1. Chapter 8 The Subsidiary Ledger System

2. Three Ledger System As a business grows so do the number of credit customers (debtors) and suppliers (creditors) General Ledger may have too many accounts to track Create “subsidiary ledgers” –A/R sub ledger –A/P sub ledger

3. A/R Sub ledger Contains all credit customers Each has an account, e.g. A/R – Hocking 1.Process sales invoices 2.Record sales invoices 3.Process cash received from customers 4.Prepare a schedule of accounts receivable Duties of A/R Clerk

4. A/R Sub ledger J. Rain V. Singh D. Woo N. Furtado 300 50 200 500 570 500 400 350 50 300 150 570 Must equal the A/R control account in the general ledger

5. A/P sub ledger Same as A/R but for amounts owed to suppliers Each supplier has an account in A/P sub ledger Duties of the A/P clerk 1.Process purchase invoices 2.Record purchase invoices 3.Pay creditors 4.Update creditors accounts 5.Prepare a schedule of accounts payable

6. Duties of Accounting Supervisor Maintain general journal and ledger Journalize and post to A/R and A/P “control” accounts Compare control accounts to A/R and A/P schedules Concerned with –Sales, profits, expenses –Expansion, processes, employee efficiency, etc.

7. Advantages of sub ledgers Division of labour –Specialize and become efficient –Helps deal with large volume of transactions Accounting control –Checks accuracy of records –Less fraud

8. Posting Direct: 1.Source documents to general journal and general ledger 2.A/R and A/P accounts posted directly Indirect: 1.All source documents to general journal first 2.All posted to general ledger 3.All posted to sub ledgers Pr column of journal indicating posting to general and sub ledger: 110