Skip to main content

7.4 Prepare a Subsidiary Ledger

What is a Subsidiary Ledger?​

A subsidiary ledger (also called a sub-ledger) contains detailed information about individual items that make up a general ledger account balance.

Purpose:

  • Provide detail for general ledger accounts
  • Track individual customers, suppliers, inventory items
  • Support accounts receivable and accounts payable management
  • Enable detailed reporting

Subsidiary Ledgers vs. General Ledger​

General Ledger:

  • Contains summary accounts (control accounts)
  • Shows total balances
  • Example: Accounts Receivable (total of all customers)

Subsidiary Ledger:

  • Contains individual accounts
  • Shows detail for each customer, supplier, etc.
  • Example: Customer A account, Customer B account, etc.

Relationship:

  • Total of subsidiary ledger = General ledger control account
  • Must reconcile (balance)

Types of Subsidiary Ledgers​

Common subsidiary ledgers include:

  1. Accounts Receivable Subsidiary Ledger: Individual customer accounts
  2. Accounts Payable Subsidiary Ledger: Individual supplier accounts
  3. Inventory Subsidiary Ledger: Individual inventory item accounts
  4. Fixed Assets Subsidiary Ledger: Individual asset accounts

Accounts Receivable Subsidiary Ledger​

Purpose: Track amounts owed by individual customers

Format:

Customer Account: Customer A
Account Number: 410001

Date    Reference    Debit    Credit    Balance
─────────────────────────────────────────────────
Nov 5   INV-001     €1,170              €1,170
Nov 15  Payment              €1,170        €0
─────────────────────────────────────────────────

Example: Multiple Customers

Customer A Account (410001):

Date       Reference    Debit      Credit     Balance
─────────────────────────────────────────────────────
Nov 5      INV-001      €1,170                 €1,170
Nov 15     Payment               €1,170          €0
Nov 20     INV-004      €2,340                 €2,340
─────────────────────────────────────────────────────
Balance: €2,340

Customer B Account (410002):

Date       Reference    Debit      Credit     Balance
─────────────────────────────────────────────────────
Nov 10     INV-002      €3,000                 €3,000
Nov 25     Payment               €1,500        €1,500
─────────────────────────────────────────────────────
Balance: €1,500

General Ledger Control Account:

410000 Accounts Receivable (Control)
─────────────────────────────
Nov 30  Sales J    €6,510  │  Nov 30  Cash R    €2,670
─────────────────────────────
Balance  €3,840

Verification:

  • Customer A: €2,340
  • Customer B: €1,500
  • Total Subsidiary: €3,840
  • General Ledger Control: €3,840 ✓

Accounts Payable Subsidiary Ledger​

Purpose: Track amounts owed to individual suppliers

Format:

Supplier Account: Supplier X
Account Number: 400001

Date    Reference    Debit    Credit    Balance
─────────────────────────────────────────────────
Nov 8   SUP-001              €2,340    €2,340
Nov 12  Payment     €2,340              €0
─────────────────────────────────────────────────

Example: Multiple Suppliers

Supplier X Account (400001):

Date       Reference    Debit      Credit     Balance
─────────────────────────────────────────────────────
Nov 8      SUP-001                 €2,340      €2,340
Nov 12     Payment      €2,340                  €0
Nov 20     SUP-003                 €1,500      €1,500
─────────────────────────────────────────────────────
Balance: €1,500

Supplier Y Account (400002):

Date       Reference    Debit      Credit     Balance
─────────────────────────────────────────────────────
Nov 15     SUP-002                 €3,000      €3,000
─────────────────────────────────────────────────────
Balance: €3,000

General Ledger Control Account:

400000 Accounts Payable (Control)
─────────────────────────────
        │  Nov 30  Purchases J  €6,840
Nov 30  Cash D     €2,340  │
─────────────────────────────
        │  Balance  €4,500

Verification:

  • Supplier X: €1,500
  • Supplier Y: €3,000
  • Total Subsidiary: €4,500
  • General Ledger Control: €4,500 ✓

Inventory Subsidiary Ledger​

Purpose: Track individual inventory items

Format:

Inventory Item: T-Shirt - Red - Medium
Item Code: TS-RED-M

Date    Reference    In    Out    Balance
───────────────────────────────────────────
Nov 1   Beginning            -     50 units
Nov 5   Purchase     20             70 units
Nov 10  Sale                 -5     65 units
───────────────────────────────────────────

Luxembourg Considerations:

  • May need to track by VAT rate
  • Must support inventory valuation
  • Must integrate with point-of-sale systems

Reconciliation​

Reconciliation Process:

  1. Total all subsidiary ledger accounts
  2. Compare to general ledger control account
  3. Investigate and resolve any differences
  4. Document reconciliation

Example Reconciliation:

Accounts Receivable Reconciliation
November 30, 2024

Subsidiary Ledger Totals:
  Customer A:                    €2,340
  Customer B:                    €1,500
  Customer C:                      €800
  Total Subsidiary Ledger:       €4,640

General Ledger Control Account:  €4,640

Difference:                      €0 ✓

Luxembourg Compliance Note​

Subsidiary ledgers in Luxembourg must:

  • Support PCN account structure
  • Maintain proper audit trail
  • Be exportable for FAIA
  • Support VAT tracking
  • Be retained for 10 years
  • Reconcile with general ledger

Think It Through​

Why is it important that subsidiary ledger totals equal the general ledger control account? What would indicate an error if they don't match?