Answer to Question #52810 in Accounting for Abdulla Sabit

Question

a) When do companies normally post to: 1) the subsidiary accounts and 2) the general ledger control accounts?
b) Describe the relationship between a control account and subsidiary ledger.

Answer 1

a) A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable contains all of the information on each of the credit sales to customers, each customer's remittance, return of merchandise, discounts, and so on.
b) With these details in the subsidiary ledger, the Accounts Receivable account in the general ledger can be a control account. As a control account, it will simply report the aggregate amounts of the accounts receivable activity.
By having the details of the accounts receivable activity in a subsidiary ledger, a company can better control its financial information.