Types of subsidiary ledgers and special journals

October 10, 2015

General ledger may not be able to maintain all individual transactions of a company. This is especially true in large organizations where there may be thousands of transactions each day. In such cases, subsidiary ledgers and special journals are used. In this article, we will discuss the most common types of subsidiary ledgers.

1. Types of subsidiary ledgers

Subsidiary ledgers – whether in a manual or automated accounting system – are important because they help maintain records of similar types in a central location and not clutter the general ledger.

A subsidiary ledger is a group of accounts/records of similar types (e.g., accounts payable).

Subsidiary ledger totals is what’s typically recorded in the general ledger in control accounts.

Three common examples of subsidiary ledgers are:

Accounts Receivable Subsidiary Ledger

Accounts receivable subsidiary ledger is a record of all transaction data of individual customers.  A control account for this type of subsidiary ledgers is Trade Accounts Receivable.

Accounts Payable Subsidiary Ledger

Accounts payable subsidiary ledger is a record of all transaction data of individual creditors.  A control account for this type of subsidiary ledgers is Trade Accounts Payable.

Fixed Asset Subsidiary Ledger

A fixed asset subsidiary journal is a record of all transaction data for individual fixed assets. This subsidiary ledger may have several control accounts (e.g., Fixed Assets – Buildings).

2. Types of special journals

Recording each transaction directly in the general ledger may become cumbersome and unnecessary.  Instead, transactions can be recorded in special journals and totals can then be posted to subsidiary ledgers and then general ledger.

A special journal is used to record similar types of transactions.

There are multiple special journal types.  Let’s review some of them.

Sales Journal

A sales journal is used to record sales transactions.  This type of journal is used to accumulate information about sales on account.  For example, if a company sells a product for $100 on account, it will be recorded in the sales journal.

Cash Receipts Journal

A cash receipts journal is used to record cash receipts.  Such receipts may include cash from sales of merchandise, collection of balances due from customers and so on.

Purchases Journal

A purchases journal is used to record purchases of merchandize/inventory.  When a purchase on account is made, it is recorded in this journal.

Cash Payments Journal

A cash payments journal is used to record cash payments.  When a company pays for merchandize purchased on account, for supplies, etc., such payments are recorded in the cash payments journal.

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