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The subsidiary ledger

This step explains how an invoice from a credit transaction is recorded in all the necessary places within the accounting system.
The information in a sales invoice feeds into two channels: first to the subsidiary ledger and then to each customer list, and second to the general ledger as debits and credits in the books of prime entry.

Shortly we’ll have a look at the example referred to in the previous video. However, before we do let’s briefly go through how information is entered into the various records.

When a business makes a credit sale it gives rise to a sales invoice. The information from the sales invoice is entered into two places:

  1. The two relevant accounts in the general ledger (part of the double entry Dr Receivables, Cr Sales)
  2. The subsidiary ledger or the customer’s individual ledger account. Each customer will have their own list, and this transaction will be added to the list. This is not part of the double entry process.

Remember, the purpose of the memorandum ledger is to find out at any time what is owed and by/to whom.

Now let’s go and have a look at the worked example in the next step.

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Controls within an Accounting System

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