Ledgers are used to record financial information and transactions as per the accounting principle. The principal set of accounts is managed by the general ledger, whereas, a subledger is the subset of a general ledger. Since we cannot record every transaction in the general ledger, we use a subledger to record information on different accounts.
The general ledger is a set of accounts that consists of transaction records of all principal accounts. It consists of all the entries of debit and credit for a particular period in different accounts.
Another feature of the general ledger is that it records the transactions that take place in the subledger accounts. Thus, we also refer to the general ledger as the ‘set of master accounts’ since it contains all the information in the subledgers.
Subledger, which is also known as a subsidiary ledger, is a detailed report of accounts that consists of transaction information.
Subledger is also known for being the subset of the general ledger in the accounting world. In other words, we can say that the subledger is a part of the general ledger. The trial balance, though, has no connection with the general ledger (it is a statement or worksheet where all the records of debit and credit entries are stored in two equal columns).
If the transactions are recorded in a subledger in a different account, then the total sum of the transactions will be recorded in the general ledger. The total amount should match the sum of the concerned line items in the general ledger. A subledger can include all business transaction details such as purchases, receivables, production costs, payables, and payroll.
With the help of this table, we will explain the key differences between subledger and general ledger in accounting:
|1. All the accounting transactions are recorded in this set of master accounts.||1. It is linked to the general ledger where the transactions of intermediary sets of accounts are recorded.|
|2. Example: Cash management, accounts receivable, and accounts payable.||2. Example: Vendor accounts, fixed assets, and customer accounts.|
|3. All the transactions that are recorded here have different characteristics.||3. All the transactions that are recorded here have common characteristics.|
|4. Only one ledger account can be present.||4. Multiple subledger accounts can be present.|
|5. Limited volume of data can be recorded.||5. Large volume of data can be recorded.|
|6. The total of the general ledger may not always match with the line items present in the subledger.||6. The total of subledger should always match with the line item amount present in the general ledger.|
|7. It controls subledger.||7. It is a subset of the general ledger.|
|8. The trial balance is prepared with the help of general ledger.||8. The trial balance is not prepared with the assistance of the subledger.|
A company needs to review its general ledger regularly to keep track of all the accounts that they currently handle. This is one of the most important practices that one needs to follow when handling a general ledger account.
Similarly, the following are some of the best and most important practices you should follow to ensure that your general ledger is created accurately:
General ledger accounts are designed to handle a high volume of transactions, resulting in a high proportion of accountants’ time going into reviewing and matching these accounts monthly. Over a period of time, some general ledger accounts will no longer be required, due to the low amount of transactions. Thus eliminating them can save your employees and your business a lot of time.
The number of general ledger accounts is supposed to grow over time as new revenue and expense categories get added to the accounts. Listing more than the desired number of accounts in the general ledger can lead to wrong accounting inputs. Also, adding too many accounts to the journal can cause difficulties for the management to identify the required numbers. Thus, it is recommended to merge similar accounts over time. This will help provide effective information on the different accounts.
It is highly recommended to limit employees’ access to add journal entries to the ledger and subledger. Too many employees adding line items can lead to confusion and difficulties in the review and approval processes.
If you are among those businesses that still use manual accounting methods, then there are a few things you need to consider when using a subledger. Let’s check them out:
You must remember that the total of the subledger account should always match with the total of the general ledger account. For example, if you are working on multiple subledger accounts that currently equal the value of $20,000, then the balance of the general ledger account should also show a total of $20,000. In case the totals do not match, consider recalculating and checking the figures to understand the reason for the difference, and rectify any errors.
After all the subledger accounts are reconciled, make sure to close the entries in the books or the entry journals so that the accounting cycle gets completed. You must also reverse any incorrect or duplicate entries made in the journal. However, these manual data entries may include errors and if you keep physical records, it becomes even more difficult to maintain them, as your company grows, it’s better to switch to digital options and moreover, automated bookkeeping.
We understand that it must be tiring to manually maintain a voluminous general ledger. An automated accounting system eliminates the need to manually enter data into the accounting books. This makes the whole process easier and less error-prone. Also, the automated system can calculate and add the interest, amortization, and depreciation values directly to the system.
Both general ledger and subledger accounts are used to record financial transactions. The primary difference between the two is that the general ledger is a set of master accounts, whereas the subledger is a set of accounts that is a subset of the general ledger.
Both the general ledger and the subledger play an essential role in the world of accounting. Properly managing the ledger accounts is crucial to meeting financial reporting and regulatory obligations. It also helps build trust with your customers and other stakeholders.
Bookkeeping is an important part of the accounting process since it records every transaction and reports all activities that impact a business’s financial performance. As an organization grows, it’s better to switch towards digital and automated accounting systems to streamline your workflows with minimized cost and real-time reporting.HighRadius’ Autonomous accounting solution uses AI-based anomaly detection, saving your teams from manual work during the month-end close. Connect with our experts to learn how our Account Reconciliation platform identifies and resolves variances for general ledger accounts through configurable matching criteria and algorithms.
The general ledger consists of the summary of every transaction that took place in the accounts, whereas the general journal contains the original set of entries for low-volume transactions.
The four sections in a general ledger are financial transactions, accounting periods, a chart of accounts, and account balances.
The subsidiary ledger comes first since the balances of a general ledger are posted after entries are made in the subledger accounts.
Yes, the accounts receivable is a subledger since all the credit sale accounts of a business are recorded in the same. It is used to keep track of all the information on the amounts invoiced and memos issued to the customers.
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