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    Subsidiary Ledgers and Control Accounts

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    Hafidzi Derahman
    Subsidiary ledgers provide detailed supporting information for control accounts on the balance sheet, such as accounts receivable and accounts payable. For accounts receivable, Fooz Ball Town recorded sales to customers Robby Red and Bobby Blue in their subsidiary ledger accounts. For accounts payable, Fooz Ball Town recorded a purchase from vendor Gus Grass in their subsidiary ledger account. The balances in the subsidiary ledgers must equal the balances in the related control accounts on the balance sheet.

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    Subsidiary Ledgers and Control Accounts

    Uploaded by

    Hafidzi Derahman
    364 views4 pages
    Subsidiary ledgers provide detailed supporting information for control accounts on the balance sheet, such as accounts receivable and accounts payable. For accounts receivable, Fooz Ball Town recorded sales to customers Robby Red and Bobby Blue in their subsidiary ledger accounts. For accounts payable, Fooz Ball Town recorded a purchase from vendor Gus Grass in their subsidiary ledger account. The balances in the subsidiary ledgers must equal the balances in the related control accounts on the balance sheet.

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    Subsidiary Ledgers and Control Accounts

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    Subsidiary ledgers provide detailed supporting information for control accounts on the balance sheet, such as accounts receivable and accounts payable. For accounts receivable, Fooz Ball Town recorded sales to customers Robby Red and Bobby Blue in their subsidiary ledger accounts. For accounts payable, Fooz Ball Town recorded a purchase from vendor Gus Grass in their subsidiary ledger account. The balances in the subsidiary ledgers must equal the balances in the related control accounts on the balance sheet.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    364 views4 pages

    Subsidiary Ledgers and Control Accounts

    Uploaded by

    Hafidzi Derahman
    Subsidiary ledgers provide detailed supporting information for control accounts on the balance sheet, such as accounts receivable and accounts payable. For accounts receivable, Fooz Ball Town recorded sales to customers Robby Red and Bobby Blue in their subsidiary ledger accounts. For accounts payable, Fooz Ball Town recorded a purchase from vendor Gus Grass in their subsidiary ledger account. The balances in the subsidiary ledgers must equal the balances in the related control accounts on the balance sheet.

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    Subsidiary Ledgers and Control Accounts

    A subsidiary ledger is a detailed list to support a control account. A control account


    appears on the balance sheet in summary or total, and are accounts like accounts
    receivable, accounts payable, and inventory. This video explains the theory (the
    video refers to a Debitor account which is Accounts Receivable and and a Creditor
    account which is Accounts Payable. A Debtor is a customer and a Creditor is a
    vendor)

    This section will look at the transactions for Fooz Ball Town and how to post to
    subsidiary ledgers for accounts receivable and accounts payable.

    Accounts Receivable Subsidiary Ledger

    The accounts receivable subsidiary ledger will contain an account for each individual
    customer. The sales, payments, and returns and allowances are recorded into the
    individual customer accounts as well as the bigger picture (control account) accounts
    receivable account. For Fooz Ball Town, the sales entries were:

    • July 5 Sold $5,000 of merchandise inventory, terms 1/15, n 30, FOB


    Destination with a cost of goods sold of $3,000 to Robby Red.
    • July 10 Sold $1,500 of merchandise inventory for cash, FOB Shipping
    Point, with a cost of goods sold of $1,000.
    • July 15 Received payment from Robby Red from July 5 sale less the
    discount.
    • July 30 Sold $7,000 of merchandise inventory, terms 1/15, n 30, FOB
    Shipping point with cost of goods sold $5,000 to Bobby Blue.

    These entries were recorded in the sales journal and cash receipts journal as
    follows:

    Sales Journal

    DR Accounts Receivable
    Date Customer
    CR Sales

    July 5 Robby Red $5,000

    July 30 Bobby Blue 7,000

    TOTALS $12,000
    Cash Receipts Journal

    DR Sales CR Accounts
    Date Customer DR Cash CR Sales
    Discounts Receivable

    July 10 Cash Sale 1,500 1,500

    July 15 Robby Red 4,950 50 5,000

    TOTALS 6,450 50 5,000 1,500

    These journals would be posted to the Accounts Receivable control account like this:

    Account: Accounts Receivable

    Date Description Debit

    July 31 from Sales Journal 12,000

    July 31 from Cash Receipts Journal

    The customer (subsidiary) ledger would be updated for Robby Red and Bobby Blue
    as:

    Customer Account: Robby Red

    Date Description Debit Credit

    July 5 Sale 5,000

    July 15 Payment 5,000

    Customer Account: Bobby Blue

    Date Description Debit Credit

    July 15 Sale 7,000

    At the end of the period, a schedule is prepared to verify (or prove) the Accounts
    Receivable (control account) balance reported on the balance sheet. This schedule
    is a listing of all customers with the ending amounts owed and should always match
    the ending balance in Accounts Receivable. The schedule of accounts receivable
    for Fooz Ball Town would be:

    Fooz Ball Town


    Schedule of Accounts Receivable

    July 31

    Robby Red

    Bobby Blue

    Total Accounts Receivable

    Note: It would not be necessary to include customers with zero balances but it is
    included here just so you can see how the subsidiary ledger works. Notice how the
    schedule of accounts receivable balance equals the ending accounts receivable
    balance (control account).

    Accounts Payable Subsidiary Ledger

    The accounts payable subsidiary ledgers works the same way as accounts
    receivable with the control account of accounts payable and the subsidiary ledger a
    vendor ledger to provide a listing of everyone we owe. The purchases, payments,
    returns and allowances are recorded in the individual vendor accounts as well as in
    the accounts payable account. The purchase transactions for Fooz Ball Town are:

    • July 12 Purchased $10,000 of merchandise inventory, terms 2/15, n 45,


    FOB Destination from Gus Grass.
    • July 16 Returned $2,500 of merchandise damaged in shipment from
    July 12 purchase.
    • July 25 Paid for the July 15 purchase from Gus Grass less the return
    and discount.

    These transactions were recorded, under the perpetual inventory method, in the
    following journals:

    Purchases Journal

    DR Merchandi
    Date Vendor
    CR Account

    July 12 Gus Grass 10,0

    TOTALS 10,0
    Cash Disbursement Journal

    Date Account DR Accts Payable CR Mdse Inventory

    July 25 Gus Grass 7,500 150

    General Journal

    Date Account Debit

    July 16 Accounts Payable 2,500

    Merchandise Inventory

    These journals would be posted to the Accounts Payable control account like this:

    Account: Accounts Payable

    Date Description Debit

    July 16 Gus Grass Return 2,500

    July 31 from Purchases Journal

    July 31 from Cash Disbursements Journal

    The vendor (subsidiary) ledger would be updated for Gus Grass:

    Vendor Account: Gus Grass

    Date Description Debit Credit

    July 12 Purchase 10,000

    July 16 Return 2,500

    July 25 Payment 7,500

    The vendor balance for Gus Grass is $0 and the accounts payable balance is
    $0. Since both are zero and match, it would not be necessary to prepare a schedule
    of accounts payable. If there is a balance, a schedule of accounts payable would be
    prepared in the same manner as accounts receivable.

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