Separate account needed for each customer and vendor Separate ledger for customers and vendors A ledger that is summarized in a single general ledger account is a subsidiary ledger. A subsidiary ledger containing only accounts for vendors from whom items are purchased or bought on account is called an accounts payable ledger.
A subsidiary ledger containing only accounts for charge customers is called an accounts receivable ledger. An account in a general ledger that summarizes all accounts in a subsidiary ledger is called a controlling account. Balance in the controlling account = total of all account balances in its related subsidiary ledger.
Posting to the general ledger can be done throughout the month-depends on # of transactions Postings must be done at the end of the month. Separate amounts are not posted individually for special amount columns- only the totals are posted for special amount columns.
A is placed in parentheses below the general debit and credit columns to indicate that column totals are not posted individually. The account number is written in parentheses below special amount columns to show they are posted individually.
Each vendor has a 3-digit number. The 1 st digit is the division in which the controlling account appears in the general ledger – accounts payable. The second 2 numbers show where the account is in the subsidiary ledger. Accounts in the subsidiary ledger can be located by number or name. When balance in vendor account changes, the balance of the controlling account or Accounts Payable changes.
Opening a new account Write the vendor name on the heading Write the vendor number on the heading The vendor name is on the first purchase invoice received.
First digit 1 shows the controlling account is an asset-Accounts Receivable. The next two numbers show the customer number. When the balance of a customer account changes, the balance of the controlling account or Accounts Receivable changes. Total of all the customer accounts equals the balance of the Accounts Receivable account.
Accounts Receivable has a debit balance so there is only a debit balance column on the form. To open an account: Write the customer name on the heading Write the customer number on the heading Totals of Accounts Receivable special amount columns are posted to the general ledger at the end of each month.
To prove the accuracy of posting: Cash is proved Subsidiary ledgers must equal controlling account totals A trial balance is prepared to prove debits equals credits in the general ledger A listing of vendor accounts, account balances, and total amount due all vendors is called a schedule of accounts payable.
A listing of customer accounts, account balances, and total amount due from all customers is called a schedule of accounts receivable.