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Why Accounting Uses Special (and Subsidiary) Ledgers?



Further simplification of the general ledger is brought about by the use of subsidiary ledgers. In particular, for those businesses that sell goods on credit and that find it necessary to maintain a separate account for each customer and each creditor, the use of a special accounts receivable ledger eliminates the need to make multiple entries in the general ledger.

The advantages of special or subsidiary ledgers are similar to the advantages of special journals. These are:


  1. Reduces ledger detail – Most of the information will be in the subsidiary ledger, and the general ledger will be reserved chiefly for summary or total figures. Therefore, it will be easier to prepare the financial statements.
  2. Permits better division of labor – Here again, each special or subsidiary ledger may be handled by a different person. Therefore, one person may work on the general ledger accounts while another person may work simultaneously on the subsidiary ledger.
  3. Permits a different sequence of accounts – In the general ledger, it is desirable to have the accounts in the same sequence as in the balance sheet and income statement. As a further aid, it is desirable to use numbers to locate and reference the accounts. However, in connection with accounts receivable, which involves names of customers or companies, it is preferable to have the accounts in alphabetical sequence.
  4. Permits better internal control – Better control is maintained if a person other than the person responsible for the general ledger is responsible for the subsidiary ledger. The general ledger accounts as a controlling account, and the subsidiary ledger must agree with the control. No unauthorized entry could be made in the subsidiary ledger, as it would immediately put that record out of balance with the control account.


The idea of control accounts, introduced above, is an important one in accounting. Any group of similar accounts may be removed from the general ledger and a controlling account substituted for it. Not only is another level of error protection thereby provided, but the time need to prepare the general ledger trial balance and the financial statements becomes further reduced.

In order to be capable of supplying information concerning the business’s accounts receivable, a firm needs a separate account for each customer. These customer accounts are grouped together in a subsidiary ledger known as the accounts receivable ledger”. Each time the accounts receivable ledger must also be increased or decreased by the same amount. The customer’s accounts are usually kept in alphabetical order and include, besides outstanding balances, information such as address, phone number, credit terms, and other pertinent items.

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