Financial and Managerial Accounting

Appendix F Subsidiary Ledgers and Special Journals

Learning Objectives

After studying this appendix, you should be able to:

1. Describe the nature and purpose of a subsidiary ledger.
2. Explain how companies use special journals in journalizing.
3. Indicate how companies post a multi-column journal.

Expanding the Ledger—Subsidiary Ledgers

LEARNING OBJECTIVE 1

Describe the nature and purpose of a subsidiary ledger.

Imagine a business that has several thousand charge (credit) customers and shows the transactions with these customers in only one general ledger account—Accounts Receivable. It would be nearly impossible to determine the balance owed by an individual customer at any specific time. Similarly, the amount payable to one creditor would be difficult to locate quickly from a single Accounts Payable account in the general ledger.

Instead, companies use subsidiary ledgers to keep track of individual balances. A subsidiary ledger is a group of accounts with a common characteristic (for example, all accounts receivable). It is an addition to, and an expansion of, the general ledger. The subsidiary ledger frees the general ledger from the details of individual balances.

Two common subsidiary ledgers are:

1. The accounts receivable (or customers’) subsidiary ledger, which collects transaction data of individual customers.
2. The accounts payable (or creditors’) subsidiary ledger, which collects transaction data of individual creditors.

In each of these subsidiary ledgers, companies usually ...