Your Ask Joey ™ Answer

What is the difference between the general ledger and subsidiary ledger?

To fully understand the difference between the general ledger and the subsidiary ledger (i.e. subledger), you need to have a solid understanding of how the general ledger fits into the overall flow of information in accounting records. The general ledger contains all of the debit and credits that have been recorded for transactions incurred by a company. The company will then summarize all of the debits and credits recorded in the general ledger to prepare the trial balance.

While the general ledger provides more detail than the trial balance, the subledger is where an extreme level of detail can exist for a particular general ledger account. For example, a company will have the accounts receivable account, but the company might have several different customers. The subsidiary ledger (subledger) would track accounts receivable by customer, while the general ledger would display the combined total accounts receivable balance across all customers.

While using a subledger can provide more detail, it also requires more effort and time to manage. Additionally, since the subledger may live outside of the general ledger, it is key to reconcile the two sources of data. If the general ledger does not reconcile with the subledger, then your financial statements will be inaccurate.

Other types of activity where subledgers are used include:

Accounts payable: Track amounts due to specific vendors or suppliers.

Inventory: Track inventory by warehouse or location. A separate system is often used to manage inventory.

Fixed assets: Track specific assets within class of assets (i.e. number of specific computers). A company will use a separate system to track its fixed assets.

Back To All Questions

You might also be interested in...

  • CECL Excel Workbook

    If you would like to use the Excel workbook that was used to create the Universal CPA lecture on CECL for debt securities, please click the link below to download the Excel workbook: CECL Calculation workbook (Universal CPA Review)

  • Journal Entry for Direct Materials Variance

    Journal Entry for Direct Materials Variance In the current year, Mission Burrito budgeted 6,000 pounds of production and actually used 4,000 pounds. Material cost was budgeted for $5 per pound and the actual cost was $8 per pound. What would the debit or credit to the direct material efficiency variance account be for the current...

  • Understanding Variance Analysis

    Variance Analysis Variance analysis is a method for companies to compare its actual performance vs its budgeted amount for that cost measurement (related to the flexible budget). The differences between the standard (budgeted) amount of cost and the actual amount that the organization incurs is referred to as a variance. By analyzing variances, the company...