Accounting technology / Glossary / Sub-ledger

What is a sub-ledger?

Definition

A sub-ledger is a detailed ledger for one area of the accounts, such as customer invoices, supplier bills, fixed assets or inventory. It records individual transactions by customer, supplier or asset, and posts summary totals to a single control account in the general ledger, whose balance must agree with the sub-ledger total.

Also calledsubsidiary ledgersubledgerauxiliary ledger

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Posts to: A control account in the general ledger
Common types: Receivables, payables, fixed assets
Month-end check: Sub-ledger total agrees to control account

How sub-ledgers work

Common sub-ledgers are accounts receivable (the sales ledger), accounts payable (the purchase ledger), fixed assets, inventory, payroll and, in subscription businesses, revenue or billing. Each holds the detail that would clutter the general ledger: thousands of invoices become one receivables balance. Postings flow from the sub-ledger to the control account automatically in integrated software, and the control account is usually locked against direct journals so the two cannot drift apart. At month end, accountants reconcile each sub-ledger total to its control account; a difference points to a manual journal posted to the control account, a cut-off error or an interface failure between systems. Specialist systems for billing, revenue recognition or leases often act as sub-ledgers to the ERP.

Common questions

What is a control account?+

A general ledger account that holds the total of a sub-ledger, such as trade receivables. It is reconciled to the sub-ledger, and direct journals to it are usually blocked.

Why would a sub-ledger not agree with the general ledger?+

Usually a manual journal posted straight to the control account, a transaction dated in a different period in each, or a failed interface between a separate sub-ledger system and the ERP.

Is a revenue sub-ledger different from a billing system?+

Billing records what has been invoiced. A revenue sub-ledger schedules when that revenue is recognised under accounting standards, and posts the recognised and deferred amounts to the general ledger.