A subsidiary ledger is a group of accounts with a common characteristic. Its purpose is to free the general ledger from the details of the individual balances. It is an addition to, and an expansion of, the general ledger.
A control account is a general ledger account that summarizes subsidiary ledger data. Its purpose is to keep the general ledger free of details, yet have the correct balance for the financial statements.
The two general ledger accounts that may act as control accounts for a subsidiary ledger includes accounts receivable subsidiary ledger and accounts payable subsidiary ledger. The accounts receivable subsidiary ledger collects transaction data of individual customers. The accounts payable subsidiary ledger collects transaction data of individual creditors.
The advantages of using subsidiary ledgers includes, they show in a single account transactions affecting one customer or one creditor, providing up-to-date information on specific account balances.
They free the general ledger of excessive details. They help locate errors in individual accounts by reducing the number of accounts in one ledger and by using control accounts.
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