3 Ways to Use Accounts Receivable Subsidiary Ledger

Today, you’ll learn how to use accounts receivable subsidiary ledgers.

Some accounting systems have a feature that supports accounts receivable subsidiary ledgers. For instance, a user can download from a system quickly. With a click of a mouse button, a report is extracted immediately. Moreover, receivable ledgers are added easily whenever needed. This can create problems in the future when it is not properly controlled. Furthermore, a report of all ledgers is usually generated on a monthly, quarterly, and yearly basis. This report usually lists each account that contains ending balances. However, in this post, let us discuss deeply the core usage of an accounts receivable subsidiary ledger.

Subsidiary ledgers for accounts receivables are usually required from an accounting office. First of all, tracking each client’s credit sales is essential for a complete reporting of accounts receivables. Some things to monitor are when a customer incurred a credit and when are receivables paid. Furthermore, subsidiary ledgers can help prepare aging schedules. Most accountants have less trouble preparing an aging report when they have accounts receivable subsidiary ledgers ready. In addition, sub-ledgers provide details of customers’ credits since an Accounts Receivable General Ledger only shows the ending balance.

Use Subsidiary Ledger for an Aging Schedule

The records of most subsidiary ledgers, in an accounting system, are recorded in many databases. Indeed, it occurs when a database gets huge. It usually happens when a system is running for over five years. For instance, when an accounting system is already slowing-down, it must be because of almost full storage. Hence, there is a need to transfer the ending balances of subsidiary ledgers to a new data center. Transaction histories inside a ledger are accessed by switching to a data source.

It is usually not a good idea to generate an aging schedule when subsidiary ledgers are stored in various data storages. For instance, an accounting system can usually access a database one at a time only. The program may not be capable of accessing previous data so the aging schedule will also be inaccurate. Indeed, some computer applications may require a user to change the year somewhere in the settings to access a period. Hence, it is the time in which a manual subsidiary ledger is usually used for the preparation of an aging schedule.

Track Customers’ history

An accounts receivable subsidiary ledger is usually used for monitoring a customer’s sales credits and payment history. For instance, a customer who has not made payments may not be allowed to borrow. This is a control for ensuring that clients must pay their previous balances before adding more credits. Indeed, a subsidiary ledger is also reviewed to prioritize the collection of old receivables. Collection officers are usually mobilized immediately for long overdue accounts. Hence, Account receivable SLs are typically used for managing transactions with customers.

It is important to avoid duplicating an account receivable subsidiary ledger to prevent errors in recording. For example, three SLs were created for a customer which can increase the chances of incurring errors in recording. Bookkeepers are usually confused when a customer has more than one SL account. Moreover. Creating multiple ledgers for one client may cause account negative balances. A collection may be recorded in a zero-balance ledger. Hence, an SL controller should check whether a name exists before creating new ledgers.

However, there are some exemptions. A bank can have a customer with multiple bank accounts requires creating multiple ledgers.

Use a PIVOT Table For an Accounts Receivable Subsidiary Ledger

It is possible to administer subsidiary ledgers in an Excel spreadsheet rather than relying on an accounting system. In the first place, an accounting system has a database to store data, so when it becomes too large a data migration is usually necessary. It is already discussed several reasons for preferring manual SLs. Moreover, it is easier to track subsidiary ledgers through a PIVOT table. Setting up a PIVOT table is simple and generating an SL for a customer is done with just a click of a button. In addition, it is usually easier to copy and paste an accounting entry into an excel spreadsheet. An accounting entry mostly has subsidiary ledgers in them, so there is no need to re-encode all information again.