balances resulting from journals, subledgers, and external system transaction data. Mutable historical records make 4 tips on how to categorize expenses for small business life a living hell for auditors, and thus for the internal teams whose work is being audited. They won’t be able to find the financial transactions that power your general ledger chart of accounts because there’s a lack of data lineage.

An example of the line items in a single general ledger account is shown in the following table. In the battle of ledger vs. subledger, there’s no true winner—both have their uses and can be helpful to businesses in different ways. General ledgers and subledgers are both important tools for businesses to adopt as they grow and need more detailed and controlled financial management.

What does subledger mean?

It enlists the financial accounts companies set up for recording transactions. Since sub-ledgers relate to the general ledger, they don’t need a chart of accounts. As stated above, companies post the total of each book in it after regular intervals.

A subledger journal entry must be balanced in the entered currency. If a subledger journal entry has lines with different entered currencies, the subledger journal entry must be balanced for each currency. This means that for each entered currency (CURRENCY_CODE), the sum of the entered debit amounts (ENTERED_DR) must equal the sum of the entered credit amounts (ENTERED_CR). The accounts receivable subsidiary ledger shows all the sales made on credit by a business.

How to pronounce subledger?

No budget subledger journal entries are created if it is created with a status or Error. These are the sequence versions, identifiers, and values assigned to the subledger journal entry at period close. These are the sequence versions, identifiers, and values assigned to the completed subledger journal entry.

But once vendor or customer activity increases, you’ll need a way to track the individual transactions that make up the balance of those general ledger accounts. A general ledger can have any number of subledgers, sometimes also known as journals. Some of the most common types of subledgers include accounts payable, accounts receivable, cash, assets, expenses, and income. Select the Balance by Ledger Currency option to enable the assignment of a Ledger Currency Balancing Account. If Balance by Ledger Currency is not enabled, the Accounting Program raises an exception when a journal entry is out of balance by ledger currency.

Bank accounts

The accounting function processes that transaction and records it in the books. This is the statistical amount of the subledger journal entry line. This is a sequential number that identifies each subledger journal entry line within a subledger journal entry. It is an updateable value when creating a manual subledger journal entry.

• Accounting ignores secondary ledger and accounts only for primary ledger in this case.
• It contains a set of related accounts whose balances in total will equal the balance in the controlling account.
• If you have five bank accounts, each one will have its own sub-ledger.
• There may be a large volume of items to organize or complex transactions that can’t be captured as a single line item in the general ledger.
• They also have a few sub-accounts, such as accounts payable and accounts receivable.

When it comes to Inventory, items for that account come from the Purchases account. The Inventory account keeps track of the number of items in the warehouse. When inventory that is outdated or obsolete is written off if unsold or into Accounts Receivable when sold at a discounted rate. The sales of inventory then affect Accounts Receivable which will also affect Income. There is a separate account for discounts to account for loss of income.

What Is Enterprise Performance Management?

For example, if you have multiple accounts receivable subledger accounts that currently equal $15,000, your accounts receivable balance in your general ledger should also be $15,000. If the balances do not match, you should reconcile the account to determine the reason for the difference. A subledger is a ledger containing all of a detailed sub-set of transactions. The total of the transactions in the subledger roll up into the general ledger.

As companies scale, they may find that keeping all the detailed financial data about each transaction in the general ledger is cumbersome and unworkable. For example, if your business has 2,000 transactions in AR in a given month, your accounting clerk would need to go through all those entries to find the total. This can be a major inconvenience when looking to get a quick snapshot of your business’ financials. Accurate bookkeeping is the foundation of business stability and a necessary precondition for growth.

Your general ledger account contains only one specific account for each category, while a subledger can have an unlimited number of account transactions. In the event of an audit, balances on financial statements should link back to all of the posted transactions that make up that balance. Transactions in a subledger are periodically recorded in the general ledger.

As businesses attempt to keep pace with the speed of change, the general ledger is of limited use when providing forward-looking insight and business strategies. For instance, the purchase of a $2,000 computer would increase the business’s assets by $2,000 while decreasing its cash position by the same amount. The general ledger also contains information used to calculate the financial performance of an organization. Understanding an organization’s finances is essential for creating budgets and business strategies, as well as for assessing the financial health of a business. For many people, the idea of a general ledger might conjure up images of visor-wearing accountants wielding quill-and-ink pens, scribbling numbers and notes in large, dusty parchment books. While many fundamentals of the general ledger remain intact more than 500 years after it was established as a cornerstone of modern accounting, technology has moved it light-years into the future.