This way, employees that have no business with credit sales or accounts receivable cannot access your business’ accounts receivable ledger. Note though that while it isn’t required, it’s still recommended that you prepare and maintain an accounts receivable ledger. One of these tools is the so-called accounts receivable subsidiary ledger, or simply called accounts receivable ledger. Below is a simplified example of an Accounts Receivable Ledger for a fictional company called “BestPrint,” which sells printing services to clients on credit. The ledger shows individual customer accounts and their respective transactions.
- Immediately after posting, the balance in the control account should match the balance in the accounts receivable ledger.
- This is why businesses invest in their accounting function, some even spending more for the monitoring of certain asset accounts.
- If the GL had to include detail for each account, it would create a mess and make it difficult for bookkeepers to navigate the GL.
- Again, it’s important that the total balance of the subsidiary ledger correlates to the accounts receivable balance in the general ledger.
If the GL had to include detail for each account, it would create a mess and make it difficult for bookkeepers to navigate the GL. That’s why the accounts receivable ledger holds all the details, so the GL account can be slimmed down. While it isn’t really required for you to maintain an accounts receivable ledger for your business, it is still recommended that you do so.
Understanding an Accounts Receivable Subsidiary Ledger
The Accounts Receivable Ledger maintains information for each customer, such as their name, address, credit terms, and a record of all transactions, including sales, payments, credit memos, and adjustments. It helps businesses monitor the amounts due from each customer, track payment histories, and identify overdue accounts for collection efforts. An Accounts Receivable Ledger, also known as a subsidiary ledger or customers’ ledger, is a detailed record that tracks individual customer transactions related to accounts receivable.
An accounts receivable subsidiary ledger is an accounting ledger that shows the transaction and payment history of each customer to whom the business extends credit. The balance in each customer account is periodically reconciled with the accounts receivable balance in the general ledger to ensure accuracy. The subsidiary ledger is also commonly referred to as the subledger or subaccount.
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Since access is limited, it’d be relatively easier to pinpoint who’s responsible whenever there is fraud or embezzlement. One of the asset accounts that might need a little bit more attention is the “accounts receivable”. Having a sound and well-functioning accounting system is essential for the success of your business. Our continued learning packages will teach you how to better use the tools you already own, while earning CPE credit. This makes it easier for accountants and bookkeepers to detect discrepancies and errors.
If no accounts receivable ledger is maintained, then all transactions will be recorded on the general ledger. Again, it’s important that the total balance of the subsidiary ledger correlates to the accounts receivable balance in the general ledger. Though keeping an accounts receivable subsidiary ledger in addition to a general ledger requires more work and documentation, it is typically worth the extra effort. The analysis that can go into the detail provided by the accounts receivable subsidiary ledger helps organize a company and allows it to perform in a more targeted manner. That said, it’s recommended that you assign to at least one employee the responsibility of preparing and maintaining your business’s accounts receivable ledger. Businesses use the account receivable ledger to account for and record every transaction (e.g. sale, payment) for each customer/buyer.
The accounts receivable ledger records and organizes purchases made by each customer and tracks the balances of each account. Each credit purchase recorded in the subsidiary ledger includes a date, description of the purchase, amount, as well as payment terms. The usefulness of the accounts receivable subsidiary ledger lies in the fact that it can show, at a glance, the account status and amounts owed by a specific customer. For example, the general balance may show a total accounts receivable balance of $100,000, but it will not show which customer owes how much.
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Just imagine having tens or hundreds of customers purchasing or paying at the same time, it’d be hard or maybe even impossible to keep track of a specific customer’s credit balance. In essence, “accounts receivable” is the accumulation of non-interest bearing loans extended to customers who purchased products or availed of services on credit. An accounts receivable ledger can also help in the management of a business’s various projects.
It is a separate ledger within the company’s accounting system used to manage and organize the outstanding balances owed by customers who have purchased goods or services on credit. When a customer purchases a product on credit, the store debits its A/R balance and credits a sale account. When the customer makes a payment to pay down his account balance, the debits cash and credits the A/R balance.
Why you should maintain an accounts receivable ledger
For example, you can restrict access to just you, the top management, the accountant, the employees of the credit department, and the accounts receivable ledger/bookkeeper. The total balance of the accounts receivable ledger is regularly matched with the balance of the accounts receivable in the general ledger. It is more detailed than the general ledger as it also includes the transaction and payment of each customer who availed themselves of credit. However, some accounts receivable may also be treated as non-current assets if they are expected to be converted to cash after a year or so. To represent this promise of payment, an asset account is recorded – the accounts receivables.
Am I required to prepare an accounts receivable ledger?
Customers that are in debt to a company are listed in the ledger in order to ensure easy tracking of accounts receivable in a company. This subsidiary ledger also reflect the transaction history of a company, it opens a separate account for each customer owing the company. The amounts of debts owed by customers recorded in this subsidiary ledger is compared with the accounts receivable balance in the general ledger. An accounts receivable subsidiary ledger is the opposite of accounts payable subsidiary ledger.
Accounts Receivable LedgerDefined with Examples & More
Conversely, removing privileges for viewing data may also remove privileges for related reports. Consult the Privileges changed pane on the Security Groups setup screen to see all privilege changes that are triggered by enabling access to a report. The main benefit of having an accounts receivable ledger is that gives us access to more detailed information about a business’s accounts receivable.